In the insurance industry, an additional insured is defined as someone who is covered by an insurance policy for which they are not the policyholder.
This coverage is usually contingent on an indemnity agreement between the primary policyholder or “named insured” and the party wanting to be added to the policy.
An additional insured can take the form of an individual or a group and is typically not granted the full spectrum of protection extended to the policyholder.
Which types of insurance qualify for an Additional Insured?
The additional insured classification is popular on auto policies but can often be applied to many different types of coverage.
Rather than limit the types of coverage that are eligible for adding an additional insured, most insurance providers instead limit the specific protections allowed to be extended. Some of the more common protections that can be extended to an additional insured include:
Legal Costs: In most cases, a general liability policy (Link) can be extended to cover an additional insured. This coverage can help cover the cost of legal defense, court costs and settlements or judgements if the additional insured is named on a lawsuit against your organization.
Property Damage: In some cases, an additional insured can be added to a Commercial Property Policy (LINK). This is a common practice in the commercial rental industry with many landlords requiring lessees to add them as an additional insured on their commercial property coverage.
Commercial Auto Liability: More often than not, a policyholder of a Commercial Auto Policy (LINK) can opt to extend that coverage to an additional insured. This practice is common with delivery businesses and other organizations that regularly have employees driving company-owned vehicles.
Additional Insured as a Subcontractor
If you work as a subcontractor, it would be wise to ask about being added as an additional insured on the policy of the General Contractor.
All too often a subcontractor ends up with a big bill because they were not required to carry their own insurance to work on a job and something went wrong. Never assume that just because the General Contractor running a project has insurance that you are covered as a subcontractor.
The last thing you need is to find out the GC wasn’t carrying the proper coverage to cover your liability in the aftermath of an incident.
When Should I Add an Additional Insured?
As the named insured of your policy, it’s important to know when it makes sense to share your coverage with another person. Just because a subcontractor or client asks to be added to your insurance policy, does not always mean you should do so.
While each situation is different, some examples of when it may be smart to add an additional insured to your policy include:
- If you are a General Contractor on a project with a contract stating you’ll be held liable for subcontractor damages.
Even if your subcontractor has their own policy or claims they are “covered”, adding them as an additional insured to your policy can save huge headaches down the line.
- If you are a commercial property lessor that hires a third-party service company (i.e. Cleaning Service) to work on your property.
When it comes to hiring third parties and subcontractors, it’s always better to be safe than sorry. Whether or not your service company claims to carry the proper insurance to limit their liability, the risk of getting stuck with a bill from a tenant for damage or theft is too big to ignore.
- If you are a business owner with employees that drive company vehicles, they should almost always be named as additional insured on your Commercial Auto Policy (LINK).
Carrying the proper liability and collision coverage on your commercial vehicles does not necessarily mean they are covered while being driven by employees. Adding all drivers as additional insured parties can help limit your liability when your vehicles are on the road.
Beyond knowing when it makes sense to add an additional insured to your policy, it’s also important to know when it makes sense to request being added to the policy of another person or business.
Here are a few examples of when you should ask to be added as an additional insured:
- If you are a commercial property owner that leases retail or office space to tenants.
Failing to get named as an additional insured on the General Liability and Commercial Property policies of your lessees can expose your business to dangerous coverage gaps and legal liabilities.
- If you are a General Contractor hiring a subcontractor who plans on carrying their own insurance on a job.
Not only does being named an additional insured on your subcontractor’s policies offer an extra layer of protection for your business, it can help give you clarity into whether or not they have the proper coverage to work on the job.
- If you work in a position that requires you to drive company vehicles or be exposed to another liability related to the company’s business operation.
Unfortunately, your personal auto coverage is usually not enough to protect you from the increased liabilities involved with driving a commercial vehicle, operating heavy equipment or participating in other commercial activities. Getting added as an additional insured on your employer’s policy can help make sure you don’t get stuck with a big bill in the aftermath of an accident.
How do I Add an Additional Insured to My Policy?
The best way to know if adding an additional insured to your policy makes sense is with the help of a business insurance expert (LINK). Not only are there some circumstances in which an additional insured cannot be added to a policy, doing so without the help of professional can cost you unnecessary money or expose your business to unnecessary risk.
If you’re thinking about adding an Additional Insured to your business policy, give Tomins a call today. Unlike most insuretech firms, we take the time to understand your unique situation and design a coverage plan that makes sense for your specific needs.
Don’t settle for the NEXT best thing.
Tomins—because you deserve an insurance partner who works as hard as you do.