Everything you need to know about additional and named insureds
Insurance policies include a lot of terminology that may be unfamiliar. You may hear the terms ‘named insured’ and ‘additional insured,’ and wonder if there is a difference. There is, and here’s what it means.
On a business insurance policy, there is always a named insured – the person or entity whose name is on the policy, and who therefore is protected from liability by the coverage offered by the policy. Your business is typically the named insured on your policy.
A policy may also have an ‘additional insured,’ in addition to the named insured. To confuse the issue even further, this party may sometimes be known as an ‘additional named insured.’ It may seem as though a ‘named insured’ and an ‘additional insured’ will have the same coverage under the policy, but that’s not always the case.
Here’s what you need to know.
Coverage for the named insured
The named insured is the person or entity who owns the policy, and whose name appears on the first page of the policy. They may also be referred to as the policyholder or the primary insured. The named insured owns the policy and is entitled to all of the coverage provided by the policy. Losses will be covered per the terms of the policy, up to its limits.
There can be more than one named insured on a policy. For example, the business itself and the business owner may be named insureds. Or a business and its subsidiaries could be named insureds on the same policy.
What about an additional named insured?
The use of this term may vary from one insurance company to another. At Hiscox, the additional named insured and the named insured both have full rights under the policy. The named insured is the one who is responsible for paying the premiums, and who can cancel the policy. The additional named insured doesn’t have those obligations to the insurer.
Coverage for an additional insured
When you name an additional insured on your policy, they are covered to the limits of the policy, but typically only for claims arising from acts performed by or on behalf of the named insured.
Here’s an example. Suppose you rent the building your business is in. You have a business owner’s insurance policy. The owner of the building in which you rent space requires that you name them as an additional insured on the policy. They will be covered under your policy for damage caused by you or someone acting on your behalf, but not for other damage or claims caused by other tenants or natural disasters, for example.
As another example, suppose you are a hairstylist who rents a station at a salon. You have general liability and professional liability policies. The owner of the salon requires that you name them as an additional insured on your policy. This protects the salon if one of your customers is injured during their appointment with you, and they sue you and also the salon.
An additional insured has no ownership in the policy and no responsibility for paying premiums and they cannot make changes to the policy.
How to use named and additional insureds to fully protect your business
The ability to add additional insureds and named insureds can help you get the most comprehensive protection for your business. Here’s an example of this.
Jack and Jill have a marketing consulting practice. They have two different entities: J&J Copywriting, which is their primary business, and J&J Graphic Design, which is a smaller business. They know they need general liability and professional liability insurance (E&O coverage) to protect themselves.
They purchase a general liability and a professional liability policy from Hiscox, with J&J Copywriting as the named insured. They also name J&J Graphic Design as an additional named insured so that entity will also be fully covered. J&J Copywriting pays the premiums on the contract and handles any administrative tasks that come up.
After a few months, J&J lands a big contract with a new client, NBC Corp. NBC requires that they be added as an additional insured on J&J’s insurance policies. They add NBC Corp. as an additional insured, which means the policy will cover claims against NBC Corp. for marketing work done by J&J.
As part of the scope of work, J&J Graphic Design creates a new logo for NBC Corp. Unfortunately, some people think it looks like the logo of another, similarly named company, and NBC Corp. is sued for intellectual property infringement. Because the suit resulted from a design created by J&J Graphic Design, and NBC Corp. is an additional insured J&J Copywriting’s policies, J&J’s professional liability policy provides coverage for both J&J and NBC Corp. in defense of the lawsuit.
Adding an additional insured
You can name one or more additional insureds when you purchase your policy. But sometimes a subcontractor, a client, or a vendor will need to be added to your existing policy as an additional insured. At Hiscox, this is a quick and easy thing to do. Just go to the Manage Your Policy page on the Hiscox website. Having the right coverage, and naming the right parties, will help you protect the business you’ve worked so hard to build.