In a litigious business climate, small business owners need to shield themselves. A common way to protect your interests is to be an Additional Insured on another business owners’ insurance policy.

Additional Insured (AI) status offers the organizations you do business with some of the liability protections you enjoy. It’s an important step to safeguard your business against the financial impact of third-party lawsuits over bodily harm, property damage, or advertising injuries. Read on for the fine print.

What is an Additional Insured?

An Additional Insured is a person or entity with whom you conduct business or have a contractual relationship. Listing an Additional Insured extends your liability or property insurance coverage to them. It includes protection against third-party claims resulting from the Additional Insured’s conduct on your behalf.

Generally, that means anyone you enter into a business relationship with, excluding your employees. Once you get an Additional Insured endorsement, the parties you’ve added are granted much of the same protection you have under the primary insured policy and they can file a claim if they are sued.

What is an Additional Insured endorsement?

An Additional Insured endorsement is a policy endorsement that extends coverage to 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.

A blanket Additional Insured endorsement allows business owners to extend their coverage to any business or person they’re contractually obligated to cover. This is useful for companies that work with multiple contractors, subcontractors, and other third parties.

When to add Additional Insureds to your insurance policy

There are several reasons small business owners may want to add Additional Insureds to their policies, including:

  • Contractual Requirement — Some businesses add Additional Insureds because regularly doing so is a stipulation in their contracts. This is common in event planning, where venues often want to be Additional Insureds on event planners’ general liability insurance and for most tradespeople when working as sub-contractors.
  • Government Statute — Certain permits and licenses may require business owners to name the governmental agency as an Additional Insured. Tradespeople, like plumbers and electricians, often run into these requirements.
  • Voluntarily — Business owners may also offer to extend insurance coverage to another business voluntarily. For instance, an IT consultant might offer to make a potential consultant as an Additional Insured to attract their talent.

Probably the most common reason a small business owner adds an Additional Insured is that they’ve rented business space. Commercial landlords often require they be listed as Additional Insureds to their tenants’ liability coverage.

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 on adding Additional Insureds.

What’s an Additional Insured vs. a Named Insured?

A Named Insured is the party designated explicitly as protected by an insurance policy. The Named Insured is responsible for the premium payments and benefits from all the coverage available in the policy.

Additional Insureds neither own the policy nor are they fully protected. They are, however, named on the Certificate of Insurance (COI)
(COI), which satisfies most third-party requirements for proof of insurance. Only Named Insureds have the authority to generate a COI, and Additional Insureds can obtain COIs from them. By the way — with Thimble, you can download as many COIs as you need at no additional cost.

What’s an Additional Insured vs. a certificate holder?

A certificate holder is any person or business entity that your COI lists by name and address. Being a certificate holder conveys no policy coverage and no liability. In most cases, a certificate holder has asked for proof of insurance. However, you’re legally obligated to notify certificate holders if you make changes to the policy or decide to cancel it altogether.

Why would someone want to be a certificate holder? Having a COI to prove you have the right insurance could be the difference between being hired or losing out on the job. That said, a potential client might also request to be listed on your policy as an Additional Insured because of the protections it provides.

Business owners who are Additional Insureds are often granted that status in more than one business relationship (think venue owners, tradespeople, and event planners). These people can use the Thimble Certification Manager to make it easier to request and organize the COIs they receive.

Are there limitations on Additional Insureds?

Additional Insured coverage is typically limited to:

Work performed for Named Insured — For instance, if a contractor hired a painter to help with sections of a home, the contractor is usually only insured for any claims stemming from the work done on that specific job.
Specific types of liability — An important example is that you can’t add Additional Insureds to your professional liability insurance. However, coverage can be limited to certain types of liability, like vicarious liability, where your business is held responsible for the actions of another party.
The insurance provided by the terms of the contract — Essentially, this means the coverage for the Additional Insured can’t be broader than what’s described in the contract.

Can an Additional Insured file a claim?

Yes, Additional Insureds can usually file a claim if they’re accused of causing third-party bodily injury or property damage. The type of claim they can file depends on the types of coverage within the policy.

General liability insurance provides financial protection for the Named Insured and any Additional Insureds against claims due to third-party bodily injury or property damage. Say that you’re a subcontractor who is an Additional Insured on a general contractor’s policy. If you accidentally break a piece of furniture while you’re working at a client’s home, you could be held liable, and you could file a claim on your policy to pay for the cost of the furniture repair.

Getting covered with Thimble

Whether you need general liability insurance or professional liability insurance for your business, Thimble’s affordable coverage offers you the protection you need and total control over your 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.”