Many times, insurance policies cover the person who purchases the policy as well as other people who that person designates. These people are typically referred to as the "additional insured" or "additional named insured" in the policy documents and understanding the difference between these two terms is important.
Distinguishing the Terms
For the most part, additional insured can be distinguished from additional named insured because their names are not included in the insurance contract. In short, additional insured are entitled to coverage, but their entitlement is extended to them by the actual policy holders. By contrast, additional named insured are considered the same as the main policy holders, meaning that they assume similar rights and risks.
It is important to note that these terms can mean a remarkable range of things depending on the exact insurance policies in question, though there are still some commonalities shared among them.
Rights of Additional Insured
Entities classified as additional insured are entitled to receive compensation in case the coverage laid out in the insurance contract is applicable. In most cases, additional insured receive less coverage than their counterparts, though the exact details can see significant divergence from policy to policy.
Risks of Additional Insured
Since their coverage is extended to them, additional insured may find it more difficult to protect their financial interests. Entities classified as additional insured need to exert extra effort to remain informed about their insurance policies so that the policy holders cannot make changes that will catch them by surprise. Furthermore, additional insured that are unwilling to negotiate with policy holders will end up with less coverage than their more outspoken counterparts.
Rights of Additional Named Insured
Additional named insured are considered owners of their insurance policies, meaning that they also command significant influence over the exact details of their coverage. For example, they can exert influence to lessen coverage for entities classified as additional insured, so long as their counterparts agree with them.
Risks of Additional Named Insured
Since additional named insured are considered owners of their insurance policies, they also assume the burden of their responsibilities. For starters, even though said entities are not the main policy holders, they need to take some measure of responsibility for the administrative aspects of their insurance policies because that is the best method for remaining informed and thus capable of protecting their financial interests. This is particularly important because they can be held responsible if the main policy holders become unable to meet their obligations under the insurance contracts, which can cause serious problems if said entities are caught unaware.
To sum up the information presented here, businesses need to be careful about committing to insurance policies. In this, as in other matters, businesses must examine the terms of their insurance policies and follow up on changes so as to protect their interests. Failure to exert such effort can be catastrophic.