When it comes to insuring your small business, there’s a lot at stake. The difference between a proper named insured status and additional named insured status could indicate who is responsible for paying a claim in the event that a major loss should take place.
The following are some things to think about before speaking with your agent:
Named Insured and Additional Named Insured: The named insured is the person who owns the policy, and the additional named insured is a person, organization or other entity that is included on the policy via an endorsement. Unlike the proper or original named insured, the additional named insured does not automatically have full liability and other coverage associated with the primary policy. The endorsements or addendums may or may not be the same as those enjoyed by the primary insured person.
All Named Insured and Automatic Insureds: All named insured consolidates any/all persons or entities associated with the policy by name. Automatic insureds are those persons or organizations that are not named but are still covered by the policy. Common examples include the spouse or partner in a joint venture.
Why It Matters: Improper classification or naming conventions can easily result in lawsuits that would otherwise have been avoided, and they can quickly become legal nightmares due to cross-suit exclusions and other contractual issues surrounding naming conventions. According to experts, entities that you do not have an ownership interest in should not be listed as named insureds. You should also ask your agent about cross-suit exclusions for any insurance contract with named insureds.