The Proposed Insured Makes the Premium Payment

The Proposed Insured Makes the Premium Payment.

Today we continue our series helping personal lines
insurance
professionals seeking to make the move to commercial lines. In the past we’ve written about Business Income, Worker’s Compensation/Employer’s Liability, Coinsurance and the Basics of Commercial Lines Insurance.

What is the difference between a Named
Insured
and an Additional
Insured? If you’ve ever been asked to explain this to a client, you know that the differences are important, but you may have struggled to list them off quickly. Here’s a guide:

Named Insured:

The Named
Insured
is typically, but not always, the owner and payer of the
policy. This is the entity that you will see listed on the Declaration Page indicating who the
policy
is covering. As the Named
Insured, this entity is provided the full
protection
as outlined in the
policy. Assuming they also own the
policy, they are the party that is able to request modification or cancellation of a
policy. It is important to know that certain types of policies may be purchased and owned by someone who is not the named
insured. This is the case for some
life
insurance

policies, particularly in business situations, like group life policies or key man
life
insurance
. Another common instance is in the event that the owner of a
construction
project requires the general contractor to purchase the
policy
for the project; this type of
policy
is called an Owners and Contractors Protective
Policy
(OCP).

Policies may have multiple Named Insureds if there is a situation that calls for it, such as a joint venture between two entities. In this event, the First Named
Insured
has certain rights and responsibilities that the others do not. The rights include receiving notices of cancellation, invoices, and other communications regarding the
policy. The responsibilities include payment of
premium, compliance with audit or inspection requests (if required by the
policy’s conditions), and reporting of claims in a timely fashion.

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Additional Insured:

On the other hand, additional Insureds are added to the
policy
due to a relationship they have with the named
insured. They are added to the
policy
by
endorsement, and the
protection
that they are afforded will vary depending on which
policy
form is used to add them. Most companies charge a nominal fee to add an additional
insured
to the
policy
since the
endorsement
does expand coverage to include another party.  And, most companies have many different forms for adding additional insureds. There are even some options to add “Blanket Additional Insureds,” which cover any Additional
Insured
if required in a
contract
with the Named
Insured. In general, their rights and responsibilities will be severely limited compared to a Named
Insured. They will have the option to file a
claim
if necessary, but they will not be able to modify or cancel coverage. They would also not be entitled to a refund of
premium.

There are many Examples of when you mayo receive a request to add an additional
insured:

  1. A general contractor may ask to be named as an additional
    insured
    on his or her subcontractor’s
    liability
    policy. In this case, the general contractor is looking to ensure that should the subcontractor cause a
    claim
    due to their work on a project, the general contractor’s own
    policy
    can respond after the subcontractor’s
    policy.
  2. The lessor of a building requests to be added as an additional
    insured
    on his or her tenant’s
    liability
    policy. The lessor wants coverage in the event that the tenant experiences a premises
    liability
    claim.  Similar to the situation above, the tenant’s
    policy
    would provide primary coverage since the landlord and the tenant would likely both be called upon in the event of a suit.
  3. A bank may ask to be listed on a property for which it holds the mortgage.  This is usually referred to as being “listed as a mortgagee.” This does apply to the property coverage and typically gives the bank privileges in the event that the
    insured
    experiences a property
    claim.  The mortgage company would be listed on the settlement check, and in some cases, they may even receive payment if the
    insured
    discontinued payment on the
    policy.  On the property side, these endorsements are called Mortgagee Clauses or Loss Payable Clauses.
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When it comes to adding additional insureds to policies, it is important to understand the relationship between the two entities and be certain that it makes sense before doing so. Adding the additional
insured
endorsements does open the
policy
up to potential to be brought in on more lawsuits.

About Carly Burnham

Carly Burnham began her
insurance
career in 2004 as an office assistant at an
agency
in her hometown of Duluth, MN. She riol licensed as a
producer
while working at that
agency
and progressed to serve as an office manager. Working in the
agency
is how she fell in love with the industry. She saw firsthand the good that
insurance
consumers experienced by having the proper
protection. When Carly moved to Des Moines in 2010, she decided to commit to the industry, and she completed her CPCU in one year finishing it in 2012 and attending commencement in New Orleans. She completed her MBA at Iowa State University in 2014. During this time, she and Tony founded a Gen Y Associate Resource Group at Nationwide in Des Moines. After they had both left Nationwide, Tony recruited Carly to co-author and manage InsNerds.com. She has the difficult task of keeping his constant flow of crazy ideas focused and helping to flesh them out into useful articles. Carly enjoys sharing knowledge and ideas about the future of the industry and finds the website a good outlet for this passion. Carly is involved in the the CPCU Society Underwriting Interest Group. She also writes “Next Wave” a monthly column in the “Perspectives” section of Best’s Review.

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Named Insured: Owns the policy, owes the premium, has all the rights.

Additional Insured: Added to the policy by endorsement due to a relationship with the named insured, and what they get will vary depending on policy form.

This is a summary of a summary of a summary. Don’horizon take it at face value.

The Proposed Insured Makes the Premium Payment

Source: https://insnerds.com/named-insured-additional-insured/