Commercial Insurance

What's the Difference Between Additional Insured and Loss Payee

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Key Points
  • Additional Insured adds a third party (like a contractor or landlord) for liability protection under your policy—covering lawsuits related to your work—often required by contract.
  • Loss Payee designates a third party (such as a lender or leasing company) entitled to receive insurance payouts for damaged or lost property, commonly used for vehicles or heavy equipment.
  • Practical differences: Adding an additional insured may slightly raise your premium, while including a loss payee generally doesn’t affect your cost; consult with an independent agent to ensure proper endorsements are applied.

While Additional Insured and Loss Payee sound similar, they are quite different besides the fact that they both extend the policyholder’s insurance coverage to a third party. In this post, we’ll look at the difference between the two and the situations they are commonly used for.

What is Additional Insured?

An additional insured is a third party added to an insurance policy because of liability exposure due to their relationship with the insured. By including an additional insured in the insurance policy, the policyholder can extend some degree of coverage to a third party. This is often done to comply with a contract or to protect a person or entity close to the policyholder.

An example of this is a plumber who works for a general contractor being required to name the general contractor as additional insured. If the plumber causes a problem on site, the insurance policy will protect the general contractor in addition to the policyholder.

What is a Loss Payee?

A loss payee is a person or entity entitled to insurance payments due to damage or a loss of insured items. This is typically executed by a loss payable clause on the declarations page of an insurance policy. This will direct all or some of the total insurance payout to the loss payee. Two policies that often carry this clause are Commercial Property and Commercial Vehicle insurance.

For example, when a business leases a vehicle, it will commonly need to add the leasing company as a loss payee on their Commercial Insurance Policy. Therefore, in the event of a crash or totaling of a vehicle, the car leasing company will receive an insurance payout for their loss.

How to Add an Additional Insured or Loss Payee to an Insurance Policy?

To add an additional insured or loss payee to an insurance policy it’s best to first consult with your independent insurance agent to review your options. They will be able to let you know which endorsements are available for a particular insurance policy, as you cannot add an additional insured or loss payee to all types of insurance policies.

An independent insurance agent will also be able to advice if the third party’s request is reasonable and if the coverage amount is adequate. When adding an additional insured, this will increase your insurance premium, but it’s typically a small amount compared to the cost of the overall policy. The addition of a loss payee generally does not increase the cost of your policy. If you have further questions about additional insured or loss payee additions to an insurance policy, please reach out to us. We’re here to help!

Brittany Mohr Headshot

Brittany Mohr Hunter, ARM, AINS

Brittany Mohr Hunter is the Chief Operating Officer at Lewis Mohr Insurance Agency and brings over a decade of experience in commercial insurance and risk management. A third-generation leader in the family business, she earned her degree in Finance with a specialization in Insurance from The University of Alabama, and holds both the ARM and AINS designations. She remains deeply committed to ongoing professional development and staying at the forefront of industry changes, policy updates, and evolving coverage needs—ensuring her clients receive the most informed and up-to-date guidance possible.
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