Tom's Blog
In order to protect your business properly, you must have business insurance, but do you understand every aspect regarding your business and the protection it deserves? You may hear two terms that coincide quite frequently, but making sure you understand the difference between the two is imperative should something unfortunate happen. If you are a business owner, knowing the key differences between “certificate of insurance” versus “additional insured” is essential to keeping your business in tact.
What is a Certificate of Insurance?
Simply put, a certificate of insurance is a document that proves there is an insurance policy that is in effect for that particular business. Before any job starts, it is always recommended that you ask to see the certificate of insurance; otherwise you may be setting yourself up for financial demise should something happen during the course of a job, only to find out there was no coverage available. Having that certificate of insurance readily available shows potential clients or employers that you are insured.
Keep in mind, though, that just because insurance has been documented does not automatically mean you will be covered if a loss happens during the course of the business transaction. That current policy must specifically be amended with an endorsement to be added as an “additional insured” and is best to request proof of that as well, before any job begins. Some examples of this may pertain to personal trainers, painters, plumbers, custodians, or electricians.
What is an Additional Insured?
Before a job contract begins, you not only need to see that insurance coverage exists (certificate of insurance), but that you are ALSO named as an additional insured on that policy. If you are named as an additional insured by the endorsement, you are typically insured for covered losses that result from the “named insured’s” negligence.
For example, imagine being a general contractor and hiring out a sub contractor for the plumbing work on a particular job. Your hired subcontractor (plumber) accidentally breaks through a pipe on the job site that results in a huge water mess, significant clean up, and costly repairs. Now a lawsuit has been filed against both the contractor and subcontractor for the damages that have ensued.
Here is where being named as “additional insured” comes into play. 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 since the subcontractor was negligent.
Be aware there are different ways in citing how the additional insured will be covered under the endorsement form. One way is listed as “specific” and the other “blanket.” A specific basis means that particular named additional insured will be covered; while the blanket covers anyone in broader terms that meets the definition of “additional insured” as the policy indicates.
The Difference Can Be Tricky
It’s easy to see where some people can get confused between the terms “certificate of insurance” versus “additional insured” as it relates to business contracts. If you don’t fully understand the difference, you could be faced with some serious financial consequences, so it is recommended that you contact us at Paramount Insurance Agency at 866-869-3335 with all of your questions regarding coverage for your business needs.
