What is an additional insured?
Wondering about additional insureds is an excellent problem to have. It likely means you’re growing your business and entering into partnerships. You’re taking on bigger jobs and subcontracting—or hiring subcontractors.
But who insures what for whom are confusing questions when you’re new to these endorsements. What is the terminology? Who should have additional insured coverage? Who gets additional insured status?
Here are the basics to get you started.
Additional insured vs. policyholder vs. certificate holder
Let’s say you buy an insurance policy for your small business. Congrats! You’re what’s called the policyholder or the named insured. A named insured is entitled to the benefits of the policy. They also pay for its upkeep.
As a policyholder, you can add others to be covered under your policies. You will still be the named policyholder responsible for paying your premiums. But the additional insured endorsement extends your commercial general liability coverage (CGL) to another party.
An additional insured is a person or organization that enjoys the protection of that policy without responsibility for insurance premiums. They’ll get coverage in the scope of their work for the policyholder’s business. However, your policy won’t cover their work outside your mutual business.
- You’re an accountant who is required to name the firm where you see some clients as additional insureds. Your policy does not cover the firm for clients you see on your own.
- You’re a pond designer who named one landscape company as an additional insured. They will not have coverage for a water feature they completed without you.
If a client sues an additional insured’s company for work involving your business, the company will be able to file a claim against your insurance carrier. The benefits could include the right to legal representation against third-party claims or coverage for damage caused. As an additional insured, they’ll be able to keep losses off their history and protect their premiums.
Why is an additional insured endorsement important?
- If subcontractors add you to their policies, it can protect you from losses that impact your premiums and loss history.
- If clients add you to their policies, it can provide you a legal defense over your work for the client.
- If clients add you to their policies, it protects you from using their own policy to defend against a claim when the fault lies with the named insured’s organization.
Who should be an additional insured? You. Companies always benefit from an extra layer of liability protection. But if your business subcontracts, a general contractor may require you to name their business as an additional insured on your liability insurance. The additional insured endorsement lets you work with larger businesses and prove you’re not a risk to them.
Many companies and landlords ask you for a Certificate of Insurance (COI) to show you are currently insured and the terms of that policy. You can grab yours online from Huckleberry and hand it over—they are now certificate holders. That does not guarantee them coverage. A COI shows your coverage limits and affirms that you carry an additional insured endorsement.
Examples for business owners and contractors
Additional insured requirements are standard in subcontracting industries like construction. Here are industry examples.
You are a subcontractor
You own a landscaping company that serves as a subcontractor for a residential construction company. The general contractor demands you add them as additional insureds on your business liability insurance as a risk management tool. During the project, one of your landscape workers damages an underground sprinkler system while using the edger.
The developer might sue the construction company for property damage. The construction company was not at fault, so the owner feels confident knowing the subcontractor’s insurance can cover claims resulting from the landscape company’s negligence.
A risk of not having the subcontractor name the construction company as an additional insured is that when sued, the construction company is responsible for defending the developer’s claim against them.
You use subcontractors
You and a small group of dentist colleagues are excited to open your own clinic. You own a majority stake in the clinic, and you are the named insured. You work with independent subcontractors, like the endodontist, who does work for the clinic when needed.
One patient developed an infection after a recent root canal and had the tooth extracted at another clinic. The patient plans to sue the endodontist and your clinic since they mentioned pain and your endodontist assured him it could not be an infection. Requiring your subcontractors to add you as an additional insured means their insurance will cover your clinic’s legal fees.
Similar situations include business owners with independent contractors: hair stylists, nail technicians, physicians, and counselors.
You own a commercial building
You are a lessor. You rent an adorable commercial cottage to the local pizzeria. A customer slips in the dining room during ongoing operations and sustains a bodily injury, naming you and the pizzeria in a lawsuit.
You would avoid a claim on your record by requiring your tenant, Dough Mama’s, to designate you as the building owner as an additional insured on their commercial property policy.
How to add an additional insured to your small business insurance policy
Choose a scheduled vs. blanket endorsement
Typically, you add a new person to your policy with an endorsement from your insurance company. You’ll just need to name the entity you want to add. It’s an amendment to your current policy and is also called a scheduled endorsement.
However, some policies require a different process called a blanket additional insured endorsement. This approach can be called an automatic additional insured endorsement. It doesn’t require you to name an individual or group. It just describes the individuals to whom you’re extending coverage during their work for you.
Make sure you have liability coverage
If you require a subcontractor to add you to their policy, you’ll need your own coverage, too.
Additional insureds don’t enjoy all the same coverage as a named insured. For example, if the additional insured’s negligence is the cause of the claim, the carrier won’t cover those damages. The endorsements are great tools to keep liability where it belongs.
Here’s a tip: Check your policy limits
Consider the minimum coverage you’ll need for an additional insured. Different contractors and industries have other requirements, usually not less than $1,000,000 combined single limit or $2,000,000 aggregate. Automotive liability, professional liability for licensed workers, or excess liability may also be required.
You can name multiple additional insureds on your policy endorsement, but you’ll only have one limit to share with all of them. Is it enough? Contractors adding multiple additional insureds might want a higher limit of liability.
How to add an additional insured to your Huckleberry policy
How do you become an additional insured? Require your subcontractors to name your company on their general liability insurance policy or carry a blanket endorsement that includes an indemnification clause. Be sure you have this contract in place before completing any work, or their policy won’t cover you.
On the other hand, if you’re working with subcontractors, vendors, or lessees, you are in a solid position to benefit from requiring those professionals to have their insurance agents add you to their named insured’s policies. You’ll protect yourself from having to file a claim on your own insurance policy.
To add an additional insured to your Huckleberry policy, give us a call or reach out online. We’ll connect you with the right people who can help you update your policy.
Considering new partnerships is all the more reason to check out our workers’ compensation calculator. Find out what you’re likely to pay for this required coverage as you grow.