Learn About an Additional Insured on an Auto Policy

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Going through your personal auto policy's insurance paperwork, you might come across the term "additional insured." Or, maybe someone has requested to be added as an additional insured. It is important to understand all aspects of your personal auto insurance policy, including what additional insured means.

An additional insured has partial ownership of a vehicle or is liable for a vehicle that is insured by another party. A driver on a policy is not automatically considered an additional insured.

Key Takeaways

  • An additional insured is a vehicle's partial owner or is liable for a vehicle insured by someone else.
  • A driver who is listed on the policy is not the same as an additional insured.
  • Additional insured parties are typically co-owners on the title, leaseholders, or driving vehicles owned by someone else.
  • A listed driver isn't eligible for the compensation an additional insured is.

Additional Insured vs. Listed Driver

A difference exists between an additional insured and a listed driver. Do not assume because you are listed on someone's policy as a driver, that you will be compensated for a loss. Only named insureds, loss payees, and additional insureds are listed on insurance claim checks for total losses.

The additional insured must have ownership of one or more vehicles on the policy. Additionally, this person may or may not drive the vehicle, depending on whether the individual is listed as a driver or has insurance elsewhere.

The listed driver could have no ownership of the vehicle, be its primary operator, or even just occasionally operate the vehicle.

Who Is Usually Added as an Additional Insured?

  • Co-titled vehicles: usually have an additional insured if the two people on the title are not married or are listed as named insureds together. For example, if your grandmother cosigned on a car for you and doesn't live in your household, she would be listed as an additional insured. She does not need to be listed as a driver because she lives out of the household and probably has her own car insurance policy. As part-owner of the car and an additional insured, she is entitled to compensation after a total loss if both of you owe less than the actual cash value of the vehicle.
  • Leased vehicles: should always have the lease company listed as both loss payee and additional insured, sometimes referred to as combination. The lease company acts as both the lender and the owner of the vehicle. In a total loss, the lease company would get the claim check. Often, gap insurance is included on leases so you won't have to worry about an out-of-pocket expense.
  • The vehicle owner is not the named insured: Not many insurance companies allow people to insure vehicles they don't own. Preferred carriers are often very strict about the rule and only allow insurance to be held in the name of the person on the title. Some standard and non-standard insurance companies do not have any restrictions on who insures a vehicle. If you allow someone to insure your vehicle and physical damage protection is purchased, the claim check will go to the insured unless you are listed as an additional insured.

The Purpose of Being Listed as an Additional Insured

The additional insured is notified anytime a change is made to the vehicle. If coverage is reduced to storage insurance, the additional insured is notified. The same goes if the vehicle is removed from the policy or coverage is added or reduced in any way. It keeps the additional insured in the loop when it comes to insuring the vehicle.

Additional insureds are included in insurance claim payouts. As an owner of the insured property, the additional insured's name is on total loss claim checks.

When Should an Additional Insured be Removed?

An additional insured is only removed when the name is removed from the title due to a sale. Because the additional insured has no interest in the vehicle after its sale, they should be removed immediately. Having an additional insured listed on the policy can delay the transfer of a vehicle's title during a sale if it is not first removed.

The owner of the vehicle is entitled to compensation if the coverage is correct and the owner owes less than the actual cash value of the vehicle. Whether you are the additional insured or you need to add one to your insurance policy, it is important to know how additional insured works. Make sure the additional insured is listed properly on your policy by checking your declaration page or by asking your agent.