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What is a named insured driver?

Yahoo Personal Finance· Getty Images
Updated 5 min read

As you might guess, the named insured on an auto insurance policy is the individual who purchases coverage and has their name listed on the policy declarations page.

The named insured is responsible for paying premiums on the policy as well as filing claims with the insurance provider. They are the only ones authorized to make changes to the policy, such as adjusting coverage, adding authorized drivers or canceling the policy. In some cases, the named insured might be more than one person, such as spouses or joint owners of a vehicle.

As the owner of the auto insurance policy, the named insured is presumed to be the primary driver. This means that their driving record, credit history and more are taken into account when the carrier calculates premiums. The named insured also decides whom the policy covers, which affects premiums.

The named insured may also be referred to as the policyholder or primary insured. When there is more than one, the second person may be listed as “additional named insured.”

Beyond the named insured, other drivers may be covered or listed on an auto policy. Because the terms used to identify those drivers can sound similar — like named driver, non-rated driver and excluded driver — it’s important to understand the differences.

Additional drivers — also known as named drivers — can’t manage the coverage, but are added to the policy with permission to drive the covered vehicles and share full coverage. These additional drivers could include teenagers or adult children living in the home, unmarried partners or even spouses who have their own auto insurance policy elsewhere (but have access to your vehicle). You can add named drivers who don’t live in your home but regularly drive your vehicle, such as a close friend or the nanny.

An authorized or named driver on an auto policy is considered a rated driver, which means that their actions can affect what you pay for coverage. Just adding another driver is likely to raise your rates. But if they get into an accident, get a speeding ticket or have their license suspended for moving violations, you may see an additional increase in your cost of coverage.

Some insurance policies offer cheaper premiums by limiting coverage only to drivers named on a policy. These have been banned in some states.

A non-rated driver is an individual who lives in your home or may occasionally drive your vehicle, but won’t affect your policy’s premiums. Also known as a listed or list-only driver, these individuals may have regular access to your vehicle but either don’t drive it often or have their own insurance coverage.

This may be the case with unmarried partners, roommates, deployed military family members or an your adult child who is living with you temporarily. When someone is added as a non-rated, listed driver, they may be allowed to borrow your vehicle in a pinch, but aren’t expected to drive your car regularly. Your insurance company will likely only allow listed drivers who have their own vehicle and/or valid insurance with proof of coverage.

Because these drivers have their own valid coverage, they won’t be taken into consideration when calculating the premiums for your policy.

Most traditional auto insurance policies extend coverage to permissive drivers, the occasional drivers who might borrow your vehicle, such as your best friend. These are non-rated drivers; that is, their driving history and other rating factors are not included in your rate calculations. But if your friend borrows your car and causes an accident, as long as they had your permission to use the car, your liability insurance should cover the damage.

In some states, insurers can offer cheaper premiums by reducing coverage for permissive drivers through provisions known as step-down clauses. The coverage limits enjoyed by named drivers don’t apply; instead, coverage is limited to the state minimum.

There may be someone in your household you want to explicitly say is not covered in your policy. Once named as an excluded driver, this person’s rating factors (such as their driving history) won’t be factored into your rate. This may be beneficial if you have roommates who aren’t allowed to use your car, for example, or live with a sibling who has a poor driving record.

The caveat is that once a driver is excluded from coverage, they are expected not to have access to your vehicle. If they drive your vehicle and get into an accident, your insurance will not cover any losses. You could also be held liable for any damage or injuries that occur.

Read more: What happens if someone else crashes your car?

Yahoo Personal Finance

If you’re not the only person who ever drives your car, or if other adults have access to your vehicle, you may need to add other individuals to your policy in some capacity.

Not all added drivers fall into the same category, though. Determining which drivers should be named, added to, or excluded from your auto insurance policy will depend on how your vehicles are used, who lives with you, and what you can afford to spend on your premiums.

If you have questions, consult an insurance professional to ensure you have as much insurance as you need, the type of coverage that fits your situation and all available discounts applied. To save money, shop multiple companies for quotes and consider bundling your auto policy with your renters or homeowners insurance.