It’s easy to get confused when reviewing your insurance policy, especially when it comes to deciphering specific terminology. For example, “additional interest” and “additional insured” may sound similar, but they have vastly different definitions.
When you buy an insurance policy—whether it’s car, homeowners, or other property coverage—you are listed as the primary policyholder and must pay the premium. As the policy owner, you have the option to add additional interest or an additional insured to your policy. What’s the difference?
An additional interest is a person or organization with a financial interest in the property you insure. Common examples of additional interest parties are leased car co-signers or a lending company for financed vehicles. Fortunately, adding an additional interest to your insurance policy will likely not impact your rate.
On the other hand, an additional insured is a person who is jointly insured on your policy and has a financial interest in the insured property. Additional insureds usually reflect a business relationship between the policyholder and the additional covered party. Adding an additional insured will not typically impact your premium unless the additional insured is also a listed driver on the policy.
To better understand the terms, here’s how they’re broken down for different types of policies:
Homeowners Insurance
Mortgage lenders may request to be added as an additional interest in a homeowner’s policy because they have a personal stake in homes for which they give out loans. They want to be able to ensure coverage is in place so they are not left unpaid in the case of a loss. If multiple people share a property with ownership, each owner should be listed as an additional insured on the policy. This is common in shared family homes or vacation homes.
Car Insurance
For car insurance, an additional interest could be added to your policy if your car is financed. Your lienholder doesn’t need the coverage from your policy, but they want to ensure that you have coverage so if an accident happens, they will receive payment. Anybody with vehicle ownership can be an additional insured. For example, when you lease a car, you are not the owner, so the leasing company would be named as an additional insured on your policy. This way they receive payment in the case of a loss, and you are not responsible for paying them.
Renters Insurance
Renters insurance differs slightly from homeowners insurance because you don’t own physical property. If the landlord requires you to have renters insurance, they might request to be added to your policy as an additional interest. In this case, your landlord would be notified should your policy lapse. If you have an adult child that you live with, you could list them as an additional insured if you want to be covered under the same policy.
Still confused? Anytime someone asks that others be added to a policy, ask questions about who has ownership and why a party should be listed. This will ensure accurate insurance coverage.
