What Does Additional Insured Mean
Are you living or operating your business from a rented property? There are some concerns regarding insurance policies you should be aware of for your benefit.
If you look at the lease, you may find that your tenant has added you, the landlord, as an Additional Insured.
Don't know what additional insured is? We got you covered with all the nitty-gritty details of the term. Read on so you are educated about the things that benefit you in leasing the property.
What Does Additional Insured Mean?
It is a type of status linked to the general liability insurance policy. It gives coverage to other groups or individuals not mentioned in the policy initially. Additionally, it requires an insured endorsement, which will be protected under the name insurer's policy. Later it can be claimed in the event they are sued.
Instead of using their policy, the additional insured can get coverage from your policy, leaving their own as a backup.
Some Necessary Rudiments for Insurance
Essentially the agreement of the additional insured covers:
- General Liability: It covers the claims that involve bodily injuries or any property damages that result from the property manager's operations.
- Errors and Omissions: You are protected against mistakes in the property and manager's services in this cover. It is a common coverage involved in all things real estate.
- Compensation: If your property management company and its employees are based in another city, it must have workers' compensation insurance. It covers all medical expenses of the employee for work-related injuries.
The Idea Behind the Insurance
Essentially, when the landlord rents out the property, they are to bear the risk if someone gets injured when visiting the tenants.
For instance, a loose floorboard or broken window is a cause of the injury; it becomes the problem of a property owner.
That put the landlords at a disadvantage as they were completely unaware of what followed the mishap and resulting in paying for unknown incidents.
Hence the landlords protect themselves by adding additional insured in their general liability insurance.
In this way, tenants are saved from any such claim and keep their landlords from such liabilities. This is why landlords want to be included as additional insured in the tenant's policy.
So, if or ever any claim arises tenant's side of operation due to general use of premise – particularly liability claim, landlord remain unscathed. As a result, it will be covered first in the tenants' policy.
Also, when falling into a lawsuit, various parties can be termed defendants, including the landlord.
All in all, it is a tedious and expensive process, and the problem can be mitigated by only adding the landlord as an additional insured.
How it Covers the Tenant
In case you choose the route to cover the landlord in the liability policy, you will need an endorsement. It is required to cover the landlord as an additional insured. But its accurate nature can vary from one insurance company to another.
Similarly, many companies will limit the coverage for the landlord in the endorsement. And if the tenant has multiple landlords, for instance, husband and wife own the property together; they will require separate endorsement for each.
Endorsements contain schedules in them. They indicate which building and what part of the building is leased in your name. Therefore, it is crucial to check all the information given in this section is accurate.
When needed, you will find that information in the endorsement is incorrect, then you cannot make any claims. Furthermore, all the information regarding landlords should be accurate – such as his address, name, contact, etc.
Meanwhile, some policies naturally provide coverage for the lease of the premise. It can be covered because of the policy section "who is insured." So, it is vital to double-check because you will find you have the coverage already you are planning to apply for.
Landlords Additional Insured
For a commercial building, the landlord will require that the tenant include the landlord's additional insured in the tenant's insurance policy. Henceforth, if there is any mishap or loss at the tenant's space, the landlord can benefit from the tenant's insurance coverage, leaving him unscathed.
Restrictions of Additional Insured
There are some limitations to the policy due to its nature of coverage. First, the policy providers cover only those individuals or groups recorded in the list of endorsements.
The landlord gets the cover due to their ownership, use, or maintenance of the premise; described in the endorsement.
Equally, if the building is not maintained, and any mishap happens due to your negligence or landlord's – the landlord is held accountable. For instance, some fixes around the apartment are your responsibility, and you fail to follow through – any mishap resulting from your negligence makes the landlord liable again.
Ironically, the policy does not exclude the incidents after you stopped being the tenant. According to the policy, the liability lands with the landlord if your friend encounters an injury when visiting the property with you.
Important to note that some policies do not offer broader coverage mentioned in the contract. If the contract demands lesser coverage and the policy can comply, it will default to the lesser expanse.
Benefits of the Additional Insured for the Landlord
It is helpful for the individuals or groups who opt for extended coverage under the insured policy. If anything unfortunate happens, it covers the claims of a lawsuit.
Additionally, it is advantageous for the concerned party to have a cover as an additional insured.
This is because it reduces the history of losses of the additional insured and can lead to lower premiums. Otherwise, claims of losses against the policies will result in increased premiums.
Usually, the cost of adding the additional insured to the policy is quite insignificant compared to the premium cost. An insurance company's underwriting department tends to consider the added risks associated with additional insured as marginals.
Also, endorsements and additional insurance are the cause of disputes and litigation. Mostly the disagreements entail whether the additional insurance covers the independent negligence under the additional insured or if the insurance covers the liabilities incurred by the named insurer's doings.
Now that you are aware of this policy and how it can benefit you in your property management. It is vital to sit with the insurance agent and discuss all the details to avoid any inconvenience in the future. Steadily helps many landlords and property managers with adding additional insured to their policies, in just a matter of minutes. Contact us today to learn more.
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