ad·di·tion·al in·sured | əˈdɪʃ(ə)n(ə)l ɪnˈʃʊəd
Definition: A person or entity, other than the named insured, that is protected under the terms of an insurance policy.
In the world of insurance, an additional insured is a person or organization that is added to an insurance policy in addition to the main policyholder (the named insured).
The important thing here is the difference between named insured and additional insured. named insured refers to the person who took out the policy—their name is on it. Under most home insurance policies, coverage will automatically include the named insured’s immediate relatives, their spouse, and their children, as long as these individuals also live in the home. Someone who needs to be covered by the policy, but doesn’t fit one of those descriptions, may be added as an additional insured.
An additional insured must have an insurable interest in the property being insured; that is, they must have some financial stake in the whatever is being insured. Usually, this involves some degree of ownership of the property.
Adam and his friend Courtney decide to purchase an investment property together. They buy a new condo downtown. Adam puts up 75% of the purchase price, and Courtney pays the remainder. Adam takes out a home insurance policy on their new property.
On the policy, Adam is the named insured. Since Courtney owns 25% of the condo, she also has an Insurable interest in it. But, since she’s not related to Adam, she is not a named insured; Adam’s policy wouldn’t allow her to make insurance claims.
Adam adds Courtney to the policy as an additional insured. That also allows Courtney to make insurance claims if necessary, and ensures that her investment is protected as well.
There are a few scenarios where it would be necessary for a policyholder to add an additional insured to their policy. You might need to use the additional insured option if you’re buying a home with your partner, but the two of you aren’t legally married. In this case, one partner would purchase the policy as the named insured and add the other partner as an additional insured. If an elderly relative dies, and they leave their home to three grandchildren (cousins from three different families), those three cousins would each need to be additional insureds on a policy covering the home.
These are both examples of home insurance situations. In commercial insurance, there are a whole lot of other, more complicated scenarios in which someone might need to add an additional insured. Without jumping off the deep end, one example might be a general contractor who subcontracts part of their work to a smaller company. The general contractor would ask the subcontractor to add them as an additional insured on their commercial liability policy. That way, the general contractor can be covered by the subcontractor’s insurance if the subcontractor does something damaging at the jobsite.
additional interest is similar to additional insured but without the “insured” part. When someone is listed as an additional interest on a home insurance policy, it means they have an interest in the insured property, but they do not have any ownership of that property. They will be notified of changes to the policy’s status, but they can’t make any changes to the policy, and they are not entitled to payment in the event of loss or damage to the property being insured.
Courtney lives in an apartment, which she rents. The rental property management company asks Courtney to add them to her tenant insurance policy as an additional interest, as they ask of all tenants. The property management company will not be covered by Courtney’s policy, but they’ll be notified if the policy is ever cancelled. They want to know that Courtney is covered in case of certain losses that might occur as a result of her actions, like accidentally injuring others on the premises, or accidentally starting a kitchen fire that damages the structure.
So now we have named insureds, additional insureds, and additional interests. Using our example situation, it breaks down like this:
Adam purchases a home insurance policy for the condominium. He is the named insured.
Courtney is a part-owner of the condo but is not related to Adam, so he adds her to the policy as an additional insured. Adam’s policy now covers her portion of the ownership.
Meanwhile, Courtney lives on her own in an apartment that she rents. The rental property management company that manages her building is an additional interest on her tenant insurance policy. They receive no coverage, but they’re notified if her policy is cancelled.
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Adding an additional insured to a policy is normally inexpensive. For example, Square One can add additional insureds at no extra cost.
Adding an additional insured to the policy doesn’t change the amount of coverage the policy offers. The policy coverage limits may have been designed to cover the named insured and aren’t high enough to properly cover the additional insured as well. If you add an additional insured to your policy, make sure to review your coverage limits to make sure they’re enough for the new situation.
Only the named insured’s immediate family will be automatically covered by most home insurance policies. But who are their immediate family? “Immediate” usually includes relatives who are a single step away on the family tree: spouse, parents, children. Grandparents or grandchildren can be covered if they live in the home as well. Aunts, uncles, cousins, your sister’s boyfriend’s stepdad… these relatives are best added as additional insureds if they’re sharing in the ownership of the property. Otherwise, they probably need their own separate policies.
When in doubt, talk to your insurance provider.
An additional insured is a person added to an insurance policy who isn’t the policyholder (the named insured) or someone directly related to the policyholder.
Additional insureds have a financial stake in the insured property.
Once added to the policy, additional insureds are covered just the same as the named insured.
When it comes to home insurance, the main reason to add additional insureds is when multiple people who are not directly related share ownership of a home.
Even when you take precautions, accidents can happen. Home insurance is one way to protect your family against financial losses from accidents. And, home insurance can start from as little as $12/month.