Are you extending your liability for free?
By Bennett Cromer

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Your neighbor purchases a new vehicle but is concerned about the cost to insure it. Knowing that you are getting a multi-auto discount, he asks if you will add it to your policy. Would you?


Do your service contracts name the other party as an additional insured?
  • 1. Yes
  • 2. No

Entering into contracts may place you in a situation similar to the one above. Service contracts for copiers or fax machines, lease contracts for company vehicles, and rental contracts for office space all have their own wording variations and can expose your business in many different ways. However, most contracts commonly require you to name the other party as an additional insured.

While there are many variations of an additional insured endorsement, generally an additional insured is a person or organization that enjoys the benefits of being insured under another's insurance policy, but is not required to pay the premium, make changes to the policy, or direct or receive notification of a cancellation of the policy.

An additional insured's status on your policy causes the policy limits to be shared by you and the additional insured — with the potential to reduce or even exhaust the occurrence and aggregate limits of insurance available.

In addition, when an additional insured makes a claim, the loss amounts paid become part of your claims history and are considered when determining future acceptability and pricing of your insurance programs.

What can you do? Contact your insurance representative to discuss ways to help reduce the exposures of additional insureds.

Bennett Cromer is an account executive for Federated Insurance and manages associations in Arizona, Oklahoma, New Mexico and Texas. He is heavily involved in offering risk management solutions to businesses to provide a safer and more profitable work place.