Naming Additional Insureds: A Quick Guide

There are several reasons why you might want to name additional people on an insurance form. For example, you might want to add a driver to your car insurance policy, or you might want to insure a vehicle that is registered to someone else. When adding a driver to your policy, you should consider who will be driving the car, how often, whether they own or co-own the vehicle, their relationship to you, and whether they live with you. It's important to note that adding a driver to your policy can affect your premium, but this is not always the case.

When it comes to insurance coverage, it's also important to understand the difference between being an additional insured and an additional named insured. A named insured is the owner of the insurance policy and is entitled to 100% of the benefits and coverage provided. On the other hand, an additional insured is someone who is not the owner of the policy but may be entitled to some benefits and coverage under certain circumstances.

Understanding the difference between insured and additional insured

When it comes to insurance, the named insured is the person or entity that owns the insurance policy and is listed on the first page of the policy document. They are also referred to as the policyholder, and they are responsible for purchasing the policy, making decisions about coverage, and paying premiums. The named insured receives full protection and benefits under the policy and can make changes or cancel it. In the case of a business, the business itself is usually the named insured, but owners or subsidiaries can also be named insureds.

An additional named insured is someone other than the policyholder who shares full coverage and rights under the policy. They are typically added to the policy after it has begun and are listed in an addendum. While they are not responsible for paying premiums, they are entitled to be notified of changes and cancellations. An additional named insured is often a partner, co-owner, or family member of the named insured.

An additional insured, on the other hand, is added to a policy through an endorsement and is only covered for incidents related to the named insured's work and responsibilities. They are not responsible for paying premiums or modifying the policy and are usually not notified of changes or cancellations. For example, a general contractor may be added as an additional insured to a subcontractor's policy, protecting them from liability arising from the subcontractor's work.

While both additional named insureds and additional insureds are added to a policy after the fact, the key difference lies in the extent of their coverage. Additional named insureds enjoy the same full coverage as the named insured, while additional insureds have limited coverage tied to the named insured's work.

Pros and cons of adding an additional insured

An Additional Insured (AI) is a person or business entity that is added to a liability policy to extend coverage for liability caused by the acts or omissions of the primary policyholder. This can be done for one single event or for the duration of the policy. The benefits and drawbacks of adding an Additional Insured are as follows:

Pros

• Accessing someone else's insurance: Additional Insureds avoid the procurement process, paying premiums and defence costs, and disclosing their own loss history, which could increase their premiums.
• Backing up a promise of indemnification: Additional insured coverage acts as a reassurance that protection will be provided even if the indemnitor is financially unable to comply with the indemnification obligation.
• Prohibiting an insurer's subrogation against the Additional Insured: The anti-subrogation rule prevents an insurer from asserting a right of subrogation against the policy's insureds, including additional insureds.
• Defence: If someone sues your AI for something covered by your insurance, your policy steps in to defend them.
• Bodily injury and property damage: Your policy will pay on behalf of the AI for someone else's medical bills or property damage.

Cons

• Misconceptions about available coverage: Additional insureds may not get an accurate picture of the scope of coverage that's available, as factors such as other additional insureds and prior claims can affect their benefits.
• Conflicting defence positions: If the insured and additional insured are blaming each other for the loss, the insurer may have to hire separate defence counsel for each, which could erode the policy limits and leave less money for indemnification.
• Sharing your insurance: Adding an Additional Insured means sharing your insurance with someone else. Their claims become your claims, and your insurance company might raise your rates, refuse to renew, or even cancel your policy.

How to name an additional insured

An "additional insured" is a person or entity that is covered under another party's insurance policy. This is different from an "insured", who is the person who purchases coverage from an insurer and is the owner of the policy. A "named insured" is the owner of the insurance policy and is entitled to 100% of the benefits and coverage provided by the policy. An additional insured is someone who, under certain circumstances, may be entitled to some of the benefits and coverage under the policy.

An additional insured is often added to a business insurance policy. This is a way of extending the named insured's coverage to others. For example, a larger business may require a smaller business to add them as an additional insured. This protects the larger business from financial risk if something unexpected happens.

Adding an additional insured can be done through an amendment called an endorsement or rider. This is a tweak or addition to the current policy that is agreed upon by the insurance company and the policyholder.

To name an additional insured on an insurance policy, the following steps can be taken:

• Determine who needs to be named as an additional insured.
• Review the insurance policy to confirm that it allows for an additional insured endorsement.
• Provide information about the additional insured, such as their name, address, and relationship to the policyholder.
• Agree on the terms of coverage, including the scope of coverage, limits of liability, and duration.
• Pay any additional premiums that may be required to validate the coverage.

It is important to note that adding an additional insured will likely result in higher premiums for the policyholder due to the increased liability.

When to add a driver to your insurance policy

Adding a driver to your insurance policy is a simple process but it can be confusing to know when to do so. Here are some guidelines to help you decide:

Licensed Drivers in Your Household: You should typically include licensed drivers who live in your household and have access to your vehicle on your insurance policy. This could include a partner who moves in, teenage children who obtain their driver's license, or college-aged children who drive your vehicle when they return home. Check with your insurance company about including others who live with you, such as roommates or boarders.

Regular Drivers of Your Vehicle: If someone who doesn't live with you but regularly drives your car, such as a friend or family member, you should consider adding them to your policy. This ensures they are covered in case of an accident.

Teen Drivers and College Students: If a teen or college student living in your household has a learner's permit or a valid driver's license and will be driving your vehicle, you need to add them to your policy.

Spouses and Significant Others: It is common for spouses and partners to be included on each other's insurance policies, especially if they share a vehicle.

Employees: If someone who works for you but lives outside your home starts using your car regularly, consider listing them on your policy. This is especially important if they are using your car for commercial purposes, as most personal auto insurance policies don't cover this.

It's important to note that adding a driver to your policy may affect your premium, depending on factors such as their age, driving history, and relationship to you. In some cases, adding an experienced driver may even lower your premium.

When in doubt, it's always best to consult with your insurance provider to determine the appropriate course of action based on your specific circumstances.

Insuring and registering a car under different names

In the United States, most states allow residents to register and insure their vehicles under different names. This is because the car's owner can be an approved driver on the policy rather than the primary policyholder. However, some states, such as New York, North Carolina, and New Jersey, require the name on a car's insurance policy and registration to match.

While it is allowed in most states, insurers might still refuse to underwrite a policy to a name different from that of the registered vehicle owner. Additionally, having a car insured and registered under different names may complicate the claims process. This is because having different names for these documents can confuse the insurance company, and the company may pay the claim to the registered owner rather than the insured driver.

There are several common reasons why a driver's registration and insurance policy may be under separate names:

• Your child buys an insurance policy for your car: Some parents may ask their children to purchase their own insurance policy if they gift or allow them to drive a vehicle in their name. While most states will allow this, policyholders must follow the insurance carriers' contract specifications. For example, some insurance providers may require the parent and child to live at the same address.
• You add your child and their vehicle to your insurance policy: Parents may sometimes add teen drivers to their existing policy to help offset higher insurance rates. While most insurance companies allow this if you live at the same address, each driver must be listed on the policy. Otherwise, your teen driver may not be covered in the event of an accident.
• Your family member or friend is the primary driver of your car: If a family member or friend who lives with you is the primary driver of your vehicle, they may purchase a car insurance policy in their name rather than yours. You'll need to insure your family member or friend if they drive your vehicle regularly. If your friend only uses your car occasionally, you don't have to purchase an insurance policy for your car under their name.
• Your roommate drives your vehicle: Some states require all eligible drivers who live at the same location where a vehicle is registered to be included in the policy. Some insurance providers may consider excluding household members from their coverage if they never intend to drive the vehicle, but this will vary depending on the specific provider. A non-owner insurance policy may also be an option if your roommates drive your vehicle frequently.
• You co-own the car with another person: If you share vehicle ownership, the name on the vehicle's registration can differ from the insurance policy. However, both drivers should have sufficient coverage on the vehicle. One owner may purchase the policy and then list the other owner as a covered driver.

If you are considering insuring and registering a car under different names, it is important to discuss your options with your insurer to determine the best course of action for your specific situation.

Frequently asked questions