Additional Interest vs. Additional Insured: What's the Difference?

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Additional interest and additional insured are standard terms in the insurance industry. But, however familiar they may sound, they are often a source of confusion. Are they the same … are they different? Related? Even insurance agents have been known to confuse them.
The truth is, knowing the difference between these two terms could save you legal and financial trouble down the line.
So, what is an additional interest vs. an additional insured?

Additional Interest vs. Additional Insured

Additional interest: If you have ever taken a loan for a car or a mortgage, you may already know that lenders can require you to purchase extended insurance coverage for the asset (the car or the house). They are also notified whenever you make changes to your insurance policy or default from it altogether. This is because they are listed as an additional interest in the policy.
Additional interests in a policy are not covered, and therefore, they have no right to file claims. They are usually an interested party that wants to ensure coverage for an asset because they have invested in it. Being an additional interest gives them access to updates and policy information from the insurance company.
Additional insured: On the other hand, an additional insured is a certificate holder of a policy. That means they are covered under the insurance policy, in addition to the person that took out the policy. Unlike an additional interest, an additional insured can receive payouts and file claims.

Additional Interest vs. Additional Insured for Car, Home, and Renters Insurance

Car Insurance

Additional Insured: If you leased a car from a dealership, you would need to list the dealership as an additionally insured party on your car insurance plan because they are the owner of the vehicle and entitled to file claims and receive payouts. It is important to note that an additional insured is not the same as a listed driver. A listed driver is anyone who is listed in the policy and therefore able to drive the car, while an additional insured is someone who will receive payouts in case of a loss.
Additional Interest: In the case of your vehicle, an additional interest would be a bank or lender that has a financial interest in protecting your investment. They will receive updates and policy information from the insurance company.

Homeowners Insurance

Additional Insured: If multiple people have ownership of a single home or property, each owner should be listed as an additional insured on the policy (in addition to the person that took out the insurance). This scenario is common when multiple families share a vacation home.
Additional Interest: Again, any bank or lender who wants to make sure their investment is being protected could be listed as an additional interest. They could also require a certain endorsement from the insurance policy to increase the asset’s protection level.

Renter’s Insurance

Additional Insured: Anyone, apart from the person that took out the policy, who is part of the lease and lives in the insured property or unit should be listed as an additional insured.
Additional Interest: Sometimes landlords require renters insurance and may ask to be added as an additional interest in the policy so they are entitled to making sure you maintain coverage of the rented property. They would not have the ability to file any claims or be covered by the policy; they would only have access to changes in the policy.

Why is it important to know the difference?

As we mentioned earlier, many people (including some insurance agents) don’t know the difference between the two, which can lead to some serious trouble.
Picture this: You hire a home contractor and they require you to add them as an additional interest. You agree and pass this information along to the insurance agent; however, they end up adding the contractor as an additional insured because they think the terms are interchangeable.
A few months down the line, work was not properly completed in the house and it causes an accident. You decide to sue the contractor for the financial repercussions only to find out it’s not possible because you can’t sue a person listed under the same insurance.
Accidentally assigning an additional interest instead of an additional insured can be just as consequential because people who are added as an additional interest are not protected against liabilities. For example, if you and another person own a house together but one of you is listed as an additional interest instead of an additional insured, the person listed (incorrectly) as an additional interest would not be covered under homeowners liability. Therefore, they may run the risk of losing money as well as personal property in a legal battle.
That being said, there’s no fooling you! You’re now an expert on the distinct differences between additional interest and additional insured and how those differences can impact your insurance coverage.

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