Additional insured explained: What it means, who needs it, and how coverage works

An additional insured is someone who doesn’t own or pay for a business insurance policy but gets added to it and is allowed to file claims in certain cases. Generally, the additional insured is allowed to file claims for their own losses stemming from the primary policyholder’s business operations, but they can’t file claims for unrelated losses.

Here’s everything you need to know about how additional insured coverage works, when you might be asked for it and how it can impact your business.

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What is an additional insured?

An additional insured is a business or person other than the main policyholder who gets added to a commercial insurance policy. Unlike the primary named insured, an additional insured doesn’t have to pay premiums to the insurance company. Nevertheless, they’re eligible for coverage and can file claims for certain losses covered by the insurance policy.

Specifically, your insurance covers additional insureds if they face lawsuits or other financial losses directly tied to your business operations. General contractors, commercial landlords, and event venues commonly ask smaller companies they work with to designate them as additional insureds.

For example, if you offer cleaning services, a company that hires you may ask to be added to your general liability insurance so it’ll be covered if a guest slips on a wet spot left behind by one of your workers. However, your policy wouldn’t cover the other company if it’s sued over a guest injury unrelated to your services.

While there may be extra costs and coverage limitations associated with adding an insured to your policy, it is sometimes necessary to enter into a contract or otherwise protect a business partner from out-of-pocket expenses caused by your company.

Characteristic of additional insureds	Benefit
Right to file claims	Additional insureds are allowed to file claims directly with your insurance company, allowing for a more straightforward reimbursement process that doesn’t require filing claims with their own insurance and seeking subrogation
No-cost eligibility	Adding an insured doesn’t cost anything for the additional insured and may cost little to nothing for the primary insured, resulting in a mutually beneficial arrangement with minimal financial drawbacks
Protection from not-at-fault losses	Additional insured status can help protect a business partner from certain claims resulting from the named insured’s commercial activities, transferring risk to the at-fault insured for relevant claims

Right to file claims
Benefit	Additional insureds are allowed to file claims directly with your insurance company, allowing for a more straightforward reimbursement process that doesn’t require filing claims with their own insurance and seeking subrogation
No-cost eligibility
Benefit	Adding an insured doesn’t cost anything for the additional insured and may cost little to nothing for the primary insured, resulting in a mutually beneficial arrangement with minimal financial drawbacks
Protection from not-at-fault losses
Benefit	Additional insured status can help protect a business partner from certain claims resulting from the named insured’s commercial activities, transferring risk to the at-fault insured for relevant claims

What is a blanket additional insured?

A blanket additional insured refers to an entity that is automatically added to your business insurance policy whenever you sign a contract requiring you to add that entity to your liability coverage. While standard policies may require you to individually add insureds, a blanket additional insured provision can speed up the process, making it useful if you regularly sign contracts that necessitate adding other stakeholders to your policy.

Why would someone ask to be an additional insured?

Someone may ask to join your insurance policy as an additional insured to manage risk and clarify who will cover relevant expenses and how in the event of an unexpected accident or peril. It’s a common contractual provision anytime a large business hires a smaller business for a certain project. By joining your insurance, another business owner won’t have to worry about filing a claim on their own policy if they face a lawsuit because of work you did for them.

In some cases, a commercial insurance policyholder may choose to add other people to their policy because of the nature of their relationship with the additional insureds. For example, a nonprofit may add volunteers to its policy so they can continue to offer their time without fear of out-of-pocket losses from legal claims associated with the nonprofit.

Who commonly needs additional insured status?

In general, any organization or person who has an interest in your business activities and could be held liable for bodily injury or property damage caused by your commercial operations may need to be an additional insured on your general liability insurance policy. See the following sections for examples of industries and situations where adding insureds is often necessary.

General contractors

General contractors often need to be additional insureds because they may hire numerous types of subcontractors—such as electricians, plumbers, and landscapers—and could face liability issues due to work performed by the subcontractors. For example, suppose you’ve been hired to install flooring for a new building, but a visitor gets injured after tripping over an uneven floor and sues the general contractor instead of suing you.

Property owners and landlords

If you don’t own a building and instead need to rent or lease space for your business, your commercial landlord may want to be listed as an additional insured to protect themselves if they face a lawsuit due to your business activities. For example, a fitness center may ask to be added to the policy of a freelance yoga instructor who hosts classes on its property in case it’s sued after someone gets injured during a yoga class.

Businesses hiring vendors

Additional insured status may be beneficial for any business hiring vendors for specific projects or events. For example, if a car dealership brings in several food trucks for a special promotional event, the owner may want to make sure they’re added to each vendor’s general liability insurance. That way, they’ll have coverage if they’re sued after a food truck employee drops a hot plate of nachos onto a customer’s arm and burns them.

Event venues

Several independent businesses may be involved in orchestrating special events, so any venue that hosts such events may ask to be an additional insured in order to be covered in case of lawsuits stemming from any of the contracted companies’ activities. For example, this arrangement could protect a wedding venue if it’s sued because an independent caterer served undercooked food that caused many guests to get sick.

Clients hiring service providers

Sometimes, a prospective client may ask to be added to your commercial insurance policy if they could reasonably face financial losses on account of your work. For example, a client may ask to join an accountant’s professional liability insurance policy in case they end up facing financial or legal penalties due to mistakes the accountant makes in filing their tax return.

What does additional insured status cover?

If you’re listed as an additional insured, you may be able to file claims for losses you experience stemming from projects or services completed by the primary policyholder. Additional insured status typically only applies to liability insurance policies, though similar coverage may be available to an additional interest under your commercial property insurance. Here are examples of situations and expenses that may be covered for an additional insured:

• Legal fees, including court costs, damages, judgments, and payments to attorneys
• Medical treatments and property repairs for others
• Alleged failures in the provision of professional services
• Commercial auto accidents

Additional insured vs. named insured

An additional insured differs from a named insured in that they generally have fewer privileges and responsibilities under an insurance policy. For example, the additional insured doesn’t have the right to cancel or make changes to the policy, and they can only file claims related to the named insured’s work. Nevertheless, additional insureds enjoy some benefits, like the fact that they have access to coverage without having to pay a premium.

	Named insured	Additional insured
Ownership of the policy	Owns the policy and has the sole right and obligation to renew, cancel, or otherwise change coverage details	Doesn’t own the policy and cannot modify it in any way
Eligible claims	Can file claims for any losses or expenses covered by the policy	Can only file claims for liabilities arising out of the named insured’s work
Premium requirements	Has the sole responsibility of paying premiums on a regular basis to keep the policy active	Isn’t required to pay premiums

Ownership of the policy
Named insured	Owns the policy and has the sole right and obligation to renew, cancel, or otherwise change coverage details
Additional insured	Doesn’t own the policy and cannot modify it in any way
Eligible claims
Named insured	Can file claims for any losses or expenses covered by the policy
Additional insured	Can only file claims for liabilities arising out of the named insured’s work
Premium requirements
Named insured	Has the sole responsibility of paying premiums on a regular basis to keep the policy active
Additional insured	Isn’t required to pay premiums

Additional insured vs. certificate holder

A certificate holder is simply a person or organization that has requested a copy of your certificate of insurance (COI). Unlike an additional insured, they don’t have access to any coverage under your policy, but they may have a right to be notified anytime the policy is updated. Keep in mind that both certificate holders and additional insureds are typically listed on your COI.

	Additional insured	Certificate holder
Relationship to the insurance policy	Able to file claims on the named insured’s policy if they experience covered losses stemming from the named insured’s business operations	Receive proof of insurance coverage and are eligible for updates whenever the named insured makes changes to their policy
Method of addition to the COI	Added when the named insured purchases a rider to update their coverage	Added automatically upon requesting a copy of the certificate of insurance
Cost of addition to the COI	Doesn’t have to pay premiums themselves, though a small surcharge may apply to the named insured’s premium	Can receive a COI and add their name to it free of charge

Relationship to the insurance policy
Additional insured	Able to file claims on the named insured’s policy if they experience covered losses stemming from the named insured’s business operations
Certificate holder	Receive proof of insurance coverage and are eligible for updates whenever the named insured makes changes to their policy
Method of addition to the COI
Additional insured	Added when the named insured purchases a rider to update their coverage
Certificate holder	Added automatically upon requesting a copy of the certificate of insurance
Cost of addition to the COI
Additional insured	Doesn’t have to pay premiums themselves, though a small surcharge may apply to the named insured’s premium
Certificate holder	Can receive a COI and add their name to it free of charge

What is an additional insured endorsement?

An additional insured endorsement simply refers to the policy add-on that makes a separate entity eligible for coverage under your insurance. Different endorsements may impact the additional insured’s status in different ways. For example, a noncontributory endorsement means the named insured’s policy acts as primary coverage for relevant losses, and the additional insured’s own insurance may not be required to contribute toward covered claims.

How to add an additional insured

The exact process may vary by insurance company, but in general, you need to take the following steps to secure business insurance coverage for an additional insured:

1. Shop around and purchase a commercial insurance policy.
2. Collect all the information you’ll need to share about your planned additional insured, such as the company’s name, location, and relationship with your business.
3. Fill out a form with all the relevant details, and submit a formal request through your insurer’s website.
4. Prepare for a possible increase in your premiums to account for the added coverage.
5. Request a new certificate of liability insurance to confirm that the party in question has been added as an insured.

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How much does it cost to add an additional insured?

Depending on your insurance carrier, you may be able to add an insured to your policy for free. If you do have to pay an additional premium, you can usually expect a surcharge of around $25 to $100. Remember that the responsibility of covering any additional premium costs generally falls to the primary policyholder rather than the additional insured.

Additional insureds at a glance

1. An additional insured is a person, a business, or some other entity that is added onto a commercial liability insurance policy, making them eligible to file claims for losses related to the main named insured’s operations.
2. Additional insureds are added to business insurance policies via endorsements. Possible add-ons include blanket additional insured endorsements that automatically add contractually mandated insureds and noncontributory endorsements that make the named insured’s coverage primary over the additional insured’s policy.
3. It’s common for large businesses, property owners, and even clients to ask to be an additional insured, meaning you can often expect an additional insured request whenever you sign certain contracts, rent commercial property, or take on new clients.
4. The additional insured doesn’t have to pay premiums, but they also don’t have the ability to make changes to the policy and can only file claims for liabilities stemming from the named insured’s work.
5. Certificate holders and additional insureds both appear on a company’s certificate of insurance, though certificate holders differ in that they don’t have access to coverage and merely have a right to see proof of insurance and be informed about changes to the policy.
6. Adding an insured to your policy may cost up to $100, but some insurance companies allow you to add insureds for free.

How to determine if an additional insured is right for your business

The main way to know if an additional insured is right for your business is to see if it’s required by any contracts you need to sign. Additional insured stipulations are common for contractors, commercial property renters, and certain professional service providers, and it’s crucial to adhere to the terms of your contracts. If you agree to add an insured but fail to do so, you could have to cover their losses out of pocket if they unsuccessfully try to file a claim.

That said, there are some drawbacks to adding insureds that you need to consider as you negotiate contracts with other businesses. For example, adding an insured to your policy usually doesn’t raise your coverage limits. As a result, you risk exhausting your coverage limits more quickly if both you and the additional insured are sued at the same time.

Frequently asked questions

Is an additional insured the same as a certificate holder?

No, an additional insured is someone who has access to coverage under your commercial liability insurance policy, while a certificate holder is someone who requests a copy of your certificate of insurance and receives updates about your coverage.

Who can be added as an additional insured?

In general, anyone can be added to your policy as an additional insured as long as they have a close financial or contractual relationship with your business or could reasonably be held liable for claims related to your commercial operations.

Does it cost money to add an additional insured?

The cost to add additional insureds to your business insurance policy may range from $0 to $100, depending on your insurance provider.

How long does additional insured coverage last?

Coverage for additional insureds may last for the window of time specified in the additional insured endorsement or until the policy lapses or is canceled.