An additional insured is a business, individual, or other entity included in a general liability policy in addition to the named insured. Additional insureds are typically covered only during a loss claim that directly affects them.
What is an additional insured?
An additional insured is an additional person, property, or entity included in an insurance policy. An additional insured endorsement indicates that it is not the primary policyholder but instead is covered through an extension of the policyholder.
For example, an IT consultant who works as an independent contractor holds a small business insurance policy. This protects the consultant from lawsuits, injuries, and other risks.
If the consultant works with two software developers on a regular basis, the software developers may ask the IT consultant to list them on the insurance policy. This provides the software developers with coverage benefits.
Named insured vs. additional insured
The named insured is the primary policyholder. This is the group, individual, or entity whose name is directly and first mentioned on the contract. It is often the person or organization that pays the premium. The named insured benefits from all coverage included in the policy.
Any claim or incident is submitted by the named insured, whereas the additional insured endorsement applies only if the incident pertains to them.
In the example above, the IT consultant is the named insured, taking full responsibility for the policy, paying premiums each month, and enjoying full coverage benefits. The IT consultant can list a client as an additional insured. This means the client of the named insured receives coverage only if involved in the loss.
Certificate holder vs. additional insured
A certificate holder constitutes any group, business, or individual covered by the insurance policy. A certificate holder can contact the insurance company to produce proof of insurance that confirms the additional insured is included in the policy. Typically, this certificate is provided upon request.
An additional insured is a certificate holder, but not every certificate holder is an additional insured. In other words, each person, group, or entity mentioned and covered by the insurance policy can be a certificate holder.
The IT consultant from the example before names the software developers as additional insureds with proof of insurance. The software developers are now certificate holders.
Loss payee vs. additional insured
A loss payee is a person, organization, or business that receives the payment from a claim after a loss. The named insured is the loss payee in every situation. And the additional insured might be a loss payee as well.
The named insured is likely a loss payee for every claim, while the additional insured is included only if the loss affects them.
For example, the same independent IT consultant includes software developers into the coverage as additional insureds. The software developers are included as a loss payee for losses that occur only while the IT consultant is directly working for them.
When to consider an additional insured policy
The additional insured status is ideal for businesses, organizations, and individuals that are vulnerable if an incident were to occur, particularly if they work with others who possess a general liability policy. The cost to add an additional insured is relatively small, and it is a good idea for entities to request being added as an additional insured with independent contractors and other businesses they work with consistently.
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