In today’s litigious business climate, being a small business owner without the protection granted by liability insurance is like going into battle without armor (you just can’t afford to risk it). In addition to shielding you from a liability suit, general liability insurance demonstrates to potential clients that your business is legitimate and safe to work with. Having a Certificate of Insurance (COI) on hand could be the difference between being hired or losing out on the job.
That said, these days, a potential client might also request to be listed on your policy as an Additional Insured. Not sure what that is? We’ve got your answers right here. Let’s do this.
What is an Additional Insured?
Additional Insured is a status that can be added to any general liability insurance policy that extends coverage to further individual(s) or groups that were not included from the outset. Once an Additional Insured endorsement is made, the parties included will then be granted much of the same protection under the primary insured policy, which would allow them to file a claim should they be sued for an event related to your services.
Typically, the relationship can be boiled down to three parties:
- Policyholder – Refers to the business, person, or group of people whose name the insurance policy is filed under. So, for the purpose of clarity, you are the policyholder in this example. Also, it’s important to note that the Named Insured is not always the same as the policyholder, since that title designates the individual or company who the policy is purchased to protect.
- The Additional Insured – Any individual or business that you elect to attach to the original policy. If added, they are also then named on the certificate. That said, they’re not automatically sent a certificate; rather, you must send them a physical or digital copy.
- Certificate Holder – A certificate holder is any person whom the Certificate of Insurance lists by name and address. In most cases, the certificate holder will ask for proof of insurance with them listed on the document. In addition, you’re legally obligated to notify the certificate holder if there are changes made to the policy or if you decide to cancel it altogether.
Reasons for adding an Additional Insured
Naturally, you may wonder what the purpose of Additional Insureds might be. Typically, it comes down to one of three reasons:
- Contractual Requirement – This is often the result of a contractual stipulation that requires Additional Insured coverage. For example, if you are hired to work for another company, they might request that you add their company as an Additional Insured on your general liability contract. This duty of coverage must be laid out in writing and then signed by both parties.
- Governmental Statute – There are some permitting instances where you may need to add a governmental agency as an Additional Insured in order to obtain the permit.
- Voluntarily – A business may also decide to extend insurance coverage to members that work on its behalf. For example, a charity of a church might insure members who regularly participate and represent them in fundraisers or philanthropic events.
Examples of business relationships that typically require an Additional Insured include:
- Contractor and subcontractor
- Landlord and tenant
- Vendor and product manufacturer
- Property owner and contractor
- Governmental agency and permit holder
What does Additional Insured status cover?
So, if a person or entity is added to the policy, what does that mean for them, and what does coverage entail? The scope of coverage is typically limited to an extent, and such limitations are often listed in the insurance policy.
It does not grant the Additional Insured carte blanche freedom (limitless freedom) based on the assumption that they won’t face any liability issues in all matters. Rather, it’s limited to claims that come from work or operations the Named Insured is doing on behalf of the Additional Insured.
For instance, if a contractor hired a painter to help with sections of the home, the contractor would only be insured under the painter’s policy for any claims that might arise from the painting work done on that specific job.
How do you add Additional Insureds to your general liability policy?
One of the many benefits of using Thimble’s Small Business Insurance is that adding Additional Insureds is totally free. And, adding them to your existing policy is incredibly easy to do. It can be done during the initial purchase stage or after you’ve already begun coverage.
Getting covered with Thimble
In a world where it’s practically impossible to distinguish one insurance provider from the next, Thimble shines bright. Whether you need a general liability or professional liability insurance policy for your business, Thimble’s on-demand coverage offers businesses protection in an affordable, flexible, totally new way.
It’s a newer type of insurance that works when you do. Get covered by the hour, day, or month, and save when you’re done with the job. On top of providing coverage limits of $1 million or $2 million, quotes are free, general liability policies have zero deductions, and adding all Additional Insureds is free. That’s radically simple.
Want to see for yourself? Visit the Thimble mobile app and get insured in sixty seconds.
Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.