No matter a company’s size, scope, or industry, certain services and contracts require partnering with outside individuals and businesses. They may be best suited for the task, have certain expertise your employees lack, or simply be cheaper than doing the job yourself. While the both parties reap the benefits of subcontracting work and company partnerships, they also share the risks. If a subcontractor causes an accident on a job site that damages client property, or even leads to an injury, your company could be named in the lawsuit and held liable for legal fees and damages. This is where additional insured endorsements come into play. If a subcontractor adds your company to their policy, your company is covered under their insurance and is thus protected from liability. Alternatively, depending on the circumstances, it may make more sense for the company hiring the subcontractor to add them to their policy. Either way, when companies work together, it likely will be in both their interests to have each other as additional insured endorsements.

This guide will provide you with all the information you need about additional insured endorsements to make the best decision for your own company.

We Cover in This Guide

• What is additional insured endorsement?

• When to add additional insured endorsement?

• How to add additional insured endorsement?

• Pros and cons

• Tips for buying

• FAQ

• Summary 

What is Additional Insured Endorsement?

An additional insured endorsement is a way to include a business partner, subcontractor, or individual on a company’s insurance policy. When two parties work together on a project, their interests intertwine. If a project succeeds and becomes profitable, each stands to benefit, but each side may also be responsible if the other makes a mistake. If one company causes an accident resulting in harm or injuries, the other may be added to the lawsuit and potentially held responsible for damages. An additional insured endorsement is the best way to protect both parties. Once your company is added, you gain some of the benefits of their coverage while being free of liability. Additionally, once another party is included in your policy, they will not be responsible for your company’s portion if it is sued. 

When to Add Additional Insured Endorsement?

In general, when entering into business with another party, adding an additional insured endorsement should be done prior signing any documents. You or your new partner may need to be added to the other party’s insurance before agreeing to work together. Additionally, these requirements often determine the language of the contract. 

If you are a contractor, subcontractor, or business owner and are hired for a job or ongoing service, you may want your contract to state that if your work causes an accident or injury, you will be protected from lawsuits and potential liabilities under the insurance of the company that hired you. Conversely, most companies that hire contractors ask to be named as an additional insured for increased coverage and to avoid liabilities under their own policy. Additionally, they require language in contracts that require the other party to pay for damages from their own work. 

How to Add Additional Insured Endorsement?

The first step to adding an additional insured endorsement to your policy is consulting with your provider to determine whether or not your plan allows this kind of modification. If your insurer allows the addition, the next step is assessing whether you agree to and can accommodate the level of coverage the other party requests. Once these details are ironed out, the rest of the process is about filling out the endorsement forms with whatever information is required.

Finally, before adding a subcontractor to your own policy, you may want to ensure that they have their own separate insurance. The coverage provided by an additional insured endorsement varies depending on a number of factors, including their own policy.

Pros and Cons

Pros

• The additional insured endorsement cost is less expensive than the other party purchasing a new policy.

• Each side adding the other helps build a strong business relationship with one another.

• Prevents one party from being unfairly harmed by the actions of the other.

Cons

• An additional expense for the party adding the other to their policy.

• Coverage for the additional insured may not be equal that of the primary policyholder. 

• May increase future premiums if there is a claim against the party you added.

Tips for Buying

When considering additional insured endorsement costs, keep the following in mind before making your decision.

• Consider switching providers: If the partnership is important enough and your current insurer is not accommodating adding an additional endorsement, it may be necessary to seek coverage elsewhere.

• Work with an independent agent: An independent insurance agent will help direct you toward providers with the best rates and the most experience in your industry and with your particular needs. 

• Identify your risks: Be sure to thoroughly analyze your business, that of your partner, and the work you will be conducting, to identify potential risks and make sure both parties are adequately covered. 

• Compare quotes: Policy costs vary between insurers. Consider at least three quotes to find the best rates.

FAQ

- How much does additional insured endorsement cost?

You can’t really provide a general price range for adding another party to your policy. Additional insured endorsement costs depend entirely on the type of insurance and coverage level of the other party.

- What kind of insurance policies do companies typically add additional insured endorsements?

The most common policy involved in additional insured endorsements are general and professional liability. Many companies also use blanket additional insured endorsements for their commercial auto policy. Doing so provides the same coverage for anyone driving a company vehicle.

- How do additional insured endorsements appear on an insurance policy?

They are typically included as a separate page. If you asked a company to add you to their policy, you should request a copy of this document.

Summary

When entering into a contract with another business or prime contractor, for a single job or on an ongoing basis, your successes and failures are tied together. Each party can be liable for the actions of the other. An additional insured endorsement is the best way to make sure no one will be stuck unfairly paying for the mistakes of the other.

After you understand additional insurance endorsement costs and have properly considered the nature of the contract, projects, your business, and your partner, you can feel properly prepared to make the right choice for your company.

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