Contractor insurance is an important tool to help safeguard against accidental loss.

To get the most out of your insurance, it’s essential to understand key concepts, such as the difference between a Certificate Holder and an Additional Insured and since Since our mission at The Contractors Resource Center is to make contractors’ insurance as simple as possible, we’re here to help explain these concepts.

Basically, an Additional Insured is another individual or business the policyholder ADDS to an insurance policy, who is entitled to the same coverage benefits.  A Certificate Holder receives verification of insurance and notifications of any changes made to a policy but is not covered by the policy.  Let’s take a closer look.

What is an Additional Insured?

An Additional Insured is a person or entity added to an insurance policy by the policyholder or Named Insured (the individual or business originally named in the policy).  Additional Insureds are usually added to an insurance policy through a rider or endorsement, which is an amendment made to a policy after the policy was issued.  Although Additional Insureds do not pay premiums, they are provided with protection from risk under the policy terms that may arise out of the policyholder’s conduct. As such, they have the legal right to file a claim.

To understand how this concept may apply in a real-world scenario, imagine that you are an electrical contractor. You have General Liability Insurance to protect your business from the financial consequences of third-party bodily injury and property damage liability claims. If you are hired by a general contractor to handle the electrical wiring for an office remodeling project, the general contractor may wish to be listed on your policy as an Additional Insured.

In this scenario, by adding the general contractor as an AI, the general contractor will be extended the same coverage that you have under your policy. For example, you install a faulty electrical outlet that leads to a fire and substantial property damage. If the property owner sues the general contractor, the general contractor, as an Additional Insured, would have the right to file a claim on your policy.

When Additional Insureds are added to a policy, they will be listed on the Certificate of Insurance (COI), which is the document you receive when you purchase your policy, summarizing your coverage and proving you have insurance. The COI includes details like your business name, the name of the insurance company, your policy number, your coverage period, the policy limit, and a summary of your coverage.

What is a certificate holder?

Like an Additional Insured, a certificate holder is a third party that may be named on your COI. Unlike an Additional Insured, however, a certificate holder has no protection or coverage under the policy. Therefore, a certificate holder cannot file a claim under the policy.

The primary purpose of a certificate is to verify your insurance coverage. The certificate holder receives a copy of your COI and also receives notifications if your coverage expires, renews, changes, or is canceled.

A certificate holder can be an individual or a company that has a vested interest in your business. For example, say that you have a photography business and need to rent space for your studio. Upon signing a lease, your landlord may wish to be listed on your commercial property insurance policy as a certificate holder to ensure that you maintain coverage during the period of your lease. This gives the landlord peace of mind in the event you cause damage to the property you are leasing.

Certificate holder vs. Additional Insured: A summary

Let’s sum up the main differences between a certificate holder vs. an Additional Insured. An Additional Insured is an entity that is afforded coverage under your policy and, consequently, has the right to file a claim.  NOTE: Some insurers charge a small premium for adding Additional Insureds which can range from $250 to $750 depending on the specifics required.  A Certificate Holder is an entity notified if there are changes to a policy, such as a cancellation or a renewal. However, a certificate holder is not protected by your policy and, therefore, cannot file a claim on your policy. That’s why there is no premium charge to add a certificate holder.

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