While running a business with liability insurance, you’re going to be asked to add an additional insured endorsem*nt to your current policy by one of your clients or by a hiring company. Once you go through the steps to add an additional insured to your policy, if you decide to, proving you’ve done so is effortless. Send out of the updated COI with the additional insured endorsem*nt attached and you’re done.
Understanding how adding an additional insured to your policy works and how to manage your certificates of insurance, certificate holders, and more is essential to remain compliant, conduct business and protect your company.
How to Show Additional Insurance on COI
With an attached endorsem*nt, a certificate of insurance lists additional insured entities in the Certificate Holder section of the document. Checking this section will quickly tell you who is covered by the policy if you see a check next to ADDL INSR on the document. You can also identify the additional insured on your policy from the Description of Operations section. Look for the additional insured entity name (or the attached endorsem*nt) in its description. Point your Certificate Holders to these locations in your certificate of insurance.
Pros and Cons of Additional Insured
Before you decide to add an additional insured to any policy, make sure you understand your certificate of insurance requirements by state and certificates of insurance best practices. To do so, you will need to talk to an agent who can walk you through everything. As part of that process, they should discuss how to meet your insurance obligations and compare the pros and cons of adding an additional insured to your policy.
Pros
- Adding an additional insured makes you more trustworthy
- Being added as an additional insured offers you more protection
Cons
- Adding an additional insured can raise your premiums
- Including an additional insured may necessitate an increase in your coverage limits for effective protection
How Do You Name an Additional Insured on an Insurance Policy?
To add an additional insured endorsem*nt to your policy, talk with your insurance agent about whether it’s possible to do it on your existing policy. Explain the request for coverage from your client or subcontractor, and ask about any limitations that come along with the endorsem*nt. To name an additional insured, you must file the proper forms and paperwork, and when you’re finished, your updated certificate of liability insurance will list the new insureds along with the original policyholder.
What Is the Risk of Adding an Additional Insured?
The most significant risk that comes from adding an additional insured to your policy is leaving yourself with too little coverage in a future claim. Once you add a new additional insured endorsem*nt to your policy, you are giving another person the right to submit claims that take money from your policy. For a basic additional insured example, you may have a liability policy that protects you for 1 million per occurrence. If the 1 million gets split between you and the additional insured, you may not have enough money to cover your obligations. To compensate for this problem, you may have to increase your coverage amounts. Ask your agent about this when you add the additional insured endorsem*nt.
Why Would Someone Want to Be Listed as an Additional Insured?
With liability insurance, the policyholder is the one that’s protected by the insurance policy. When someone is listed as an additional insured, they are protected by the insurance policy, too. For instance, a leasing company can enjoy the protection of a tenant’s renter’s insurance if they are listed as an additional insured on that policy. Many companies and individuals want to be listed as additional insured because it protects them against future liabilities. In the renter scenario above, the leasing company could safeguard themself against potential problems that renters cause that could get the landlord sued. It’s another way for you to protect yourself from the people you do business with.
Understanding Additional Insured vs. a Certificate Holder
An additional insured may seem similar to a certificate holder, but the two are very different things. An additional insured is another person or organization that is covered by your insurance policy in addition to you. Usually, the additional insured is only protected for a specific period of time under specific circ*mstances.
A certificate holder is merely an individual or company that’s entitled to receive updates of your certificate of insurance whenever it is changed. A certificate holder is a company that requires your certificate of insurance to do business with you.
How to Add Certificate Holder to Insurance
To add a certificate holder to insurance, you must contact your agent and request that they add a new holder. Ask your agent about how to add a certificate holder to insurance when you first start your policy so you understand the process for when you have the first certificate holder you want to add.
If you work with other companies or vendors regularly, you likely deal with certificate of insurance requests all the time. Working with your agent to update your certificate holders and to add an additional insured to your policy will help keep you compliant and will encourage more companies to trust you and work with you in the future. It’s also worth noting that most agents are going to send the COI right to the hiring party who will hold that COI. Again, being the “holder” doesn’t imply coverage, so work with your agent to make sure the needed parties have the additional insured endorsem*nt.
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