Does It Cost More to Add an Additional Insured?

Adding an additional party to an existing insurance policy raises questions about potential premium increases. Understanding additional insured status and the factors influencing its cost can help policyholders make informed decisions.

Understanding Additional Insured Status

An additional insured is an individual or entity, other than the primary policyholder, who receives coverage under an existing insurance policy. This status typically extends liability protection to the added party for claims arising from the named insured’s operations or activities. The primary purpose of this arrangement is to transfer some risk from the additional insured to the named insured’s policy.

This arrangement is common in business relationships, such as a general contractor requiring a subcontractor to name them on their liability policy, or a landlord being added to a tenant’s commercial property insurance. Coverage for an additional insured is generally limited to liabilities stemming from the named insured’s conduct or work. This differs from a “named insured,” who has broader coverage and responsibilities, including paying premiums.

Factors Influencing the Cost

Several factors determine whether adding an additional insured will incur an extra cost. The type of insurance policy plays a significant role; endorsements are most frequently applied to general liability, commercial auto, and commercial property policies. The nature of the relationship between the primary policyholder and the additional insured is also a factor, especially if the addition is a contractual requirement for a project or lease.

The risk profile associated with the additional insured’s activities directly impacts potential premium increases. Insurers may adjust the premium to account for new or elevated risk. Underwriting guidelines, which vary by insurer, also determine the cost. Some insurers might consider the added risk marginal, leading to minimal or no additional charge.

Claims made by or on behalf of an additional insured can affect the named insured’s loss history. A negative loss history can result in higher premiums upon renewal or make it challenging to secure future coverage. This long-term financial implication is a consideration beyond any immediate fee.

How Policy Premiums Are Adjusted

Some insurers may charge a direct premium increase, which is a modest amount. This could be a flat fee, often ranging from $25 to $50 per additional insured. Other insurers might offer a flat rate that allows the policyholder to add multiple additional insureds without further individual charges.

In some scenarios, particularly with “blanket additional insured” endorsements, there may be no specific charge per individual added. The policy automatically extends coverage to a defined group under certain contractual conditions. While the upfront cost might be low, the overall policy premium can still increase due to the insurer’s perception of increased risk exposure. This adjustment reflects the broader liability assumed by the policy.

The Process for Adding an Additional Insured

The process for adding an additional insured begins with the primary policyholder contacting their insurance provider or agent. Confirm that the existing policy allows for such an endorsement. The policyholder will need to provide specific information about the party to be added.

This information includes the full legal name of the entity or individual, their address, and their relationship to the primary policyholder. An endorsement form, sometimes called a rider, is then completed to officially modify the policy and extend coverage. After processing, the policyholder receives an updated policy document or a Certificate of Insurance (COI) that verifies the additional insured status.