What’s the Difference Between a Certificate of Insurance and an Additional Insured?

You typically come across these issues when you’re talking about business insurance. It’s easy to get them confused. The key difference between a certificate of insurance and an additional insured comes down to whether you have coverage under someone else’s insurance policy. This only applies if you’re named as an additional insured on a policy. What’s an additional insured? When you’re named an additional insured on a policy, you are typically insured for covered claims arising from the Named Insured’s negligence (or your joint negligence) with regard to the premises, project and equipment that’s described in the additional insured endorsement. This commonly will include defense costs should you need to hire an attorney if the claim falls within the terms of the additional insured endorsement. Businesses typically request to be named as an additional insured on a policy if another business’s negligence could affect them. Two examples could include:

• A general contractor hires a subcontractor to help with a project. The subcontractor does negligent work, which leads someone to get injured and file a lawsuit against both the general contractor and the subcontractor. By being named an additional insured on the subcontractor’s policy, the general contractor  may obtain coverage under the subcontractor’s policy within the policy’s limits.
• A wholesaler-distributor distributes products manufactured by another company. A product injures someone, and the injured person files a lawsuit against the wholesaler-distributer and the manufacturer. By being named an additional insured on the manufacturer’s policy, the wholesaler-distributer may obtain coverage under the manufacturer’s policy within the policy’s limits.

A business is usually added as an additional insured via an endorsement to a business insurance policy. Many contracts spell out who should be named as an additional insured on a business’ policy. There are two ways most policies treat additional insureds: on a specific basis and on a blanket basis. A specific basis is just that—a specific person or business is named as an additional insured on a policy. Meanwhile, a blanket basis covers anyone who meets the definition of “additional insured” as it’s spelled out in the policy. The policy typically names broad types of parties like “contractors” or “landlords.” What is a certificate of insurance? A certificate of insurance is a document that shows that insurance coverage is in effect. It shows the dates of coverage, the limits, and the line of business that’s covered. The certificate shows that a policy is in force—but that doesn’t mean the person or business requesting it is covered as well. As a certificate holder, you are only receiving proof that the insurance policy exists; the certificate of insurance is not an insurance policy and does not provide coverage or serve to amend or alter the terms of an insurance policy. A certificate of insurance is usually requested by one party in an agreement, contract or transaction to make sure another party has the appropriate insurance coverage. A certificate of insurance does not entitle you to rights as an additional insured. For example, you aren’t provided any coverage under the other party’s policy in the event of a loss, unless the policy has been endorsed to provide coverage. For that reason, the best way to verify that you have been added to a policy as an additional insured is to request proof that the additional insured endorsement has been added to the  insurance policy. If the policy has been endorsed with the additional insured form, the certificate will often include the form number and specific information about the endorsement that reflects what has been added to the policy. Proof may therefore be a certificate with this information listed or an actual copy of the declarations showing the endorsement. As you can see, additional insureds and certificates of insurance can be pretty tricky. And not having the right information can put you (as well as your business) at financial risk.