An additional insured is a party other than the policyholder who has an interest in whatever is being covered. Homeowners insurance typically covers you and people living in the house who are related to you. That can leave some people exposed.
For example, let’s say your mother leaves you and your brother a house, but only you live in it. You buy homeowners insurance, so you’re the policyholder and the person who receives the policy’s protections. However, your sister is also an owner and can be sued if someone suffers an accident on the property, and she may lose money if the home is destroyed in a fire. Making her an additional insured on your policy extends its liability coverage to her and gives her the right to file a property claim.
You might also hear the term additional insured used to describe the actual endorsement that extends your insurance coverage to the other party. Endorsements essentially modify your policy. In the case of your homeowners insurance, an additional insured endorsement alters your policy to provide coverage to someone who has a financial stake in your home but isn’t automatically covered. Additional insured endorsements may have a nominal fee associated with them.
You may hear the terms additional insured and named insured when talking to your insurance carrier or someone who wants a certificate of insurance. The named insured is any person or organization specifically designated as insured by a policy. More often than not, the named insured on homeowners insurance is the policyholder, or owner, and has all rights to control the policy. This means the named insured can change coverage or even cancel the policy.
Because an additional insured doesn’t own the policy, they can’t make any changes to the coverage. They do, however, get the benefits of the policy if a claim is filed, including having their legal fees covered if they’re named in a lawsuit over events occurring on the insured property. Moreover, additional insureds can file property claims on the insured house.
To understand how an additional insured endorsement works, let’s first review how the liability coverage in your homeowners insurance. Liability coverage covers claims where someone says you’re responsible for their property damage or bodily injury. For instance, if someone claims your dog bit them or your child broke their window, your policy may cover their medical or repair bills as well as your legal costs if they sue.
But homeowner insurance only pays these costs for:
This means that if your significant other moves in and their dog bites a visitor, your partner could be on the hook for the visitor’s injuries. However, getting an additional insured endorsement expands your coverage to include the new party.
We’ve mentioned two examples when you might want to get an additional insured endorsement. The first is if you share ownership with someone who doesn’t live on the property, such as siblings inheriting a home but only one choosing to live in it. The second is if someone who isn’t a relative, like a significant other, moves in with you. Similar situations include:
A person or organization typically asks to be an additional insured because they want to protect their interests in the property. Clearly, that’s a benefit for them, but it’s also good for you. Making sure everyone’s financial interests are covered reduces the chance of legal finger-pointing if things go awry.