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What is an Additional Insured?
Additional insured refers to a type of status that's typically associated with general liability insurance policies that provide other groups or individuals with coverage, although they weren't named in the initial policy. Therefore, the additional insured are protected under the named insurer's policy and can file an insurance claim when sued. That said, the additional insured applies when the named policyholder must provide coverage to additional groups or individuals for the new risks that emerge out of their connection. The additional insured are added to an insurance policy via an amendment known as an endorsement.
The individuals or groups added are on the same policy and have the same coverage as the named insured. Every business needs to have general liability insurance to protect itself from bodily injuries or property damage. The initial insurance policy can insure other parties if they are included as additional insured. However, to understand how additional insured works, thorough research is required. You should also consult your insurance agent to make the right choices moving forward. Getting a Broker, who can help you determine who needs to be on the policy and who doesn't can make things alot easier, get a quote today!
You should familiarize yourself with certain terms concerning additional insured. These terms include:
- Policyholder – refers to the person, company, or group that purchased an insurance policy and benefits from it.
- Additional insured – refers to the person or group/company you add to your insurance coverage. Sometimes, policyholders must extend their liability coverage to additional parties, especially if the projects are risky.
- Although the additional insured can be named within the policy, some policies prefer the additional blanket endorsement. Here, the additional insured names are not included in the amendment. Instead, the named insured's policy includes a general description of the individuals or groups/companies.
- Certificate holder – certificate of insurance (COI) is used to prove that you have valid insurance. Ergo, a certificate holder refers to the person you've provided with your COI. The holder usually requests your proof of insurance and can contact your insurance provider to confirm your coverage.
When a large company/business is doing business with a smaller company/business, the smaller company/business must present proof of insurance. This is crucial to protect the larger business from unexpected financial risks. Larger and more powerful businesses require small operations to name a large business additional insured. While this might sound counterintuitive, it all comes down to leverage. A larger business has more bargaining power because most small businesses want to do business with them. However, it does not affect your coverage when you list an individual, company, or business as additional insured. The additional insured party gets protection/coverage for any liabilities they may bring to their business. Do you have the iright additional insured listed on your policy? Not sure where to start? Allow us to help you!
For example, if you are a personal trainer and you've listed a gym as additional insured, you would be covered if you are held liable for an accident.
Additional Insured in Different Industries
There are numerous reasons why businesses want to be included as additional insured. Here are examples of business added in additional insured:
I. Fitness
Working in the fitness industry comes with its risks. Nowadays, most fitness professionals are self-employed. Therefore, fitness facilities require them to purchase professional and general liability insurances. Secondly, the fitness contractors must add the gyms or studios as additionally insured for coverage if the fitness contractor is held liable for negligence or injuries.
II. Construction
General liability protects building managers and developers from property damage and bodily harm claims. A general contractor always ensures that the contractor he hires has general liability insurance. They are then added as additional insured to cushion themselves if the hired contractor is responsible for damages or injuries.
III. Accounting
Accountants also face liabilities in the services they provide. For example, miscalculations and typos can cost a client a fortune in taxes, fees, and fines. Therefore, clients require accountants to buy professional liability insurance (Errors & Omissions insurance) before hiring them. In some instances, the clients ask to be included as additional insured just in case they have to defend themselves from typos or miscalculations made by the accountant.
IV. Hairstyling
Hairstyling is a professional where some hairstylists employ themselves. Typically, hairstylists rent a saloon booth to make money. Since a hairstylist can be held liable if a client trips and gets injured or damages their hair, professional & general liability insurance are a must-have. Booth renters ask to be included as additional insured to benefit from the coverage in case of a liability.
V. Real Estate
Commercial auto coverage is crucial in real estate because agents drive around showing properties. If an agent is involved in an accident and liable, the broker might enjoy coverage if he was included as an additional insured on the auto coverage. On the other hand, property managers and commercial building owners ask for additional insured in the tenant's insurance policy. As additional insured, they can protect themselves if a tenant's customer or visitor gets injured. Also, if the tenant damages the building, the property manager or owner is covered under the tenant's insurance policy.
What is the cost of additional insured?
Compared to premiums, the total cost of adding additional insured is low. If you want to add an additional insured to an insurance policy, there are a few things you should consider:
- Consulting an insurance agent
- Review your insurance policy
- Determine whether you can add an additional insured to your initial policy
- Assess the level of coverage requested by the additional insured
After carefully determining all these factors, you must fill an additional insured additional form. If you have any questions, please do not hesitate to get assistance from your insurance agent. An experienced insurance agent can answer any questions you might have and explain the limitations that apply to your additional insured. Remember, if the additional insured is covered for the life of your insurance policy, it is prudent to check when renewing the policy to ensure nothing has changed or if you have to make any changes. Get a Quote Today, call us!
Finally, it is advisable to include contractors as additional insured. However, they should also purchase their own insurance policy for safety precautions. Since the insurance policies are different, the extent of protection to an additional insured can vary greatly.