We’re often asked by our clients to help them understand what an additional insured is and how to make sure they’re properly fulfilling their contract requirements and protecting their business.
In its most basic form an additional insured endorsement identifies a specific third party that is covered by another company’s insurance for claims against them. For example, in the construction industry, a subcontractor might be covered as an additional insured under the insurance policy of a general contractor they are working for.
Some of the confusion comes from the difference between what it means to be an “additional insured” and a “named insured.” A “named insured” has the complete coverage provided by the policy, and is responsible for managing the policy, for example paying the premium and notifying the insurance provider of claims. An “additional insured’ has coverage that is usually more limited and is specifically defined by the endorsement.
A Brief Terminology Lesson on the use of Additional Insured language in a Contract
Here is an example of what could be asked for in a contract:
“The coverage for the additional insured must be primary, noncontributory, and there must be a waiver of subrogation.”
- “Primary” means that your insurance pays for the defense and settlement of a claim first, before other insurance pays.
- “Noncontributory” means the third party’s insurance doesn’t contribute toward payment of a claim. Your insurance pays it all, up to the policy limits.
- “Waiver of subrogation” means your insurance company can’t ask the third party or their insurance company to pay the part of the claim caused by the third-party.
- “Indemnification” means you are promising to pay for the cost of damage, loss, or injury.
Things to Consider
- Read the contract and understand what you are signing. Do not hesitate to discuss with an insurance professional to make sure your business is properly protected in case of a claim.
- Negotiate contract requirements about insurance and indemnification.
- Do not assume your insurance company will add an additional insured to your policy. Check with the company before signing the contract. Your insurance company will want to use their own policy language.
Let Lumie handle the paperwork
Keeping every certificate current is a lot to ask of any team. illumend, from myCOI, reads each certificate and endorsement against your requirements, flags what’s missing, and follows up with your third-party partners for you. You’ll see who’s covered, and who isn’t, without chasing a single email.
Want to see it in your workflow? Schedule a demo and we’ll show you how illumend fits.
