When you open an insurance policy, you will be listed as the primary owner and will be responsible for paying the premium. however, you may also have the option to add additional interest or an additional insured to the policy. While these two terms sound similar, they are quite different.
An additional interest is usually an entity that has a financial interest in the insured property, while an additional insured is someone who is jointly covered by the insurance policy, whether it is a car, a house or another property. Understanding the difference between additional interest and additional insured is important in case you need to add one or the other to a future policy.
what is additional interest vs. additional insured?
Simply put, additional interest and additional insureds are two types of parts that can be added to a single insurance policy.
An additional interest is an entity, whether a person or organization, that has a vested interest in the insured item. For example, if you finance your vehicle, you may need to add the lender as additional interest to your auto insurance policy. If something happened to your car or your insurance expired, the lender would be notified.
An additional insured, on the other hand, is a person who is jointly insured on your policy and has some financial interest in the insured property. additional insureds generally reflect a business relationship between the policyholder and the additional covered party. These types of settlements are most commonly found in property or commercial auto and liability policies. For example, if you are purchasing land on a contract basis, you could take out a home or property policy and list the person you bought the land from as an additional insured. if any claim were made, both would receive a payment. additional insureds can also file claims.
Both additional interest and additional insureds can be added to multiple types of insurance policies, including auto, home, condo, and renters insurance.
Understanding Additional Interest vs. Additional Insured in Auto Insurance
Most insurance companies allow you to add additional interest or additional insureds to a variety of different insurance policies. the main difference between these two is that additional insureds are covered by the policy and additional interest is not.
Many auto insurance companies use terms like named insured and designated driver when adding another person to their policy. The table below explains some of the common auto insurance policy terms you may come across.
In most cases, adding additional interest to your insurance policy probably won’t affect your rate. Common examples of additional stakeholders are co-signers for a leased car or financed vehicle loan company.
Adding an additional insured will not normally affect your premium unless the additional insured is also a driver on the policy. in that case, insurance agents will review the driving history and claims history of any additional insured drivers when you add them. however, listing an additional insured on your auto policy primarily ensures that claim checks are made out to both parties.
additional interest vs additional insured in other policies
You can add additional interest or an additional insured to non-auto policies. here are some other insurance policies that may have an additional insured or additional interest attached.
With homeowners insurance, there are a few reasons why you might want (or need) to add additional interest or an additional insured to the policy. First, if you have a mortgage, your lender may require you to include them as additional interest because they technically own the home until you pay off the loan.
Let’s say you have a house and your mother helped you with the down payment and is a co-signer on your mortgage. if his mother moves into her mother-in-law’s suite of her home, then she would add her as an additional insured because of her financial participation and her use of the property. this gives both parties the opportunity to file claims.
Condo insurance is similar to home insurance in many ways. If you have a mortgage or other loan on your condo, you may need to add the lender as additional interest. If you have a domestic partner to whom you are not married, you may be added as an additional insured for claim and coverage purposes.
Renters insurance is slightly different from home and condo insurance because you don’t own the physical building. If your landlord requires you to have renters insurance as part of your lease, they may request that it be added to your policy as additional interest. this way, your landlord would be notified if your policy expires. If you have an adult child you live with, you can include them as an additional insured if you want to be covered under the same policy.
why is it important
When it comes to additional insured versus additional interest, it’s important to know the differences. When you finance a large purchase, like a house or a car, you may need to include a lender as additional interest. And, if you make a big purchase with someone else, you’ll probably want to add them as an additional insured to extend the same coverage benefits.
Please note that adding additional insureds to your policy may affect your rate, depending on the type of policy. because both would have the ability to file claims, it could be affected by the frequency of filing claims by the additional insured. Make sure you understand how adding an additional insured could affect your insurance costs, and look for ways to lower your premium if necessary.