What Is an Additional Insured?

Liability is important in insurance. When dealing with claims, providers need to determine who is responsible for the actions that led to the claim. This isn’t always simple. 

When you add certain working relationships into the mix, determining liability can get quite convoluted. Adding an additional insured to a policy can sometimes alleviate this issue. Let’s take a look at what an additional insured is and some common scenarios you’ll find it in.

An additional insured is a party that receives coverage on an insurance policy that isn’t the policyholder. A policyholder can add a person or group to his plan so his insurance protects the added members. This added party is an additional insured.

An additional insured can be an individual or an entity. Businesses that sign contracts in which one provides a good or service to the other may include additional insured stipulations. 

An additional insured doesn’t receive all the protections a policyholder has. It usually focuses on liability protection, which includes property damage and bodily injury claims. If someone files a claim or sues the additional insured in one of these instances, the additional insured is protected financially by the policyholder’s insurance. This can include legal fees and settlement costs.

Adding an additional insured is the responsibility of the named insured or policyholder of the plan. If you want to add an additional insured to your policy, you’d have to contact your insurance agent and see if the person or party you want to add is eligible. An additional insured wouldn’t help pay premiums or have any influence on your coverage level.

You wouldn’t add just anyone as an additional insured. There’s typically a working relationship between the policyholder and added party that warrants some concern for liability protection. Some common instances where an additional insured is added to a policy include:

Adding an additional insured is very common in construction since it usually involves close working relationships with multiple parties and there are a lot of liability concerns. Often, a property owner or contractor has to rely on the work of a contractor or subcontractor. The employer likes to be protected financially from their hired party’s faulty work or accidents through an additional insured endorsement.

It’s also fairly commonplace for vendors and manufacturers to have additional insured endorsements, and sometimes employers who have employees drive company cars get an endorsement.

If you’re named an additional insured on a policy, you receive protection from insurance that isn’t yours. This reduces your interaction with your provider in case a claim gets filed against you, which would save you money on your premium since claims tend to increase rates.

Of course, if you, as an additional insured, end up having a ton of claims, the policyholder wouldn’t be too happy. There are usually limits to the number of claims and coverage you have, and too many claims would eventually likely cause you to be removed as an additional insured.

To add an additional insured to your policy, you’ll have to verify with your insurance agent that the party you wish to add is eligible in the first place. Usually, you have to be doing some sort of business with the party.

The cost to add an additional insured varies by insurer, but it’s usually low. It could be somewhere between $25 to $250 per additional insured. If you are looking to add a lot of additional insureds to your policy, you may be better off getting a blanket additional insured endorsement. This doesn’t require you to identify the additional insured by name. It instead describes the types of groups you work with regularly that you’ll want to cover.