As a contractor, you’ve probably been asked by clients to add them as an “Additional Insured” on your liability insurance policy. If you’re wondering why this is necessary and how it impacts your business, you’re not alone. In this post, we will cover what the Additional Insured Endorsement is and why you are being asked to add it to your General Liability policy.
What is an Additional Insured Endorsement?
An Additional Insured Endorsement is a clause added to your liability insurance policy, which extends coverage to a third party—typically your client. This means that if something goes wrong on the job, like property damage or injury, your client can be protected by your insurance.
For example, if you’re doing electrical work at a business, and an accident occurs that damages property or injures someone, the business could be sued. By being listed as an additional insured on your policy, the client gains coverage for that incident, alongside you.
Why Do My Clients Require This?
- Protecting Their Own Liability: Your clients, whether they’re property owners or businesses, want to reduce their own risk. If they are dragged into a lawsuit because of something that happened during your work, the additional insured endorsement ensures they are covered under your policy, which saves them from tapping into their own insurance.
- Legal Protection in Lawsuits: If your client is named in a lawsuit related to the work you performed, the endorsement ensures they are protected under your insurance. This can help cover legal defense costs, settlements, or judgments.
- Industry Standard: In many industries, adding clients as additional insureds is a common practice. It’s often written into contracts to ensure that both parties are protected. In fact, many clients won’t move forward with a job unless you provide proof of this coverage.
How Does It Impact Me?
While adding an additional insured endorsement benefits your client, it also offers you certain advantages:
- Fulfilling Contractual Obligations: Many clients, especially larger businesses, won’t hire contractors unless they can be listed as additional insured. By offering this, you meet their requirements and maintain good relationships with clients.
- Not Expensive: In most cases, adding an additional insured endorsement to your policy doesn’t significantly increase your premium. Many insurers offer it at a minimal cost or even include it as part of your coverage.
What to Watch Out For
It’s important to ensure that the additional insured endorsement doesn’t open you up to extra liability or obligations beyond the scope of your work. Review the terms with your insurance provider to understand what’s covered and what’s not. That way, you can confidently offer this endorsement without taking on unnecessary risks.
Conclusion
In today’s liability insurance world, being asked to provide an additional insured endorsement is very common. It’s a way for clients to protect their interests, but it also helps you secure more jobs and build trust. As long as you understand the terms of your coverage and how the endorsement works, it’s a valuable tool that benefits both you and your clients. If you have any questions, talk to your insurance provider about adding this endorsement to your policy.