What is an Additional Insured?: What Business Owners Need to Know (2024)

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 endorsem*nts. 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 endorsem*nt 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.

For example:

Why is an additional insured endorsem*nt 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 endorsem*nt 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 endorsem*nt.

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 endorsem*nt

Typically, you add a new person to your policy with an endorsem*nt 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 endorsem*nt.

However, some policies require a different process called a blanket additional insured endorsem*nt. This approach can be called an automatic additional insured endorsem*nt. 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 endorsem*nts 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 endorsem*nt, 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 endorsem*nt 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.

At Huckleberry, we know that small business insurance know-how can help you build your business and land more contracts. That’s why we’ve made it easy to get a quote online in minutes.

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.

FAQs

What is an Additional Insured?: What Business Owners Need to Know? ›

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.

Tell Me More ›

What information do you need for additional insured? ›

Once you know the name and address of the company or individual that you want to add to your coverage, get in contact with your insurer and make the request. Even though you're not taking out a new policy, the endorsem*nt will appear as a separate document under your policy.

Discover More Details ›

What is an additional insured on a business policy? ›

An additional insured extends liability insurance coverage beyond the named insured to include other individuals or groups. An additional insured endorsem*nt protects the additional insured under the named insurer's policy allowing them to file a claim if sued.

What is the advantage of being an additional insured? ›

The purpose of additional insured endorsem*nts is to keep the burden of risk closest to those parties most likely to create losses, which typically is third parties contracted to perform the work.

Read The Full Story ›

What are the risks of naming an additional insured? ›

There is also a risk of being under-insured or uninsured as additional insureds. Second, there is the risk of breaching a contract, thus potentially becoming the insurer of the other party when they are the party obligated to provide additional insured coverage.

Why do companies request to be additional insured? ›

Why would a company or person ask to become an additional insured? It boils down to larger businesses having less financial risk if something unanticipated happens. It may seem unfair, but it's a way for them to protect their own business in exchange for hiring the small business.

See Details ›

How much does it cost to add someone as an additional insured? ›

These parties may have an interest in a project you're taking on, so an additional insured endorsem*nt helps get everyone on the same page with respect to insurance coverage. There is typically no cost to name an additional insured, but some insurance companies may charge a nominal fee to amend the existing policy.

What is the difference between additional insured and insured? ›

An additional named insured will have the same rights as a “Named Insured” but typically won't be responsible for the premium. They will however be entitled to notice of policy changes and cancellations and will have the same coverage as the Named Insureds but share the policy limits.

Get More Info Here ›

Should my contractor add me as an additional insured? ›

Property owners, both commercial and residential, commonly require any contractor working on their property to deliver a “certificate of insurance” naming the property owner as an “additional insured.” This often arises when a resident owner wishes to renovate his/her apartment in a co-op or condo building or an ...

Explore More ›

What is the difference between additional insured and certificate holder? ›

Basically, an Additional Insured is another individual or business the policyholder adds to an insurance policy, who is entitled to the same coverage benefits. A certificate holder receives verification of insurance and notifications of any changes made to a policy but is not covered by the policy.

Read The Full Story ›

What are the limitations of additional insured? ›

There are some notable limitations to additional insured coverage, such as: The endorsem*nt may offer coverage for only a limited type of liability (e.g., vicarious liability). Additional insureds can't be added to a professional liability insurance policy.

Discover More Details ›

What is the difference between additional insured and policyholder? ›

Additional insureds are third parties granted limited protection under the policy, extending coverage beyond the initial policyholder to safeguard against liabilities in specific circ*mstances.