When you operate a company, you may perform work for other businesses or hire others to do work for you. Entering into business relationships with other companies can bring additional risks. With an additional insured endorsement, insurance coverage can be extended to other parties that weren’t named in the initial policy, helping to mitigate some of those risks. 

What is an additional insured?

An additional insured is a company or person that can receive insurance coverage under another company’s business insurance policy. When the original policyholder requests that another company be added to their insurance policy, the second company becomes an additional insured. Although they are not named in the original policy, additional insureds are able to file claims under the policy. 

What is an additional insured endorsement?

An additional insured endorsement extends some of the policyholder’s coverage to another company, group, or individual. In the event of a lawsuit, the additional insured can then file a claim under the primary insured’s policy. This is important in situations where one company’s activities increase risk for the company they are working with. 

It’s common for additional insureds to be added by endorsement to general liability policies, commercial property policies, and commercial auto policies. Coverage can be added for a particular period of time, for the length of a particular project, or for the length of the policy. Having additional insured status is beneficial for companies because they can file a claim under the named insured’s policy if they are sued and wouldn’t have to go through their own insurance policy to get coverage, meaning they will have fewer claims on their record. 

Example:

• You rent a storefront for your bakery. The landlord may require you to add them as an additional insured under your general liability policy. If a customer slips and falls at your bakery, sustains an injury, and names both you and your landlord in a lawsuit, your landlord could file a claim under your general liability policy, which would cover their legal fees and any resulting settlements. 

When are additional insured endorsements necessary?

When a business hires another company, it’s common for the hiring business to require the other company to add them as an additional insured. This means that if a lawsuit or accident occurs as a result of the other company’s work or negligence, the hiring company would not have to handle the claim through their own insurance. If you are a business owner or contractor, your clients or partners may ask to be named as additional insureds before they sign a contract with you. If you hire contractors or vendors, you may ask to be named as an additional insured on their insurance policy. 

The named or primary insured—the business the insurance policy belongs to—receives the broadest level of coverage from the policy. Coverage for additional insureds can be more limited and may only cover claims related to acts by the primary insured. Some endorsements only offer coverage for some types of liability, such as vicarious liability. It’s important to clarify what is covered with your insurer. Typically, the insurer will provide funds for the additional insured’s legal defense, court fees, and settlements. 

Example: 

• You run a hardware store. Your landlord is listed as an additional insured on your general liability policy. If one of your customers trips over a misplaced ladder in your store and is injured, she may sue both you and your landlord; in this scenario, your general liability policy would cover your landlord. However, if someone is injured while visiting your landlord’s offices, your general liability policy would not provide any coverage for your landlord since this incident isn’t related to acts by your company. 

To add an additional insured to your policy, you will need to discuss coverage with your insurance company. It is usually not expensive to add an additional insured to your policy.

What is the difference between additional insured and additional named insured?

Although the terms are very similar, an additional insured and an additional named insured are distinct concepts with different meanings.

An additional insured is a company or individual added to an insurance policy by endorsement. This extends some of the primary insured’s coverage to the additional insured. Typically, coverage is restricted to claims that are related to the activities of the primary insured company. 

An additional named insured is usually connected to the primary named insured, but might be named somewhere else in the contract, usually in the policy declarations. This could be a co-owner, partner, or other affiliated party. Additional named insureds share the same coverage and policy limits as the primary named insured. You cannot be added as an additional named insured by endorsement. 

What does blanket additional insured mean?

Blanket additional insured endorsements extend liability insurance coverage to multiple additional insureds without requiring the policyholder to individually name each party. Companies that regularly work with others may need to provide additional insured status in many situations, and it would be costly and impractical for a company to individually name each individual or business with its insurer whenever it’s necessary. Blanket additional insured endorsements can extend coverage to everyone that fits into a certain group defined by the named insured. Typically, the named insured must have a contract with the other party indicating that additional insured status is required. 

Example:

• You are a general contractor and are frequently hired by construction companies to work on projects. Construction companies typically contractually obligate you to add them as additional insureds. Rather than individually securing additional insured status for each construction company, your policy offers blanket additional insured status. The policy extends coverage to all construction companies you sign a contract with, simplifying the process.

Additional Insured vs. Additional Interest

It’s easy to confuse an additional insured with an additional interest, but they are two separate concepts. 

An additional insured can be added to another company’s insurance policy by endorsement; the additional insured may then make a claim under that policy if an incident occurs. 

An additional interest is a group or individual who does not have ownership in the property being insured but has a financial stake in it. For example, a business that owns commercial property may list their mortgage lender as an additional interest on a commercial property policy. The lender has a vested financial interest in the property but is not part of the ownership. 

Many insurers will add companies or individuals as additional interests on insurance policies. This means that the additional interest will be notified if the policy lapses or is canceled, but it doesn’t confer any insurance coverage. Additional interests can typically be added at no extra charge. 

What is the difference between a certificate holder and an additional insured?

A certificate of insurance (COI) is a document that verifies a company’s active insurance policies and summarizes coverage details. When a company plans to work with another business and needs to confirm insurance coverage, they can request a COI; typically, anyone who receives a COI becomes a certificate holder. Unlike additional insured endorsements, COIs are solely informational documents and do not provide any coverage to the certificate holder. Although it is not required, many insurers will notify certificate holders if a policy is canceled. 

In contrast, a company or person with additional insured status does have some coverage under the policyholder’s insurance policy. Those named with additional insured status may be listed on your certificate of insurance. 

Final Word

When you work with another company or individual, new risks can arise as a result of your partnership. Additional insured status is a way to extend protection for these new risks to your business partners. If you are hired by another company, they may ask you to add them as an additional insured on your insurance policy, extending your insurance coverage to them if your activities result in a claim. If your company hires another business, you can also require that your company be added as an additional insured on their policy. With this coverage, companies can be assured that they won’t have to expend their own resources to handle lawsuits and claims caused by the activities of partner companies.