What is the difference between “named insured" vs. "additional insured”? (2024)

FAQs

What is the difference between “named insured" vs. "additional insured”? ›

A named insured is entitled to 100% of the benefits and coverage provided by the policy. An additional insured is someone who is not the owner of the policy but who, under certain circ*mstances, may be entitled to some of the benefits and a certain amount of coverage under the policy.

An additional named insured will have the same rights as a “Named Insured” but typically won't be responsible for the premium. They will however be entitled to notice of policy changes and cancellations and will have the same coverage as the Named Insureds but share the policy limits.

Coverages – The named insured gets all of the benefits of the policy, including any enhancements or bells and whistles added to it. The additional insured only gets the shared limit of liability with the named insured.

There is also a risk of being under-insured or uninsured as additional insureds. Second, there is the risk of breaching a contract, thus potentially becoming the insurer of the other party when they are the party obligated to provide additional insured coverage.

While an additional insured enjoys limited coverage under the primary policyholder's BAP policy, a Designated Insured merely presents the illusion of providing coverage.

Only the “first named insured” may agree to policy changes. Additional named insureds must obtain approval from the “primary named insured” (and the insurer) before modifying the policy. Thus, additional named insureds need to be aware that the policy can change without their approval.

While the SOP does not specifically outline the amount of general liability insurance required, most borrowers have $1,000,000 coverage for each occurrence and $2,000,000 in the aggregate. Lenders should be named as an additional insured on the general liability insurance policy.

The insurance company may be able to simply make the surviving spouse the named insured. On the other hand, if the deceased was an additional insured, the primary policyholder remains the named insured. Either way, the surviving spouse needs to inform their insurance company to get the process started.

For example, if you're a small business owner who purchases restaurant insurance for your business, Tom's Tacos Inc., then Tom's Tacos Inc. would be the named insured. An insurance contract can have more than one named insured, such as owners or subsidiaries of a business.

This individual or entity is usually the policyholder who is primarily financially responsible for the policy, and is the first named insured in the policy document.

Why would you add an additional insured to a policy? ›

The purpose of additional insured endorsem*nts is to keep the burden of risk closest to those parties most likely to create losses, which typically is third parties contracted to perform the work.

A named insured is any person, firm, or organization, or any of its members specifically designated by name as an insured(s) in an insurance policy, as distinguished from others that, although unnamed, fall within the policy definition of an "insured."

An additional insured is a third party – either a person or a business entity – that has a liability exposure in a business relationship.

To add an AI to a CGL policy, the named insured should contact their insurer and provide the party's name and address. The cost to list an AI varies depending on the insurance company but can be as low as $50. Some insurers even permit policyholders to pay a flat rate and add as many as they would like.

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.

What is the Name of Insured? Name of Insured is a term used in the insurance industry to refer to the individual or entity that has an insurance policy in their name. The name of insured is listed on the policy documents as the party that has the legal right to make claims for losses covered by the policy.

It's common for larger companies to have multiple operating entities under one or more corporate entities, however, we typically don't see that in the small business sector. In this case, the corporation or LLC or LLP is the legal entity that should be the named insured on the policy.