1. Definition and Types of Insureds
In property and casualty insurance, an insured is anyone who is covered under the policy, whether named or not. Understanding the different types of insureds is crucial for knowing who's protected!
Insured
Anyone covered (named or not)
Named Insured
Name appears on Dec Page
First Named Insured
First name on Dec Page (controls policy)
Additional Insured
Added by endorsement
Insured
Anyone who is covered under the policy, whether named or not.
Examples of Unnamed Insureds:
- - Spouse (even if not named on the policy)
- - Resident relatives who are members of the named insured's household
Example:
John buys a homeowners policy. His wife Sarah and their adult daughter who lives with them are automatically covered as insureds - even though only John's name is on the policy.
Named Insured
The individual(s) whose name appears on the policy's Declarations.
Example:
A homeowners policy Dec Page shows: "Named Insured: John Smith and Mary Smith." Both John and Mary are named insureds with full rights under the policy.
First Named Insured
The individual whose name appears FIRST on the policy's declaration. This person has special powers - especially in commercial policies!
In Commercial Policies, the First Named Insured:
Controls the Policy
Has authority over policy decisions
Can Cancel
Only one who may cancel the policy
Request Changes
Only one who can request policy changes
Pays & Reports
Responsible for premiums and reporting losses
Example:
ABC Corp and XYZ Corp are both named insureds on a commercial policy, with ABC Corp listed first. Only ABC Corp can cancel the policy or request coverage changes. XYZ Corp is covered but doesn't control the policy.
Additional Insured
Individuals or businesses that are NOT named on the declaration page, but are protected by the policy, usually for a specific interest. Added by endorsement.
Key Points:
- - Not on the original declarations page
- - Added via endorsement
- - Usually protected for a specific interest only
Example:
A contractor hires a subcontractor. The general contractor requires the subcontractor to add them as an "additional insured" on the subcontractor's liability policy. Now if someone sues over the subcontractor's work, the general contractor has coverage too.
| Type | On Dec Page? | How Added | Control? |
|---|---|---|---|
| Insured | Not necessarily | Automatic (spouse, relatives) | No |
| Named Insured | Yes | Listed on Dec Page | Shared |
| First Named Insured | Yes (first) | Listed first on Dec Page | Full control |
| Additional Insured | No | Added by endorsement | No |
2. Duties of the Insured After a Loss
Important!
In the event of a covered loss, the named insured is required to fulfill these duties. Failure to do so could result in claim denial!
Protect Property from Further Damage
Take reasonable steps to prevent additional loss after the initial damage.
Example: After a storm blows a hole in your roof, you should put a tarp over it to prevent rain from causing more damage inside. Don't just leave it open!
Prepare an Inventory of Damaged Property
Document all damaged items with descriptions, quantities, and values.
Example: After a fire, list everything damaged: "Samsung 55" TV - $800, Leather sofa - $1,500, 50 books - $400." Take photos if possible!
Cooperate with the Insurer
Work with the insurance company in settling the loss. Answer questions, provide documentation.
Example: When the adjuster calls to schedule an inspection, be available. Provide receipts when asked. Don't refuse to answer questions about the loss.
Notify Police (If Theft)
In case of theft, report the loss to law enforcement.
Example: Your jewelry is stolen during a break-in. Call the police and file a report. You'll need the police report number for your insurance claim.
Submit Proof of Loss
Provide a signed, sworn proof of loss within the allotted time after being requested.
Example: The insurer sends you a Proof of Loss form. You must complete it accurately, sign it (often notarized), and return it within the specified deadline (often 60 days).
Memory Trick: "PICPS" (Pick Ps)
Protect property, Inventory damage, Cooperate with insurer, Police (for theft), Submit proof of loss
3. Obligations of the Insurance Company
The insurance company, in return for premium, has its own obligations to fulfill. It's a two-way street!
Be Fair in Underwriting
The insurer must evaluate risks fairly and not discriminate unlawfully when deciding whether to offer coverage or setting premiums.
Example: An insurer can't refuse coverage solely based on race, religion, or national origin. They must base decisions on legitimate risk factors.
Pay Covered Losses
The insurer must pay for losses that are covered under the policy terms. This is the core promise of insurance!
Example: If a covered peril (fire) damages your home, the insurer must pay for repairs up to your policy limits, minus any deductible.
The Insurance Exchange
INSURED
Pays Premium
Fulfills Duties
Follows Conditions
Exchange
INSURER
Fair Underwriting
Pays Covered Losses
Honors Policy Terms
Exam Trap Alerts
First Named Insured has CONTROL: In commercial policies, only the first named insured can cancel or request changes. Other named insureds cannot!
Spouse is automatically covered: Even if not named on the policy, a spouse living in the household is typically an insured.
Additional Insured = Endorsement: Additional insureds are NOT on the dec page - they're added via endorsement for a specific interest.
Proof of Loss must be SWORN: It's not just a form - it must be signed and sworn (often notarized). False statements are fraud!
Quick Reference: Part 3 Summary
Types of Insureds
- - Insured: Anyone covered (named or not)
- - Named Insured: Name on Dec Page
- - First Named Insured: First on Dec Page (controls policy)
- - Additional Insured: Added by endorsement
5 Duties After Loss (PICPS)
- 1. Protect property from further damage
- 2. Inventory damaged property
- 3. Cooperate with insurer
- 4. Police (notify if theft)
- 5. Submit sworn proof of loss
Insurer's Obligations
1. Be fair in underwriting (no unlawful discrimination)
2. Pay covered losses (the core promise)