I’ve been working with two general contractors this week. One is a custom home builder and remodeler in Dallas, and the other is a roofing company in Frisco. Both are getting general liability policies with a blanket coverage option for additional insured’s, and both wanted to understand what an additional insured is and why it matters to them.
Every insurance policy, whether home, car, life, or commercial has a named insured on it, it’s you, your company, the policy holder, or owner. If the policy is for an individual, they are the named insured, or if the policy is for a couple, then the first person listed is the named insured and the spouse, partner, etc. is the co-named or co-insured. Additional insureds are an individual or a company who want or request to be listed on your insurance policy.
Additional insured’s can be on any type of policy. When you lease a car, the leasing company will request to be named as an additional insured. If someone co-signs for a car or home loan with you, then the co-signer should be listed as an additional insured on the car or home insurance policy.
On commercial policies, additional insured’s may include of the building owner or property management company for the office space you rent or lease. They may also be suppliers of the materials you buy and resell to clients, they may be a third party such as a bank, or even the client. In the case of the home builder I’m working with, he has two additional insured’s; the bank loaning the money to the client who’s building the home, as well as the client. In addition, the home builder is having his sub-contractors list his company as an additional insured on their general liability policies.
The reason a person or company requests to be listed as an additional insured is to be covered by the policy holder’s insurance policy first if there’s a negligence claim or lawsuit. By being named as an additional insured, they are covered initially by your insurance policy before their policy pays on a claim if they are named in a lawsuit brought against you.
For example, you leased a new Lexus through the Lexus leasing company, they want to be a named insured on your car insurance policy. You drive your new Lexus to a party, have too much to drink, and cause an accident. The accident victim sues you for emotional or physical injury and they name Lexus in the lawsuit. Your car insurance policy will go to help Lexus in the lawsuit first, before their insurance kicks in, provided there’s enough coverage left over to do so.
This same principal applies to commercial policies. For example, I’ve discussed the need for both the general contractors I’m working with, to be listed or named as additional insureds on their sub-contractors insurance policies. This is to protect the general contractors in the event they are named in a lawsuit for faulty work or a negligent act by one of their sub-contractors. It provides an extra layer of coverage for the general contractors to protect them financially if something goes wrong.
There may be a cost to name someone as an additional insured on your personal or commercial policy. It may cost a small amount to add a leasing company or co-signer to a home or car insurance policy. On commercial policies, they can be added singly for a cost of $25 to $100 each, or a blanket additional insured option can be added for $200 to $500 when there may be multiple additional insureds. The cost simply depends on the insurance company writing the policy.
Share your experience of either being listed as an additional insured on someone else’s policy or you listing them on your policy, as well as your comments, and questions on our Google+ and Facebook pages. I’d love to hear from you!