Insurance policies don’t only cover those who purchase them. They can also cover additional individuals or businesses that the purchaser designates as being an “additional insured” or an “additional named insured.” Since these terms are similar and they can be very easily confused, it’s important that you understand the differences between the two.

Additional Insured

Those who’ve been designated as an additional insured may be entitled to coverage depending on the terms of the endorsement adding that party as an additional insured. Therefore, it is critical that a request to be added as an additional insured be specific as to the scope of coverage granted and that the party requesting additional insured status verifies compliance. Likewise, the party granting additional insured coverage must be careful to comply with the agreed-upon contractual requirements.

Additional Named Insured

Additional Named Insureds are considered to be owners of the policy. Therefore an Additional Named Insured has full access to the coverage provided by the policy with very few (if any) restrictions. However, the rights afforded to Additional Named Insureds come with risks. For example, an Additional Named Insured can be held responsible if the main policy holders cannot meet their financial obligations under the policy.

What Makes Sense For Your Business?

In most cases it’s to the advantage of both parties to be designated as an additional insured, as long as both parties are aligned regarding the amount of coverage being sought. If the parties are not in alignment and the liability isn’t successfully transferred to the other party, an uncovered loss or unanticipated payout could result. Inevitably, these situations result in protracted and expensive litigation in addition to the financial burden of an uncovered claim or tarnished loss history. To avoid these pitfalls and determine which designation is best for your unique situation, work with your insurance broker so you’re receiving the coverage you need.

James P. Marquet

Vice President

jmarquet@grahamco.com

The Graham Building
Philadelphia, PA, 19102

215-701-5208