Sharing Your Insurance With Others
You’ve just agreed to sign on to a new contract with a big new contractor and you read in the language and it says that you agree to name them as an additional insured. You’re not quite sure what that means, but you think you’re giving them some part of your insurance program. Hi, I’m Jeff Gordon from Gordon Atlantic Insurance.
What is “Additional Insured” Status?
When you are giving someone an additional insured status, you are indeed sharing your insurance with that person.
Here’s how it works: a contractor will say to one of his subcontractors, “if you do something that goes wrong that comes back and leaks back into my business, we want your insurance to carry all the water.” That is, if you’re responsible for it, you pay for it.
Related: What Is a Business Owner Policy?
When Might Additional Insured Status be Requested?
We see additional insured in a lot of cases. One common case is where you have a contractor and subcontractors. Another is a lessor of a place, that is, a landlord, will ask the tenants to name the landlord as an additional insured.
When is Granting Additional Insured Status Appropriate for You?
So why would you not grant additional insured? Well, you’re sharing your insurance program with somebody else. And how many times are you doing this? If you’re in a business where all the people that you are working for want to be named as additional insureds, how many people are you sharing your program with?
Related: Understanding Total Cost of Risk
Do You Need Extra Insurance?
Sometimes granting additional insured status to somebody else might prompt the consideration of “gee, do I need another layer of insurance? Do I need more insurance on top of what I have right now, because I’m sharing my program with 20 different people?”
Granting additional insured status to others does mean that you’re granting them defense coverage from your insurance program over to them. And so to ask for additional insured status is a good thing for you because you grant it, you’re sharing.
Talk to Your Broker
Always talk with your broker about whether you want to grant additional insured status or whether you need to buy additional insurance because you’re spread so thin that you want to make sure that there’s enough left for you.
About Geoff Gordon
Geoff Gordon has been the owner/president of the Gordon Atlantic Insurance agency since 1987. Gordon Atlantic Insurance provides commercial and personal insurance to businesses and families throughout Massachusetts.
A prolific writer and recognized industry thought leader, Geoff has contributed articles to Banker & Tradesman, a regional trade periodical, and served on the Quincy Patriot Ledger’s Board of Economic Advisors column. He is a member of the Plymouth Rock Assurance Agents Advisory Council as well as the Bunker Hill Insurance Agents Advisory Council. Geoff has presented to the Financial Planning Association’s (FPA) education series and teaches locally. Most recently Geoff spoke to a TEDx conference on “Personal Risk for a Rich Life” in February 2016.
Geoff obtained his Certified Financial Planner (CFP®) designation in 1985, the Certified Insurance Counselor (CIC) in 1995, and his Certified Risk Manager (CRM) designation in 2004, and serves as an Asssociate Faculty member of the Institute of Insurance Education and Reasearch, a national credentialling organization.