Who Should be the Named Insured on a Commercial Insurance Policy?
Named insured refers to a person or business listed on an insurance policy. If you are the ‘named insured,’ you choose the policy type, coverage amount, premium notice, and cancelations. Some examples of named insureds include sole proprietorships, corporations, and business partners.
What is the Difference Between Named Insured and Insured?
Named insureds buy the insurance coverage and appear on the declarations page. On the other hand, insured are business partners, entities, or people who can receive insurance payments after a covered loss. Although they do not appear on the declaration page, the insured can be employees or business partners.
Insureds have an option of extending their coverage to third parties via the following methods:
- Additional insured – this is a type of coverage extended to specified people by name.
- Blanket additional insured endorsem*nt – this is a type of coverage extended to a group of people without naming someone specifically.
Some insurance providers allow more than one named insured. If that’s the case, it is important to understand that the first-named insured carries broader rights than the rest. Please consult your insurance agent if you have any questions about multiple named insureds.
Types of Named Insureds
i. Sole Proprietorship
A single person runs sole proprietorships. Therefore, there is no legal distinction between the person and the business. If you are married, you and your spouse are considered one thing. This means that if you run a business with your spouse, it is technically regarded as a sole proprietorship. Since both of you are named insured, you are responsible for all business activities, including lawsuits and debts!
ii. Corporation
Corporations are considered legal entities formed by a group of people to make a profit. Like others, corporations can engage in activities like getting sued, suing others, signing contracts, borrowing money, paying taxes, and owning assets. Since shareholders own a corporation, it is a professional organization. With that in mind, directors and officers should never be named insureds.
iii. Limited liability company (LLC)
This type of entity includes both corporations and partnerships. Since you are trying to limit liability, you must list the LLCs as the named insured.
What Responsibilities do Name Insureds Have?
Depending on the type of insurance policy, the named insured has an obligation to the insurance company. For example, they must notify the insurer if a covered peril occurs. Also, they are supposed to keep information records to help the insurance provider calculate the premiums and settlement or compensation.
What is an Additional Insured?
An additional insured refers to a party added to a commercial insurance policy at the request of the named insured. Mainly, businesses cover additional parties to fulfill contractual obligations. Policyholders need to understand that additional insured are covered through endorsem*nts.
Remember that the coverage for additional insured depends on the work, premises, or services offered in relation to the named insured and additional insured. Additional named insureds are only added after the policy has commenced. Therefore, instead of appearing on the declaration page, they can appear in the addendum of the contract.
All named additional insured are not supposed to pay premiums and cannot modify the commercial insurance policy. However, the insurance provider is responsible for informing them of any policy changes, for example, cancelations.
The Takeaway
If you are a business owner or client, it is important to know and evaluate your expectations, i.e., your goals or benefits. For example, an additional insured endorsem*nt is the best bet if limited coverage and rights are sufficient under your commercial insurance policy. However, if your main objective is to get complete and distinct coverage from possible liabilities, you should be considered being included as an additional named insured. Some of these terms can be confusing, and you might make a huge mistake incurring huge losses! If you need clarification, research thoroughly, talk to your insurance agent, and ask the right questions.
Essentially, there are no huge differences between named insured and additional named insured because the two are entitled to the full benefits of a commercial insurance policy. You can only realize the differences by reading and understanding the terms of endorsem*nt. With that in mind, consider talking to your insurance broker so that he can explain these terms to help you understand the differences.Navigating through insurance is difficult, allow us to be your broker and help! Get a quote today!
