What is Additional Insured?
So, the contractor you work for has asked you to list them as an additional insured on your policy. What now? I get calls regarding this almost every day, and most clients have two questions; “What does this mean?” and “What will it cost?”
Let’s start with “what does this mean”. The International Risk Management Institute, or IRMI, defines an additional insured as “A person or organization not automatically included as an additional insured under an insurance policy who is included or added as an insured under the policy at the request of the named insured.” Ok, so what does that mean? Simply put, your policy will protect you and the contractor you work for if the contractor is brought into a claim that resulted from your negligence.
Here's an example:
You are the owner/operator of a trucking company, and have a contract with a logger to haul logs from the woods to the mill. While hauling a load to the mill you are run a stop sign and hit another vehicle, resulting in injuries to several of the passengers. As the owner of the truck, you will be responsible for any losses, and your insurance company will step in to defend you and pay the claim (up to your policy limits). But what about the logger you were hauling for? Because you were hauling logs for him, he may also be brought into the suit. Now the logger didn't run the stop sign. The logger didn’t ask you to run the stop sign. The logger wasn't even in the same county as the stop sign when you ran it, but those were his logs, and now he’s being sued. Because you listed the logger as an additional insured on your policy, your policy will now cover both you and him, up to the policy limits.
Now, “what will it cost?” The answer to this question depends on your carrier. Some carriers don’t charge for an additional insured, some charge a flat rate per additional insured (typically $25.00 - $100.00) and some charge a percentage of your total premium. You may also be able to add a “Blanket Additional Insured Endorsement” to your policy for a flat fee. This can save you money if you have many companies requiring the additional insured endorsement. Contact your agent for details and specific costs.
A few other commonly asked questions:
Is it reasonable for the contractor to ask you to list them as an additional insured?
- Yes it is reasonable. And it is mandatory with many contractors.
Is it commonly asked for?
- Yes. Again, it is required by many contractors today.
Will the additional insured know how much I pay for insurance, be able to make changes to my policy, or collect money for damages to my property?
- No. An additional insured is not authorized to view confidential information in your file, make changes to your policy, or collect on property losses (unless they are also listed as a lienholder).
If you are interested in talking with someone about insurance, give us a call 843-688-6800. We’ll have a conversation, and together decide if I can help.