Understanding Named Insureds and Additional Insureds

Today we continue our series helping personal lines insurance professionals seeking to make the move to commercial lines. In the past we’ve written about Business Income, Worker’s Compensation/Employer’s Liability, Coinsurance and the Basics of Commercial Lines Insurance.

What is the difference between a Named Insured and an Additional Insured? If you’ve ever been asked to explain this to a client, you know that the differences are important, but you may have struggled to list them off quickly. Here’s a guide:


Named Insured:

The Named Insured is typically, but not always, the owner and payer of the policy. This is the entity that you will see listed on the Declaration Page indicating who the policy is covering. As the Named Insured, this entity is provided the full protection as outlined in the policy. Assuming they also own the policy, they are the party that is able to request modification or cancellation of a policy. It is important to know that certain types of policies may be purchased and owned by someone who is not the named insured. This is the case for some life insurance policies, particularly in business situations, like group life policies or key man life insurance. Another common instance is in the event that the owner of a construction project requires the general contractor to purchase the policy for the project; this type of policy is called an Owners and Contractors Protective Policy (OCP).

Policies may have multiple Named Insureds if there is a situation that calls for it, such as a joint venture between two entities. In this event, the First Named Insured has certain rights and responsibilities that the others do not. The rights include receiving notices of cancellation, invoices, and other communications regarding the policy. The responsibilities include payment of premium, compliance with audit or inspection requests (if required by the policy’s conditions), and reporting of claims in a timely fashion.


Additional Insured:

On the other hand, additional Insureds are added to the policy due to a relationship they have with the named insured. They are added to the policy by endorsement, and the protection that they are afforded will vary depending on which policy form is used to add them. Most companies charge a nominal fee to add an additional insured to the policy since the endorsement does expand coverage to include another party.  And, most companies have many different forms for adding additional insureds. There are even some options to add “Blanket Additional Insureds,” which cover any Additional Insured if required in a contract with the Named Insured. In general, their rights and responsibilities will be severely limited compared to a Named Insured. They will have the option to file a claim if necessary, but they will not be able to modify or cancel coverage. They would also not be entitled to a refund of premium.

There are many Examples of when you mayo receive a request to add an additional insured:

  1. A general contractor may ask to be named as an additional insured on his or her subcontractor’s liability policy. In this case, the general contractor is looking to ensure that should the subcontractor cause a claim due to their work on a project, the general contractor’s own policy can respond after the subcontractor’s policy.
  2. The lessor of a building requests to be added as an additional insured on his or her tenant’s liability policy. The lessor wants coverage in the event that the tenant experiences a premises liability claim.  Similar to the situation above, the tenant’s policy would provide primary coverage since the landlord and the tenant would likely both be called upon in the event of a suit.
  3. A bank may ask to be listed on a property for which it holds the mortgage.  This is usually referred to as being “listed as a mortgagee.” This does apply to the property coverage and typically gives the bank privileges in the event that the insured experiences a property claim.  The mortgage company would be listed on the settlement check, and in some cases, they may even receive payment if the insured discontinued payment on the policy.  On the property side, these endorsements are called Mortgagee Clauses or Loss Payable Clauses.

When it comes to adding additional insureds to policies, it is important to understand the relationship between the two entities and be certain that it makes sense before doing so. Adding the additional insured endorsements does open the policy up to potential to be brought in on more lawsuits.

About Carly Burnham

Carly Burnham began her insurance career in 2004 as an office assistant at an agency in her hometown of Duluth, MN. She got licensed as a producer while working at that agency and progressed to serve as an office manager. Working in the agency is how she fell in love with the industry. She saw firsthand the good that insurance consumers experienced by having the proper protection. When Carly moved to Des Moines in 2010, she decided to commit to the industry, and she completed her CPCU in one year finishing it in 2012 and attending commencement in New Orleans. She completed her MBA at Iowa State University in 2014. During this time, she and Tony founded a Gen Y Associate Resource Group at Nationwide in Des Moines. After they had both left Nationwide, Tony recruited Carly to co-author and manage InsNerds.com. She has the difficult task of keeping his constant flow of crazy ideas focused and helping to flesh them out into useful articles. Carly enjoys sharing knowledge and ideas about the future of the industry and finds the website a good outlet for this passion. Carly is involved in the the CPCU Society Underwriting Interest Group. She also writes "Next Wave" a monthly column in the "Perspectives" section of Best's Review.

4 thoughts on “Understanding Named Insureds and Additional Insureds”

  1. Good topic and good article. Another related, but expanded, post I would love to see is on the differences in Additional Insureds, Additional Interests, and Loss Payees. We have some troubles with the three and people getting the titles confused. Thanks!

  2. You advise, “There are many Examples of when you may receive a request to add an additional insured:” Then you advise, “A bank may ask to be listed on a property for which it holds the mortgage….On the property side, these endorsements are called Mortgagee Clauses or Loss Payable Clauses.” In my opinion, there is a fundamental difference between additional insured and mortgagee clause. Can a bank be endorsed to a policy as an additional insured if their only interest is a lien on property?

  3. Please advise. We have hired a tree cutting contractor to top some eucalyptus trees that have grown up over the years and are now blocking our bay view. The owner of the VACANT LAND has given us permission to top the trees but insist on being named as an additional Insured on the contractors liability policy. The contractor is not in favor of adding this endorsement. What are the concerns the contractor should have by adding this endorsement and will additional cost be added to the change in his policy?



Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.