Who Is a Named Insured?
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Knowing the difference between a named insured, additional insured, and additional interest will allow you to understand just who is covered under your insurance policy.
You might have heard the term "named insured" if you've ever had a conversation about insurance with an insurance agent (if you haven't, see Insurance Agents: What's The Point? to find out whether you should). It's thrown about pretty casually in the insurance industry, but it can be confusing if you're not familiar with the jargon.
You might be extra confused if you've also heard the terms “additional insured” and “additional interests.” These terms all sound alike to the untrained ear, but they have important differences. To clear things up, we'll define each of these terms and help you understand what ways your insurance policy will cover each of these.
Let's start with the question of the hour: who is a named insured?
Put simply, the named insured is the person(s) or company that an insurance policy is explicitly designed to cover. The named insured is usually the one purchasing the policy.
In most cases, a policy will list a single person as the named insured, although some companies will allow spouses to be listed as one of the named insured alongside the primary policyholder. Even if there are other people in your household covered by the policy, such as children and other dependents, there will still only be one named insured.
But it's more than just whose name is featured on the policy documents. The named insured is often also the only one allowed to make policy changes, and all bills or documents will come solely under that party's name.
While the named insured is typically the only party on a policy who cannot be changed or removed from it, there are certain exceptions and circumstances in which a person can eliminate a named insured from the policy. Most insurance policies are alike but differ in their policy language. To find out how to eliminate the named insured, look no further than your own policy documents. Reading the specific wording will break down the exact steps your insurance company requires to remove a named insured.
Policies often cover parties other than the named insured. You may need to add others to your policy when your spouse needs to be listed, other household members need coverage, or when someone else has co-ownership of the insured property or vehicle and uses it on a regular basis (find out whether your policy will cover a loss to your vehicle while it was driven by someone else). The policy would cover these individuals or organizations as additional insureds.
An additional insured is covered under the insurance policy and has access to most, if not all, of the policy coverage. In some cases, there may be coverages that apply only to the named insured. With auto insurance, for example, there are certain states in which you are required to specify whether you want the medical coverage to cover the named insured only or other members of the household as well.
Unlike an additional insured, an additional interest is a third party who has an interest in protecting the property or vehicle insured but is not themselves insured under the policy. What this means is that they have a reason for wanting the property or vehicle to have insurance coverage in the event of a loss.
Most often, an additional interest will be a lienholder or someone financing the vehicle or property. It could also someone who co-owns the insured item.
An additional interest is notified when the policy cancels or when significant changes are made to it, but they do not have the power to make such changes themselves.
With so many similar-sounding terms, it can be confusing to try to figure out who the policy covers and what kind of coverage it provides them. By knowing the difference between named insured, additional insured, and additional interest, you will be able to know whether you, your family members, and even your lienholders are listed correctly on your policies.