When two different companies arrange to work together, they will commonly request proof of insurance in the way of a Certificate of Insurance or they could even be asked to be listed on the policy as an Additional Insured. Insurance terms can not only be confusing, but they can be extremely misleading as well. The difference between an “Additional Insured” and an “Additional Named Insured” is massive and could allow someone to make changes to your policy without your knowledge. For reasons such as this, we thought it was time to put together an article letting our followers and customers fully understand the differences in these terms.
Certificate of Insurance Briefly Explained
Certificates of insurance are a written document that states that your insurance policy is in force and it will include a generalized statement of coverages on the policy. If you are doing work for another business or on another businesses premises/behalf they may require a certificate of insurance for your company to prove that you have liability coverage in force.
The major flaw with these certificates is that you could obtain a certificate from your insurance broker and then cancel the policy the next day. That person could show that certificate prior to the expiration date of the policy and they may accept it as proof of insurance. If your company requests certificates of insurance, make sure they are current.
Additional Insured Briefly Explained
An additional insured is a party or parties named on the policy as an additional insured but only with respect to the operations performed by or on behalf of the Named Insured (your company for example). This Extension does not insure liability arising out of the operations of the additional insured or its employees.
What that really means is that if you put an additional insured on your insurance policy, your policy will cover their liability for any negligent operations by your company or on behalf of your company. This is only with respect to their interest in the operation of the named insured (your company).
An additional insured is unable to make any changes to your policy, but an additional named insured can make changes to your policy. An additional named insured means the “operations, services, products or work” of the additional named insured are fully covered for negligence. It also provides additional rights and usually a premium charge comes with it. If you are working with a company and their contract states that they need to be listed as an “additional name insured” you may want to clarify if they really mean an “additional insured” and have them amend the contract before you sign. There would be no reason for them to be listed as an additional named insured if it’s a simple business to business operation.
The Final Word
As you can see, insurance terms can be a bit tricky and very legal. We would never expect anyone outside of the insurance industry to understand all of these terms and conditions. For that reason, it is incredibly important to make sure that your insurance provider be well educated and less automated. You need an insurance professional who will guide you through these types of processes and double check that what you are asking for is in your best interests. If you are not already a customer of ours, give us a chance to quote your business to ensure you are getting the best service possible.