What Contractors Need to Know About Blanket Additional Insured Endorsements
As a contractor, you may need to provide coverage for third parties or subcontractors you work with. This is done with a Blanket Additional Insured Endorsement.
Keep reading to learn more about this coverage and how to effectively use it.
What Does it Mean to Be an Additional Insured?
To understand Blanket Additional Insured Endorsements, you have to know what it means to be an additional insured.
If you name an additional insured on your insurance policy, you are providing coverage for a third party. For example, you could name a subcontractor you are working with as an additional insured.
If you are an additional insured, you benefit from somebody else’s insurance coverage. This includes the ability to make a claim under the policy.
The most important thing to remember about additional insureds is that it gives coverage to parties not originally named in the policy.
What is a Blanket Additional Insured?
A Blanket Additional Insured is a type of additional insured endorsement. This type of endorsement covers third parties that require coverage under a contract. Let’s say you want to work with a specific subcontractor, but they will only enter a contract if you provide them with insurance coverage. In this case, you would add a blanket additional insured endorsement to your policy to cover them.
With this coverage, “the named insured will provide a general description of the type of groups that it wants coverage extended to under the policy,” says Investopedia. You could add a blanket additional insured endorsement for “all subcontractors working with you from company XYZ,” or “any subcontractor working with you who is operating heavy equipment.”
Third-parties do not have to be named explicitly in the policy to receive coverage. Because of this, insurance providers often have requirements for coverage to kick in:
- The named insured & the third party must have a contract where the named insured shows coverage for the third party.
- The contract must be in writing for the insurer to review.
- Any third party approved for coverage must receive a Certificate of Insurance (COI) from the insurer.
Blanket Additional Insured Example
Imagine there is an electrical accident on a construction site. You and your subcontractor have a written agreement. The agreement states the contractor will provide coverage to the third party for the duration of the project.
The third party doing the electrical work makes a claim under the contractor’s insurance policy.
In short, two things must be in place for the third party to receive coverage:
- The contractor must have a general description of third-party coverage recipients in the insurance policy. For example, “any subcontractor working on electrical wiring.”
- The third party and the contractor must have a contract in place requiring coverage.
If these two cases are met, the third party receives coverage.
How to Keep Track of Policies
Keeping track of which third parties have coverage under your insurance policy is a huge task.
Contractors who find themselves in this situation need to make sure they have an up-to-date system for managing COIs.
If you want to learn more, sign-up for a free product demo with SmartCompliance to keep track of insurance certificates in one cloud-based platform.