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What's an Additional Insured in Small Business Insurance?

April 05, 2022 | Insurance 101

Small business insurance provides important financial protection for the policyholder—the company or self-employed individual that purchases the policy. In some cases, however, others may want to be covered by the policy to some degree as well. This is where an additional insured endorsement may be needed.

What Does Additional Insured Mean?

It’s not uncommon for a company’s customer or client to ask to be added to a policy as what’s called an additional insured. This means they have a right to make a claim against the policy, for instance in a situation where a third party sues both the policyholder and the additional insured. Often, making another party an additional insured is required in a contract.

Additional Insured Definition

Additional insureds can be organizations or individuals, and their additional insured status can last for a limited time or the full policy term. However, their protection under the policy is less than that of the policyholder. Also, the scope of the coverage is typically limited to claims resulting from work that the policyholder is doing on the additional insured’s behalf.

Some of the business relationships where it’s common to have an additional insured include:

  • Landlords and tenants
  • Property owners and contractors
  • General contractors and subcontractors
  • Product manufacturers and vendors

For example, say you’re a tenant in a building owned by someone else. That building owner may ask to be included as an additional insured on your policy in case they’re brought into lawsuits related to your business. 

Making them an additional insured can help them avoid costs for things like court fees, legal defense costs, and settlement or judgement costs. It can also benefit them by keeping certain claims off their claims history, and thereby helping to keep their premiums low.

Insurance for Small Businesses: Adding Additional Insureds

With insurance for small businesses, adding additional insureds to the Certificate of Insurance (COI) for the policy is simple. All you have to do is contact one of our licensed insurance experts and let them know what you need. They will talk with you about the amount of coverage the additional insured is asking for and also what limitations will apply for that entity or individual. We most often get requests for additional insureds on general liability insurance, but can make additions to other types of policies in some instances. 

Next, you’ll be asked to complete a form to indicate that you’re requesting the addition. Keep in mind that it may be appropriate that someone like a subcontractor who asks to be an additional insured endorsement has their own insurance as well. Our representative can help you understand how best to address liability associated with a specific business relationship or engagement.

Small Business Insurance Costs: Additional Insured Fee

The cost of putting an additional insured on a small business insurance policy varies somewhat based on the type of policy and other factors. In some cases, addition of an additional insured may require additional premium. 

To know what your total small business insurance cost will be, you can get a fast, free online quote for the policy or policies you need and then talk with one of our insurance experts about the number of additional insureds required.