23 Feb Understanding Insurance Language: Named Insured vs. Additional Insured
Understanding Insurance Language: Named Insured vs. Additional Insured
Insurance can be complicated, and policies contain words and phrasing that can confuse many people. For some, they don’t read their insurance policy, so they may not know what’s in it. At APIA, we care about our clients. They are the ones purchasing the insurance and it’s their money so, we want to make sure they are educated on what they paid for.
Named Insured is the most important name on a policy. The first page of an insurance policy is called a “declaration page”, and on it lists the named insured—which is the person who owns, or purchased, the policy. It’s vitally important to know that the Named Insured receives all the benefits of the insurance policy. This person will be who received the funds from the policy in the event of a loss and the person who is covered in the event of a liability claim if someone is injured on your premises.
When talking strictly about property policies and liability, our policy provides not only property coverage but liability coverage as well—General Liability meaning a third-party who is injured on your premises. The additional insured will only relate to the liability. In a property policy, the named insured has all the benefits of the property, but when you go to the liability you can have an additional insured added on your policy to protect someone else because they’re related in some way to the liability. If bodily injury such as slipping and falling on the premises would qualify.
To get a better understanding of the difference between the Named Insured and Additional Insured, let’s give an example. If you are an owner of a property and you rent the property to someone else, you may have a property manager who is managing of all the rental needs such as picking up rent and taking care of issues. The renter of the property invites people over for a party and decides to set up some bear traps right inside the front door as a joke. A guest comes in, gets caught in a trap and is injured. From that aspect, you—the named insured—and your property manager who rented to this person could be involved in a lawsuit for liability. The person who was caught in the bear trap and ended up with a broken leg does not find the joke as funny as the renter who set the traps. The injured person hires an attorney and sues you on accounts of negligence and entrapment. You—the Named Insured—will be brought into the case as well as the property manager—who is an Additional Insured. Your property manager needs to be listed on your property as an Additional Insured because they are working on behalf of you and can be brought into any liability suit. Many property managers are not aware of this regarding their tenants, be sure to ask if your property manager is covered in your insurance policy as an Additional Insured. Our policy automatically lists and covers your property manager as an Additional Insured.
Another Additional Insured example would be if you decide to do construction work on your property in a city, the city will sometimes want to be listed as an Additional Insured to protect itself in the event you do something negligent. The city can’t be deemed negligent because they allowed you to do the work.
Adding an Additional Insured
Many people try to add Additional Insured to their policy unnecessarily and, after being consulted with, will find that is not what they need at all since Additional Insured is primarily for adding liability coverage. Instead, what they need to be added is a Mortgagee or a Loss Payee, which is on the property-end of the policy. A Mortgagee or Loss Payee is someone you have borrowed money from to purchase a property. If you have a loss, you may still owe him/her money. A Mortgagee or Loss Payee will be added on the check for the loss to ensure their money will be paid back from the loan. This is very different from adding an Additional Insured to the policy. To clarify, a Mortgagee/Loss Payee has to do with the money you have borrowed as a loan, such as from a bank, financial institution or individual. Additional Insured is just for someone who needs liability coverage.
As an experienced insurance company, we make it a point to thoroughly consult with our clients. If a potential client calls and asks about adding someone as an Additional Insured, we will follow up with questions like why that person needs to be added. This is to make sure we are appropriately serving our potential clients or letting them know if we are not the right insurance company for them. If we are not the right fit for their insurance needs, we can find someone who can help them. We ask questions because we are who you come to for your insurance needs and we want to make sure you have the appropriate coverage.
How does the Named Insured Relate to the typical rental property investor?
As a property investor, the name which is used in purchasing the property needs to be the Named Insured. This is imperative to ensure the property investor receives all the benefits of the insurance policy property, and the liability.
An example of Named Insured is: if you decide to purchase 3 houses under your Corporation, LLC. name, then decide to purchase an additional 2 houses under your personal name with your significant other—you have just set up two separate entities, so both need to be listed on the policy. All 5 properties may be listed under the same policy, but your Corporation, LLC. name, personal name and significant other’s name must be listed as a Name Insured since the first 3 houses and the last 2 houses were purchased under separate titles.
Benefits of our Policy
For all your properties to be listed on one policy, they must be able to be combined on the one policy—meaning you must have 51% or more ownership of the properties. If you only own 50% of the property(ies), a separate policy must be written. No matter how many properties you need to cover we can have them all insured under one policy, which helps reduce paperwork with business administration. APIA does not require the premium to be paid 100% up-front and can be paid month-to-month with no interest charged. We also allow you to have one inception date—the day the policy begins—and one expiration date—the day the policy ends, leaving you to only keep up with one policy instead of several. We also offer a quick, convenient application for an insurance quote. After submitting we then contact you within one business day to discuss your application and receive any extra information needed to approve it.
Insurance in any form is necessary to cover yourself from loss. If you are a property investor and need an insurance agent who explains all the insurance language of your policy and will go the extra mile for you, contact APIA for a quote. They truly know the insurance business and have flexible benefits to offer.