Additional Interest vs Additional Insured: What’s the Difference?

Insurance terms can be confusing enough when they don’t sound incredibly similar. When you’re looking at phrases like “additional interest” and “additional insured,” you may be wondering if insurers are purposely trying to make things complicated.

Let’s explain the difference between an additional interest and an additional insured and break down some scenarios when you might see these terms in action on insurance policies.

If an additional insured was listed on your insurance policy, that person or party would receive some coverage under your insurance. An additional interest, sometimes called an interested party, while also listed on your policy, wouldn’t receive any coverage.

An additional insured is a party named on an insurance policy that isn’t the policyholder, but they still receive coverage under the plan. If someone files a claim against the policyholder, the additional insured on the policy would also be covered under the policyholder’s insurance. The filed claim would also go on their insurance record.

An additional interest, on the other hand, receives no protection under the policyholder’s plan. The purpose of an additional interest is to give “interested” third parties a way to be kept in the loop about what a policyholder does with their plan, such as a landlord being named as an additional interest on their tenant’s policy.

An additional interest would be notified if the policyholder canceled, reduced, or changed coverage in any way, or if the policyholder let the plan expire without renewing. 

Since an additional insured is entitled to some protection, it costs a small amount of money to add one to your policy. It doesn’t cost anything to add an additional interest. 

Requesting additional insured status is fairly common between businesses. For example, if Company A hires Company B to provide a service, Company A doesn’t want to be liable if the work Company B does that ends up hurting someone and spawns a lawsuit. So, Company A may ask to be added as an additional insured on Company B’s liability insurance before doing business.

But, what scenarios would we see these statuses in everyday life?

You could see additional insureds on homeowners insurance. It could be wise to add on a plan for shared property, like a vacation home or summer cabin, if multiple people have access to it.

For example, if family members share ownership of a house, and a guest falls and injures themself in the house, the injured person could choose to sue every family member. If only one of the members is listed on the homeowners insurance, the other family members can be held personally liable for the medical bills and legal costs.

But, if the family member who got the homeowners plan on the house added siblings/co-owners as additional insureds, every family member would be protected under the same policy.

On car insurance, the leasing company on a financed car or a cosigner could be added as an additional insured. If you lease a car, you don’t own it. The leasing company does. So, if something bad happens to the car, the leasing company can recoup their losses by being named on your car insurance policy as an additional insured.

A similar principle applies to a cosigner. If a cosigner appears on the title or registration of your car, you may need to add that person as an additional insured. That way, the additional insured can turn to your insurance company for liability coverage in case you, the main owner of the vehicle, cause a problem and get sued.

The suing party may decide to pursue all the owners of the vehicle for damages, and your cosigner certainly doesn’t want to be held responsible financially for something they didn’t do.

Lenders of mortgages or car loans could be added as additional interests on those respective policies to guarantee you’re keeping coverage on their investment at all times. But, you’re most likely to encounter an additional interest in renters insurance.

A landlord can require their new tenant to get a renters insurance policy before moving in. To ensure their tenant keeps the policy through their whole stay, the landlord could ask to be added as an additional interest on it.

This way, the landlord could be notified of any changes their renter makes to the renters insurance. But, it doesn’t cost anything for the renter, and the landlord isn’t protected at all under the renters plan.