How Do You Name An Additional Insured On An Insurance Policy?

Navigating the complexities of insurance policies can be challenging, especially when it comes to understanding the roles of different parties involved. One of the key distinctions in any insurance policy is between the “insured”—the individual or business that purchases the policy—and the “additional insured,” a third party added to the policy for coverage purposes. While these terms may sound similar, they have significant differences that can impact how coverage is extended and who benefits from it.

Whether you’re a business owner trying to protect your interests or a contractor needing to comply with client requirements, understanding the nuances of adding an additional insured to your policy is crucial. In this blog, we’ll cover the pros and cons of additional insureds and walk through the process for naming both additional insureds and certificate holders to your insurance policy. By the end, you’ll have a clearer picture of how these elements work together to provide comprehensive protection.

What’s the Difference Between an Insured and an Additional Insured?

Understanding the difference between an “insured” and an “additional insured” is essential when managing an insurance policy, especially in situations involving multiple parties. These terms refer to different roles within an insurance policy, each with its own rights, responsibilities, and limitations.

Insured:
The “insured” is the individual or organization that purchases the insurance policy and holds primary ownership of the coverage. As the policyholder, the insured has the authority to make decisions regarding the policy, including choosing coverage limits, selecting deductibles, and making changes or cancellations. The insured is also responsible for paying the premiums associated with the policy. In the event of a covered loss or claim, the insured has the right to file a claim and receive compensation according to the terms of the policy.

Additional Insured:
An “additional insured,” on the other hand, is a third party that is added to an insurance policy by endorsement. This could be a person, business, or organization that has a vested interest in the operations or activities of the insured. For example, a contractor may be named as an additional insured on a subcontractor’s policy, or a landlord might be added to a tenant’s liability policy. Unlike the insured, the additional insured does not have the ability to modify the policy or make decisions about coverage. Their role is more passive—they are included in the policy primarily to extend coverage to them in specific situations that involve the policyholder.

Once added to the policy, the additional insured enjoys the same level of coverage as the insured for incidents that are directly related to the insured’s operations. This means that if a claim or lawsuit arises out of the insured’s activities, the additional insured can also be defended under the policy and may receive compensation for covered losses. However, the additional insured is not responsible for any of the premium payments; they simply benefit from the protection provided by the policy without bearing the financial burden.

Certificate Holder:
In addition to understanding the roles of insured and additional insured, it’s also important to recognize the role of a “certificate holder.” A certificate holder is a person or entity that possesses a certificate of insurance (COI) as proof that insurance coverage exists. The COI provides essential details about the insurance policy, including the types of coverage, policy limits, and effective dates. While the certificate holder does not receive the coverage themselves, they have a vested interest in ensuring that the insurance is in place—often because of contractual obligations or to verify that a certain level of risk protection is maintained.

For example, a client hiring a contractor might request to be listed as both an additional insured and a certificate holder. As an additional insured, the client would be protected under the contractor’s policy if an incident related to the contractor’s work leads to a claim. As a certificate holder, the client would have documentation verifying that the necessary coverage is in place and would be notified if the policy is altered or canceled.

Pros and Cons of Adding an Additional Insured to an Insurance Policy

When a person or business looks for insurance coverage, they need to consider the many potential risks that may arise from their operations. In some cases, they’ll need to add another party to the policy: an additional insured. Let’s quickly cover some of the pros and cons of adding an additional insured to your policy.

Pros of Adding an Additional Insured

• Adding an additional insured to a policy provides an extra layer of protection for the named party, covering them for certain risks and liabilities and helping mitigate their exposure to loss and damages.
• In some circumstances, adding an additional insured may be required by law or contract. For example, it’s common in construction for policyholders to be required to extend their insurance coverage to other entities.
• It can be cost-effective – and is certainly cheaper than an additional insured obtaining a separate insurance policy to cover themselves.

Cons of Adding an Additional Insured

• Adding an additional insured will almost surely result in higher premiums for the policyholder (usually a vendor or subcontractor) due to the increased liability associated with covering more parties. 
• Coverage disputes might come up in the process of adding an additional insured; for example, if there is disagreement surrounding the scope or amount of coverage.

How To Name Additional Insured Endorsement

Now that you know some benefits and burdens of naming an additional insured on your policy, let’s walk through the steps to do so. This process may differ depending on the type of policy and insurance company you work with, but typically, here’s how to go about adding an additional insured to your policy.

1. Determine who needs to be named as an additional insured. Consider the person(s) or organization(s) involved in your operations that could be held liable for damages or losses.
2. Review the insurance policy. Examine your current policy and confirm that it allows for an additional insured endorsement.
3. Provide information about the additional insured. You’ll need to provide some information about the person or organization you’re adding, such as their name, address, and relationship to you, the policyholder. 
4. Agree on the terms. You and the additional insured will need to come to an agreement about the scope of coverage and limits of liability your policy will provide, as well as the duration of the coverage. 
5. Pay any additional premiums. Naming an additional insured to your policy may result in higher premiums. You’ll need to pay any additional amounts owed in order to validate the coverage.

How To Add Certificate Holder To Insurance

As previously mentioned, a certificate holder is a third party who can verify the existence of insurance coverage by being the “holder” of the COI. They do not have protections under the policy like the policyholder and additional insured do, but they can use the certificate to confirm who has coverage. The certificate holder also receives a copy of every claim made against the policy and all correspondence between the insurer and the policyholder.

To add a certificate holder to your insurance, the process generally goes as follows:

1. Determine who needs to be named as a certificate holder. Consider to whom the certificate needs to be provided as evidence of insurance (e.g., a client or contractor).
2. Contact the insurance company or agent. You’ll need to request the COI from your insurance company or agent. 
3. Provide the necessary information. Ensure you have all of the information required about the certificate holder as well as the policy itself. 
4. Agree on the terms. Come to an agreement with the certificate holder about the terms terms of the coverage that are to be reflected on the COI.
5. Receive the certificate. The insurance company will then deliver the COI to the certificate holder either electronically or via mail, and from there, they can use it to verify the existence of insurance coverage.

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