What Is an Additional Insured on a Certificate of Liability Insurance?

Video Transcript

Hi, this is Jerry Becerra with Barbary Insurance Brokerage, and today we’re going to talk about what an additional insured is on a certificate of liability insurance. So, first of all, a certificate of insurance is only evidence of coverage. It does not confer any special rights on the certificate holder, at all. And in fact, if you look at the wording on the certificate itself, it’s going to have a disclaimer limiting exactly what that certificate does. What it is going to do is show who the insurance company is, who the insured party is, what the limits of liability are, and then it’s going to list the certificate holder, and that certificate holder should be informed if that policy cancels. However, there’s not obligation to do so. If the certificate named somebody as an additional insured on the certificate, that’s fine, and often acceptable to the additional insured. However, what you really need is an additional insured endorsement on the policy. And often you will find that the third party insists on obtaining the actual endorsement and not the certificate. The additional insured is based on the idea that you are the main insured on the policy, and the policy is primarily for you. However, the additional insured is somebody that, perhaps, you’re doing work for. You’re working on their premises, and they could be named in a lawsuit that had to do with your work. Therefore, the policy’s going to extend and defend those people in court for any claim that has to do with your work. The additional insured actually has special rights under the policy. Your policy could go into cancellation for something like nonpayment, and the additional insured, if they’re added on to your policy, may have additional coverage for a period of time, because they were entitled to a warning before the policy actually canceled. So, sometimes, the additional insured actually has more rights under the policy than you do. There is an increased exposure because somebody is an additional insured, and therefore, insurance companies often charge an additional premium for this. Although, it’s usually a nominal amount of money. And, if you frequently need additional insureds on the policy, ask for a blanket endorsement that would cover all additional insureds. Usually, at five to eight per year, the blanket endorsement pays for itself.