Additional Insured | 5 Vital Questions Businesses Should Ask Themselves
“Additional Insured”, in regards to business operations, is a subject that is often disagreed upon, misunderstood, and misinterpreted. But 2 things are for certain:
You need to know what Additional Insured means
And if you are at risk without an endorsement on your vendors’ insurance policies. Here are 5 vital questions you should be asking yourself if you own, operate, or manage a business that uses 3rd party vendors.
1) What does the term “Additional Insured” mean? Simply put, your business is added to your 3rd party’s insurance policy. You are protected from any unforeseen risks that may arise with your 3rd party’s conduct or operations.
2) What does Additional Insured provide? Peace of mind. Your 3rd party has a wreck while making a delivery? You’re covered. Gets sued? You are covered. Misconduct? You are covered. Contaminated food? You’re covered.
3) Will it cost me? The cost for an endorsement is minimal compared to the original insurance premium. Considering the loss associated with a mistake that results in any kind of injury, it’s extremely low. Like a penny to a hundred dollar bill.
4) What is an “Endorsement”? The endorsement identifies you by name or by a general description as the Additional Insured. Endorsements are generally written in broad terms to protect “any person or organization” who the 3rd party is working for. There are different types of endorsements. So, you want to make sure that yours are correct.
5) Should I be listed as “Additional Insured”? The billion dollar question. The short answer? Absolutely. If you have any 3rd party vendors that deliver for you, visit your locations, or work on your behalf, then you most definitely want to be an Additional Insured. There are thousands of examples where not having this coverage created devastating losses. Here are two.
A franchise restaurant decided not to include certain vital endorsements for food contamination to protect itself as an additional insured. A 3rd party delivery of vegetables was later found to contain a food-borne illness that got several people sick. As a result, the company paid over a million dollars in lawsuits.
A subcontractor came onto a construction site and had a terrible fall that resulted in a long hospital stay and lengthy rehabilitation. Because the general contractor did not include his business with endorsements, he was forced to close his company because the losses were so heavy.
When it comes to protecting your assets, having the proper endorsements as an Additional Insured should be considered a vital part of your business strategy.