Depending on the kind of business you have, you may need to be able to have other companies or persons be insured under your business’ insurance policy. Businesses often enter into contracts under which the business is required to name another business or person as an “additional insured.” For example, if your business enters into a contract with ABC Co. for your business to provide landscaping services, ABC Co. may require your business to add ABC Co. as an insured under your policy. So how do you satisfy the requirement to add ABC Co. as an insured under your insurance policy? The answer depends on the terms of the insurance policy you purchase.
The insurance policy you purchase for your business is issued directly to your business. Your business is the “named insured.” An “additional insured” is a person or business that is specifically included as an insured under the policy issued to your business. You will want to check with your insurer as to how to go about adding ABC Co. as an “additional insured” on your policy. Sometimes insurers add specific businesses as additional insureds by means of an endorsement in which the specific company, in this case ABC Co., is expressly listed as an additional insured. Other times insurers provide what is called “blanket additional insured coverage,” pursuant to which any person or organization qualifies as an “additional insured” under the policy if certain terms or conditions are met. You’ll need to look to the express terms of the endorsement to the policy to know what the terms and conditions are, but generally this means that you have entered into a contract with the additional insured prior to the loss and the loss arises out of your work or operations for that additional insured. Thus, if after you contract with ABC Co. to landscape, and your work accidentally causes damage to a nearby building because you forgot to turn off a hose and the building flooded, ABC Co. would potentially be an additional insured under your policy if your policy has a blanket additional insured endorsement.
If you enter into a contract with ABC Co. in which you are required to provide insurance for ABC Co. as an “additional insured,” obtaining a certificate of insurance is not enough. For more information on “certificates of insurance,” see our article on that topic. [insert link] You need for ABC Co. to qualify as an “additional insured” under the express terms of your policy.
If you often enter into contracts that require you to provide additional insured coverage to other companies or persons, don’t forget to take this into account when shopping for commercial general liability insurance quotes. Make sure to find out if the policy you are considering contains a “blanket additional insured endorsement,” and if so, consider the terms and whether there is an additional cost.