Every industry has terms that describe different parties or responsibilities, and insurance is no different. Understanding insurance terms helps you determine your responsibility for the policy, how much coverage you receive, and the role other people involved in the policy play. Other people involved in the insurance might directly benefit from the insurance or want to get notified if anything changes in the policy.
When getting business, auto, rental, or property insurance, there might be the need to include a named insured and interested party.
What is a Named Insured?
Named insured is the person or business named in the policy. They are usually named on the first page, and there can be several named insureds. In terms of coverage, the named insured usually has the broadest coverage.
In most cases, the business, car owner, or tenant are the only named insureds, but that varies from property to property. A named insured can change coverage limits, cancel the policy, and add endorsements to the insurance policy.
Insurance endorsements, also known as riders, are amendments to the policy. They can add, exclude, or limit insurance coverage and add or remove people or addresses from the policy.
Having several named insureds for one policy can be necessary for additional coverage.
What is an Interested Party?
Also referred to as additional interest or party of interest, this is a third party with an interest in the insured property. They don’t usually need the coverage but benefit from knowing an insurance policy is in place.
What Are the Main Differences?
- Insurance Coverage – One main difference is that named insureds usually receive coverage from the insurance policy while interested parties do not. Interested parties are only named in the insurance policy to know that the property is protected.
- Power Over the Policy – Named insureds usually have the power to determine the type of coverage they get, how much premiums and deductibles they pay, and payment terms. They also directly give and receive insurance notices like cancellation, renewal, and expiry notices. On the other hand, interested parties don’t have a say in the coverage types or payment terms. While they usually receive notifications in case of changes like lapses in coverage, cancellations, and renewals, they cannot give direct notices to the insurance company regarding the policy.
- Claims – A named insured usually has the power to make a claim and enforce their insurance policy directly against their insurers. However, the contracting party or insured’s conduct can affect whether the insurer pays the claim or not, for example, non-disclosure. While interested parties cannot directly make a claim or enforce the insurance policy against the insurance company, they have a right to recover the amount of any losses suffered according to the contract. However, the conduct of the insured or contracting party, for example, a duty of utmost good faith, could affect the claim payments.
- Making Reports – In addition to making policy changes, named insureds are responsible for reporting cases of bodily injury or property damage to the insurance company. They are also responsible for notifying the police in case of theft. This responsibility, however, does not apply to interested parties.
Types Of Interested Parties And What Might Be Covered
- Landlords and Tenants – When renting a house, landlords usually require that tenants have rental insurance. Being named as an interested party ensures they receive a payout if the tenant has caused any damage to the property. Your landlord also requires you to be named as an interested party to ensure you adhere to the renter’s requirements. If, for example, you rent a house and it is mandatory to have renter’s insurance, your landlord will get notified if you cancel it after getting your house keys. Some tenants also usually require to be named as interested parties in their landlord’s property insurance. This ensures that they are covered if the insurance states they will receive compensation if their property is damaged in the house or if they are injured, and it is not their fault.
- Financiers – Whether a bank, venture capitalist, personal investor, angel investor, or peer-to-peer lender, financiers usually require to be named as interested parties. This applies when you apply for a mortgage or auto loan, where the property was named as the collateral. Lenders usually require a payout from the insurance company in case of property damage or loss.
- Principals – Business principals are key figures in business management or primary decision-makers. They can be CEOs, business owners, or shareholders. They are usually named interested parties because they need protection from third-party lawsuits or damages that could result in financial losses.
- Car Dealerships – If you lease a vehicle or buy a car using a dealership’s financing services, the dealership will require you to name them as an interested party. This way, they will receive a payout if the car gets into an accident before the lease period ends or before you finish paying the loan.
- Cosigners – Cosigners are people who agree to pay your loan if you are unable to. They are usually essential in ensuring you qualify for the loan because they usually have higher credit scores. However, your cosigner might need to be named as an interested party in your insurance policy. This way, they will receive a payout if they can’t finish paying for the car in case of an accident.
In the above examples, the interested parties have direct or indirect financial interests in the insurance policy outcomes. Therefore, ensure you determine the interest of your interested parties when going through the policy’s terms and conditions before adding them.
While most insurance companies and scenarios work as stipulated in the examples above, ensure you consult with your insurance company first.
Insurance terms are sometimes difficult to understand, and that could result in significant inconveniences in the future. If you can’t understand the terms of your insurance policy, look for a professional to explain them to you.
Ensure you ask what the responsibilities, duties, and powers each of the parties in the policy have and how that can affect the policy.