Insurance policies are full of technical terms that can be a bit confusing, especially when it comes to phrases like “named insured” and “additional insured.” While they may sound similar, they actually refer to different things in your business insurance policy. Let’s break down the differences so you can make sure your business—and the people you work with—are properly covered.
What’s a “Named Insured”?
In simple terms, the named insured is the person or business listed on the policy as the primary party covered by the insurance. This is usually your business, and it’s the entity that owns the policy. As the named insured, your business has full protection against liability and losses, up to the policy’s limits.
The named insured has control over the policy, which means your business is responsible for paying the premiums and making any changes or cancellations. If you have multiple people or entities involved, you can have more than one named insured. For example, both the business and its owner, or a business and its subsidiaries, can be listed as named insureds on the same policy.
Named Insured vs. Additional Insured
An additional insured is someone who gets limited coverage under your policy. This might sound similar to a named insured, but it’s different. An additional insured is typically covered for claims that arise from the activities or actions of the named insured. However, they don’t have full rights to the policy—meaning they aren’t responsible for paying premiums, and they can’t make changes to the policy.
Some insurance policies also use the term “additional named insured,” which might sound confusing because it seems like they’re on the same level as the named insured. But this can vary depending on the insurer, so it’s always good to check exactly what kind of coverage is provided.
Coverage for the Named Insured
The named insured is the person or business listed on the policy, and they’re the ones who are fully covered. If something goes wrong—whether it’s property damage, a lawsuit, or an accident—your business will be protected, up to the limits of your policy. The named insured is also the one responsible for paying the policy’s premiums and managing the policy.
If you have a few different parties involved in your business, there can be multiple named insureds. For instance, a business and its owner or parent company and its subsidiaries can both be named insureds on the same policy. This gives everyone the full protection of the policy.
What Does it Mean to Be an Additional Insured?
An additional insured doesn’t have the same level of coverage as the named insured. Typically, they’re only covered for claims related to the named insured’s activities. For example, if you’re a small business owner and rent a space for your business, the building owner may ask to be added as an additional insured. This means the property owner would be covered if a claim arises from your business activities (like if an employee accidentally damages the building). However, they wouldn’t be covered for issues unrelated to your business, such as damage caused by other tenants.
Similarly, if you’re a contractor or consultant, a client may ask to be listed as an additional insured on your policy. This would protect your client if something goes wrong while you’re working with them. But again, the coverage is generally limited to claims that result from your work.
Real-Life Example: How Named and Additional Insureds Work Together
To make this a little clearer, let’s walk through a scenario.
Jack and Jill run a marketing consulting business, J&J Copywriting, and they also have a smaller business called J&J Graphic Design. They get a general liability and professional liability insurance policy with J&J Copywriting as the named insured. They also add J&J Graphic Design as an additional named insured so that both businesses are fully covered under the same policy.
A few months later, J&J lands a big client—NBC Corp.—who requests to be added as an additional insured on their policies. Now NBC Corp. is covered for claims related to the marketing work that J&J does for them.
For example, J&J Graphic Design creates a new logo for NBC. Later, a lawsuit is filed claiming the design is too similar to another company’s trademark. Since NBC is an additional insured, J&J’s professional liability insurance covers both J&J and NBC Corp. in defending the lawsuit.
Adding an Additional Insured to Your Policy
Sometimes, a client, subcontractor, or vendor may need to be added as an additional insured to your existing policy. At Holley Insurance, we make it easy to add additional insureds to your policy, whether you’re setting up a new policy or simply need to make an update.
Adding the right people as additional insureds helps protect everyone involved in a business transaction, ensuring that all parties are covered if something goes wrong.
Conclusion: Protecting Your Business with the Right Coverage
Understanding the difference between a named insured and an additional insured is important for making sure your business and partners have the protection they need. By carefully choosing who to add as additional insureds on your policy, you can expand your coverage and safeguard your business from a variety of risks.
If you’re a business owner, we’d love to talk to you about the specific risks your businses faces and how we can help you protect it. Every one of our protection advisors is an expert in business insurance. Contact us here and let’s get started!
A little more about Holley Insurance…
Holley Insurance was founded in 2000, and retains a core base of loyal clients. We have locations in Roanoke, Rocky Mount, and Forest, VA. As an independent insurance agency, Holley Insurance represents a carefully selected group of financially strong, reputable insurance companies. Therefore, we are able to offer you the best coverage at the most competitive price. If you’re interested in starting a quote online or having us take a look at your current policies, click here!
