In today’s litigious business climate, it’s important for small business owners to shield themselves from every potential hiccup. One way to do this is to add Additional Insureds to your insurance policy to safeguard against unforeseen risks.

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?

To be clear, an Additional Insured is a term for additional people you want to include in your liability coverage in case their actions or omissions on your behalf cause damage. 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 whom the policy is purchased to protect.
  • Additional Insured – Any individual or business that has a shared liability exposure with the Named Insured or financial interest in the party being insured. If added to the policy, 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 COI 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.

Can an Additional Insured file a claim?

In short, yes, Additional Insureds can file a claim if they’re sued.1 According to the Insurance Information Institute (III), business owners often add additional insurance to the liability insurance policies including:2

  • Commercial general liability: For business owners, this policy safeguards against third-party bodily injury and property damage claims, personal and advertising injury claims as well as medical payments for bodily injuries.
  • Excess and umbrella liability: This coverage adds additional protection for current policies. It’s good to have in case your current policy isn’t enough to cover the expenses associated with third-party claims.

What is an Additional Insured endorsement?

According to the International Risk Management Institute (IRMI), an Additional Insured endorsement is a policy endorsement small businesses can use to cover other individuals or entities. In some instances, insurance companies require policyholders to specifically name each additional insured they want to add to their policy, but others allow policyholders to have a blanket Additional Insured endorsement.3

A blanket Additional Insured endorsement allows business owners to extend their coverage to whomever they are contractually obligated to include. This is useful for companies that work with multiple contractors, subcontractors, and other third parties.4

Why use Additional Insureds?

Businesses tend to add Additional Insureds to their policies whenever they need to fulfill their obligations with their contractual partners, per the III. Companies in the construction, marine and energy businesses typically add Additional Insureds to their insurance policies.5 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
  • Lessor and lessee
  • 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 limitless freedom based on the assumption that they won’t face any liability issues in all matters. Rather, it’s usually 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 to add Additional Insureds to your insurance policy

One of the many benefits of using Thimble’s small business insurance is that adding Additional Insureds comes at no additional cost. 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. Use our how-to guide to add Additional Insureds.

Getting covered with Thimble

Whether you need general liability insurance or professional liability insurance for your business, Thimble’s affordable coverage offers businesses the protection they need and gives them total control over their policy.
We can give you the insurance that works for your timeframe and budget. Once you buy your policy, you can add as many Additional Insureds as you need at no extra cost. That’s radically simple. Want to see for yourself? Visit the Thimble mobile app and click “get a quote.”

Sources:

  1. Investopedia. Additional Insured. 
  2. Insurance Information Institute (III). Additional Insureds: How Policy Language Can Create Dramatic Consequences. 
  3. International Risk Management Institute. Additional Insured Endorsement. 
  4. Investopedia. Blanket Additional Insured Endorsement. 
  5. Insurance Information Institute. Additional Insureds: How Policy Language Can Create Dramatic Consequences. 

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.