Additional insurance is basically a term associated with a typical liability insurance coverage extended to an individual or a group of individuals, or a business entity that wasn’t part of the original insurance policy.
With this endorsement, the person who is additionally insured will also be named in the insurance policy and will be protected. This also means they will be able to file a claim when they are sued.
What is Additional Insurance?
So, what does additionally insured mean? This is a type of liability insurance for someone or some entity for safeguard against personal liability claims, which can range from property damage to personal injury.
This additional endorsement also provides compensation pertaining to monetary payments that the insured party may be responsible for – if they are indeed found legally responsible.
Moreover, this insurance endorsement is a liability policy that extends coverage to individuals or business entities that weren’t originally named in the initial policy.
This type of coverage generally applies where the original policyholder must provide coverage to third parties in light of possible risks associated with their link to the original policy holder’s operations or conduct.
New individuals or groups of individuals are added to the insurance policy through a policy amendment known as an ‘endorsement’. This policy amendment may include the names of the additional insured within the initial policy.
What Benefit Does Additional Insurance Endorsement Provide?
The primary advantage of additional insurance is the fact that it will potentially minimize the impact of your insurance policy in light of your loss history.
You see, the endorsement is designed to ensure that the financial accountability of the claim is attached to the policy of the third party that is more likely to be responsible for the claim.
In other words, if a loss does occur due to the involvement of another entity, the named insured in the policy will be able to ensure that those involved in this loss are going to be appropriately held responsible. This is an excellent way to minimize your loss history.
Are There Any Costs Involved in Additional Insurance?
Generally, the overall costs of adding an endorsement to your insurance policy is low – especially if you compare it with your insurance premiums.
Insurance underwriters often determine that the overall risks associated with additional insurance are typically low or marginal at best.
It’s important to understand that additional insurance endorsements are typically associated with regular disagreements, litigation, and misunderstandings.
These types of disagreements are more or less about whether or not the additional insurance coverage should be applied on independent negligence caused by an endorsee or whether it should also cover loss and liabilities that were incurred as a direct result of the actions of the named insured.
Some Practical Examples of Additional Insurance
Generally, a bigger or more powerful business organization will make it mandatory for smaller operations to name the larger company as additionally insured. While this does seem counterintuitive, it usually boils down to leverage.
The bigger company enjoys a more comprehensive bargaining power since the smaller organizations want to do business with that company. In light of this, here are some other examples where additional insurance is applied.
The owner of a commercial building will require all the tenants to name them as additional insured as part of the tenant’s insurance policy. So, in case a tenant damages their property or if there is an accident in the premises, the landlord is going to enjoy the benefits of the tenant’s insurance policy.
In many cases, contractors make it obligatory on subcontractors to name them as additional insured. That’s because in various instances, a general contractor will designate projects to third-party vendors such as electricians, plumbers, carpenters, etc.
These third parties will essentially be working indirectly for the general contractor but on the subcontractor’s project. So, in case they get hurt on the job, they will sue the general contractor. Being additionally insured, the general contractor can avoid liabilities.
When it comes to additional insurance, you have to keep in mind that these endorsements will always have varying degrees of limitations in coverage compared to the coverage provided by your original insurance policy.
So, even if you are a named insured on someone else’s insurance policy, it would be wise to apply for a general liability policy of your own as well.