What Is an Additional Insured?

An additional insured on an insurance policy is an individual or entity that receives protection under the policy — though they are not the primary policyholder. This coverage might apply only in specific situations, such as a particular event or project, or it could extend throughout the policy's entire term, depending on the terms of the endorsement.

Understanding additional insured endorsement can help businesses make informed decisions when purchasing insurance. Knowing when and why to add an additional insured can prevent gaps in coverage and potential legal disputes.

An additional insured refers to an individual or entity added to an insurance policy, granting them coverage under that policy. This is typically done through an additional insured endorsement, which modifies the policy to include the additional insured. The additional insured meaning revolves around providing protection to the added party for claims or lawsuits that arise due to the operations of the primary insured. For example, a contractor working on a project may request to be added as an additional insured on the property owner's liability policy.

Businesses often add additional insured parties to various types of business insurance, such as general liability insurance, commercial auto insurance and professional liability insurance. This endorsement helps protect the additional insured from claims related to the primary insured's activities. For instance, a landlord might request to be added as an additional insured on a tenant’s liability policy to protect against potential lawsuits stemming from the tenant’s business operations.

Adding an additional insured can create a shared responsibility between the primary insured and the additional insured. This means that if a claim arises, both parties may be protected under the same policy. However, it’s important to note that the coverage provided to the additional insured might be more limited than that of the primary insured, depending on the specifics of the endorsement.

Knowing the differences between an additional insured and a named insured is crucial to getting proper coverage. A named insured is the person or entity explicitly listed on the policy as the primary policyholder. This entity enjoys the full benefits of the insurance coverage, including protection against claims, access to policy limits and the ability to make policy changes.

In contrast, an additional insured is a third party added to the policy through an endorsement. While they receive coverage, it is generally more limited than the named insured. For example, an additional insured may only be protected against claims related to specific activities or operations. This means that while the additional insured has some coverage, they do not have the same rights and benefits as the named insured.

Another common point of confusion is the difference between an additional insured and a certificate holder. A certificate holder is a party that receives a certificate of insurance (COI) as proof that insurance coverage exists. The certificate holder has no rights to the insurance policy and does not receive any coverage. Their interest is simply in knowing that the insurance policy is in place.

On the other hand, an additional insured is actually covered under the insurance policy. They can make claims and receive protection under the policy, while the certificate holder cannot. For example, if a subcontractor provides a COI to a general contractor, the contractor is the certificate holder and is not covered by the policy unless they are also listed as an additional insured.

Understanding the difference between a certificate holder and an additional insured is crucial in business contracts. Companies may need to be listed as additional insured to receive actual protection under the policy rather than just holding a certificate of insurance as proof of coverage.

Here are some scenarios where you might want to add an additional insured to your policy.

• Entering into a contract that requires it: Many contracts, especially in construction or real estate, require adding a party as an additional insured.
• Working with subcontractors: General contractors often add subcontractors as additional insureds to ensure coverage for claims arising from the subcontractor's work.
• Leasing property: Landlords may require tenants to add them as additional insureds to protect against liability claims related to the tenant’s operations.
• Partnering with other businesses: Joint ventures or partnerships may involve adding one party as an additional insured on the other’s policy to protect both parties.
• Hiring vendors or service providers: Businesses may add vendors or service providers as additional insureds when they perform work on behalf of the business.
• Granting a loan: Lenders might require borrowers to add them as additional insureds to protect their financial interests.
• Organizing an event: Event organizers might require vendors or venues to be added as additional insureds to cover potential liabilities.

While adding an additional insured provides protection, there are limitations to this coverage. The additional insured's coverage often only applies to claims arising from the specific operations or activities the endorsement covers. For example, if a contractor is added as an additional insured on a client’s policy, they may only be covered for claims directly related to their work on the client’s project.

The additional insured may not have access to the full policy limits. In some cases, the primary insured’s coverage takes precedence, leaving the additional insured with reduced protection. For example, if a claim exhausts the policy limits, the additional insured may receive little to no coverage.

The cost of adding an additional insured to a policy can depend on several factors, including the type of insurance and the specific needs of the business. Typically, insurance companies may charge around $25 per month to add an additional insured to a professional liability policy.

The actual cost can also vary based on the insurer and the level of risk associated with the additional insured. For example, higher-risk industries or more complex endorsements may lead to increased costs​.

Selecting the right endorsement type, such as a blanket additional insured endorsement or a designated additional insured endorsement, also plays a role in determining the cost and coverage provided​.