If you’ve ever had to get an insurance quote, whether it be for your home, car, or business, you may have heard the term ‘additional insured’ and not know what it means.

It is pretty common for a client or landlord to request that you provide them with a ‘certificate of insurance’, which is a proof-of-insurance document. They may ask you to add them to your policy as an “additional insured”. It means that if they get sued because of work conducted by your business, your insurance policy will extend its coverage to protect them. 

When including an additional insured to your policy, it can be limited to a single event, or it could last for the duration of your existing policy (most business insurance policies are active for a full 12 months. You must renew your policy annually).

Here is a straightforward explanation that breaks down what it means for your insurance, why it is important to you, and how it all works:

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Understanding What an Additional Insured Endorsement Is

To know what an additional insured is, you should first understand what the term ‘insured’ means. It is a person or persons or entity to whom you extend your insurance coverage. Sometimes, you may be required to have your insurance company add someone else’s name to your business insurance policy.

Additional insureds are entitled to limited benefits under the policy and are insured for their third-party liability arising from the conduct of the named insured or policyholder (in this case, the named insured, or policyholder is you: the person who is entitled to all the benefits of a business insurance policy).

Here’s an example: let’s assume your policy includes coverages such as commercial general liability and commercial property insurance. You hire a professional cleaning services company to clean your office, warehouse, or business property. That cleaning business may ask to be added to your policy as an additional insured. Why? Because the cleaning company faces liability risks for its services, such as the risk of someone slipping on a freshly mopped floor, falling, and getting injured. If they are included as an additional insured on your policy, it extends the protection of your policy to them if they are sued by someone who slips on the wet floor and is hurt.

Additional Insured vs Additional Named Insured

Is there a difference between what an additional insured and additional named insured is? Indeed, there is.

An additional named insured is a person or organization other than the policyholder, or the named insured. An additional named insured is identified as such in your policy. They won’t have the same rights as you, the policyholder, and they are not required to pay for your annual premium or insurance bill. But they typically are notified of any changes to your policy or if you cancel it.

Can an Additional Insured File a Claim?

Yes, an additional insured on your policy can file a claim if they are subject to a third-party lawsuit. However, it’s vital your additional insureds understand what they are and are not covered for by your policy, including any exclusions and the limitations to the amount of coverage they have.

Does It Cost More to Add an Additional Insured?

It depends on your insurance company. Some insurers may charge you, the policyholder, to name an additional insured to your policy. Usually, that price is around $50. There is no cost involved for the additional insured. An insurance company may also offer a policyholder to pay a one-time flat rate to add as many additional insureds as you wish.

Types of Additional Insured Endorsements

Different types of additional insureds can be added to your insurance policy. It can be your client, your landlord, or a loss payee. Here’s a rundown of what each one is:

Loss payees

These can include mortgagees, leaseholders, or equipment rental companies. Loss payees are not covered for their liability under your policy. But they are entitled to be paid the benefit of the policy if an item they financed is lost or damaged, up to the total amount owing to them.

A financial institution can also be considered a loss payee. For example, if property from your business, like a laptop computer, is lost or stolen, the insurance company will notify the loss payee. Any payment should be made jointly to the loss payee and you, the insured.

Mortgagees

A standard mortgage clause is a different class of loss payee because this is a separate insurance contract. A mortgagee has more rights than a standard loss payee. However, fraud or arson by the insured does not vitiate coverage for the mortgagee. Remember to always refer to your specific policy wording regarding the rights of a loss payee or mortgagee. 

Contractual liability and hold-harmless clauses

Issues can arise where you were supposed to add someone as an additional insured to your policy but do not. Then, if there is a loss, both the insured and the other party (for example, your landlord) are sued. That will cause the other party to ask you, the insured, to defend them in the lawsuit.

You’ll likely contact your insurance broker to pass this request on and find out if there is even coverage in this situation. Depending on your policy, it could lead to complex issues, or there may be inadequate coverage. The best thing to do is to make sure that you initially cover all your bases to avoid a big messy claim when you are setting up your policy.

There is no “one size fits all” solution to additional insured issues, and there are limitations to the coverage an additional insured may receive. For instance, it could be that your insurance provider will only provide coverage for additional insureds for a specific type of protection (like commercial general liability).

How to Add an Additional Insured to Your Business Insurance

If you are naming an additional insured to your current insurance policy, remember: 

  • It usually takes one to two days to get an additional insured approved by your insurance company. If you’re a Zensurance customer, send an email to us at support@zensurance.com, and we’ll facilitate getting the person or people you need to be added to your policy
  • Include your company name
  • The full legal name of the client that is requesting the certificate. It is usually a business name ending with “Inc.” or “Ltd.”
  • Your client’s mailing address
  • Any specific requirements provided by your client

We will then get the certificate prepared and approved by the insurance company and send it to you.

If you’re looking for a new business insurance policy or wish to switch your coverage from your current provider, we can help. Fill out an online application to get a free quote. Our licensed broker team will shop the market for you to find you the policy you need at the lowest price available through our partner network of more than 50 Canadian insurance companies.

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