When do I need to add an additional interest to my insurance policy?

An additional insured is a person or organization that has an insurable interest in the property being insured. In light of this, you will have to put an additional interest on your insurance policy (usually via an endorsement) when another party has some form of financial interest in the property being insured such that they should be able to receive the benefits provided by the insurance policy. This is usually a legal or contractual requirement.

An interesting thing to note here is that, while an additional insured will receive payment under the insurance policy, the loss is not assessed to them, meaning that the loss will not be recorded on their claim history (see CLUE Yourself In to find out how your claim history affects your insurance). This is a good way to shift liability for a loss onto another party.

Now, lets go over some common situations in which this would come into play.

1. When getting a mortgage, your lender will usually require that you add them to the policy as an additional insured. This protects their financial interest in your piece of real estate.
2. In a commercial real estate setting, a landlord may require the tenant add them onto their tenant’s insurance policy. That way, if a loss occurs on the tenant’s property, the landlord can receive the benefits of the insurance policy.
3. General contractors will require that subcontractors add them to their policies so that they receive legal protection from the subcontractor’s insurance policy.
4. In product liability, a seller will usually request that their supplier (or manufacturer) add them to their insurance policy so they can receive its protections. This is typically the case when trying to sell a product in a supermarket or grocery store.