Additional interest vs. Additional Insured

When you’re taking out your insurance policy, you want to make sure your business has the best coverage possible. However, registering for your policy can be pretty complicated. For example, what’s the difference between an Additional Interest and Additional Insured?

If you’re taking out insurance, you might want to know if you can add a subcontractor to your policy. Would that make them an Additional Insured, or an Additional Interest? Adding “Additional Insureds” and “Additional Interest ” to your insurance policy can help make sure you’re prepared for a variety of risks that could affect your business—but there’s a difference between the two additions.

In this short guide, we’ll explain Additional Interests vs. Additional Insureds, as the terms apply to commercial property and liability insurance.

What is an Additional Insured?

An Additional Insured is another person or business entity that is insured under your insurance policy for liability as a result of your actions or operations.1 It is a named person insured on your insurance policy. A person with additional insured status is also protected by your company’s liability policy.

Depending on the specifics of your insurance, you may be able to add Additional Insureds to the following kinds of policies:

Why would you add someone else to your policy?

  • A contract may require you to add your landlord, contractor, or business partner to your insurance policy as an Additional Insured
  • If you’re doing work for a government agency, you may be legally required to add that agency to your policy before beginning work

When you add an Additional Insured, they’ll be covered by your policy with respect to liability because of your operations (according to its specific terms). This can be important if the insured party has the potential to be negatively affected by one of your projects or your premises. Renters often add a landlord as an additional insured party because if property damage occurs in your rental unit, the renter as well as the landlord will be covered.

What is an Additional Interest?

An Additional Interest is someone who has a financial interest in the insured property2. An Additional Insured may be added to:

  • Commercial property insurance, including inland marine insurance
  • Auto insurance physical damage coverage

Often, an Additional Interest is a bank or lienholder that loaned funds for a commercial property or vehicle.

When they’re listed as an Additional Interest, they’ll be kept up to date with any changes to the policy. However, they are not covered by the policy for liabilities arising out of your business.

Additional Insureds on liability policies

If you have general liability insurance, it can provide coverage for client and other third-party claims of bodily injury, personal injury, property damage, and advertising injury.

To share this coverage, you’ll always need to add (or be added as) an Additional Insured, not an Additional Interest.

Let’s take a closer look at how this works:

If you’re a landscaper who hired a contractor to remodel a client’s porch, they could accidentally leave out their tools, leading the client to injure themself. If you’ve asked to be added to their general liability insurance policy, you won’t have to rely on your own business insurance alone to cover the legal costs and damages in the event you are included in a lawsuit against the remodeller.

When you contractually require subcontractors to add you to their insurance policies, you lower the chance that you’ll be 100% responsible for the payments related to a claim that stems from the work they’re doing for you.

This is one good reason to ask your subcontractors to carry insurance—it lowers the risk that you’ll end up completely financially responsible for an error they make.

When you’re listed as an Additional Insured, their policy might help to cover the bulk of the legal costs and damages that result from litigation.

Additional Interests & commercial property

Commercial property insurance can provide coverage for loss of use and damage to your place of business, as well as the equipment inside it.

Adding an Additional Interest to your policy helps guarantee that parties with a financial stake in the commercial property have adequate coverage.

Who would be exposed in the event of a fire, storm, or other damage to your place of business?3

  • Your valuable business property may be damaged
  • If you are leasing any equipment, the lessor would also be exposed

Building owners sometimes contractually require their commercial lessees to add them as Additional Interests on a property policy that covers a building. This can be less expensive than taking out their own insurance, or they can share risk with tenants when they are listed on two policies. Because the tenant does not have an ownership interest in the building, and just a potential contractual obligation, you should talk to your insurance broker to discuss if the insurer will cover this situation.

If you are leasing expensive equipment, the lessor may require that you list them on your insurance policy.

When to add an Additional Interest vs. Additional Insured

When it comes to Additional Interest vs. Additional Insured, the technical difference is that Additional Insureds will be provided a defense and coverage under a liability policy, while Additional Interests will be kept updated of changes and reimbursed for their financial loss in the event of a covered loss under a property policy.

With Thimble’s general liability insurance and professional liability insurance, it’s easy to add Additional Insureds on-demand, and for no additional charge. When you update your policy via the Thimble mobile app, you can instantly see the Additional Insureds listed on your policy.

However, keep in mind that some insurers use these terms differently—and others may use them interchangeably (because, you know, insurance).

Are you considering adding someone else to your insurance policy? We hope this handy guide makes it easy to explain the pros and cons to folks who need to know. 

Just remember:

  • Additional Insureds can be added to general liability insurance policies.
  • Additional Interests can be added to commercial property insurance policies.
  • When they’re named in a policy, Additional Insureds are covered by that policy if they are brought into a claim because of the actions of the named insured.
  • Adding a person or company as an Additional Interest ensures that the financial interests of that entity are protected in the event of a covered loss.

The big takeaway: When everyone in a transaction is prepared for business risks, it makes it that much easier to trust each other and get the job done.

Sources:

  1. The Balance. “The Meaning of Additional Insured.” 
  2. West Bend. Additional Insured vs Additional Interest, do you understand the difference?
  3. IRMI. Insurable Interests and Interests Insured
The content on this page has been verified by
Terri Hitchcock, JD
Chief Insurance Officer, Thimble
Terri has 38 years of industry experience and knows a thing or two about insurance, so she reviewed and approved everything on this page.

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