There are so many terminologies used in the insurance landscape that can be confusing at times. A lot of people often seek clarity on terms like ”named insured”, ”additional insured”, and ”other insured”. Although these terms sound similar, there’s a significant difference between them.
To not mix it up, it is important to understand the meaning of each term so you can distinguish one from the other. In addition, having a basic knowledge on how to differentiate between named insured and additional insured will help you grasp the scope of your insurance policy, such as what it covers and its exclusions.
This article aims to shed more light on the difference between named insured and additional insured. If you’ve been searching for detailed and comprehensive information, read to the very end.
Who is a Named Insured?
As the name implies, a named insured is simply the person or business named in the insurance policy. It is the primary holder of a policy (primary insured).
Most often, there can be more than one named insured under a policy. Most often than not, the business will be the only named insured.
The owners or other third parties can also be named insured on the insurance policy. In terms of coverage, a named insured has more comprehensive protection and indemnity under the insurance policy.
When choosing coverage types and amounts, the named insured will be the one to decide on the type of coverage they need and manage their insurance policy. The named insured will also be in charge of receiving premium notice and payment of premiums on the policy.
Who is an Additional Insured?
Additional insured refers to a person or entity added to the insurance policy, mostly by an endorsement. In most cases, endorsements will provide adequate protection to the business or people that are named on the policy.
This cover is only for claims that arise out of acts and omissions of the primary insured. Therefore, additional insureds are not responsible for paying premiums and do not receive notification for policy change or cancellation. The primary job of making premium payments and managing the policy solely rests on the endorsement.
Differences Between Named and Additional Named Insured
While named insured involves the exact people and businesses named in the policy, additional named insured is the direct opposite; it often includes the addition of another person or entity who is not the primary insured.
There are three main things that distinguish a named insured from an additional insured. In terms of coverage option, claims, and policy, the two terms are entirely different.
• Ownership
In terms of ownership, the policyholders often make up the named insured. They are saddled with the responsibility of purchasing the policy, paying the premiums, and managing the policy in the event of future claims.
On the other hand, additional insureds are not exactly the owner of the policy and, as such, do not have to partake in the decision-making process of the policy. They are also not responsible for the premiums paid to keep the policy running.
• Coverage
Typically, people and businesses named insured are covered by the policy, but there’s a limitation to the coverage enjoyed by additional insured.
The only way additional insureds are covered is when there’s an act of neglect from the primary insured. Also, additional insureds won’t be covered if the damage or injury is not related to the primary insured.
It is also important to note that only incidents that are related to the named insured’s responsibilities will be covered by the policy.
• Policy and endorsement
Most insurance complaints display the list of the named insured on the front declarations page, which is the opening section of the policy’s document.
This is to show the particular people and businesses covered by the policy. On the other hand, additional insured is included on the insurance policy document through an endorsement later on.
Who Can Be an Additional Named Insured?
Virtually anyone can fall into the category of additional named insured. Most likely, the person or business added to an insurance policy will be someone close to the policyholder or one who plays a relevant role in the policyholder’s business. For instance, family members, vendors, and partners can be additional named insured.
Is Named Insured the Same as Additional Insured?
As mentioned earlier, the two terms are different in terms of ownership, coverage, and policy. Although both words look similar, a primary insured is entirely different from an additional insured.
Basically, a named insured is the main person or business on a policy. They are often listed first on the policy’s documents and are responsible for the payment of premiums, while additional insured is added and listed in the policy at a later date.
An additional insured is not responsible for the payment of the policy and will not revive notification of a policy change. However, they can enjoy the benefits of the coverage and can file a claim if the need arises.
FAQs
Can an additional insured file a direct claim against the insurance policy?
Unfortunately, an additional insured cannot file a direct claim against the insurance policy. Owing to the fact that the named insured controls the claim process, it would most likely not work out if an additional insured wants to file a claim. To file a claim under the policy, the additional insured will have to go through the named insured.
What happens if the named insured’s policy is cancelled or lapses?
If there’s an insurance lapse or the named insured’s policy gets cancelled, this automatically means the end of coverage for the additional insured as well.
Regardless of whether the additional insured is aware of the cancellation or lapse, once it is cancelled, the coverage ceases to exist for both the primary insured and additional insured. This is because the additional insured’s coverage largely depends on the named insured’s active policy.
Can an additional insured be removed from the policy?
Since the policy is not primarily owned by the additional insured, the named insured can decide to remove them from the policy at any time. This is because the additional insured does not have ownership rights to the policy and is not involved in the decision-making process that affects the policy.
