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Certificate Holders & Additional Insureds: What's the Difference?

Misunderstandings regarding the differences between policyholders, certificate holders, and additional insureds on commercial general liability (CGL) policies can lead to costly litigation and failed loss transfer in the event of an insurance claim.

While policyholders are entities that purchased the policy from a provider, certificate holders possess proof of insurance and CGL policies. Additional insureds are other parties coverage has been extended to, beyond initial policyholders.

This helpful explainer reviews everything you need to know about the differences between policyholders, certificate holders, and additional insureds.

The Certificate of Insurance

First, let’s review the scope of certificate of insurance (COI) documents.

Most often, a standardized COI—called the ACORD 25 form—is utilized for certificate of liability insurance. It stipulates the most pertinent details of a policy, including types and limits of coverage, provider, policy number, named insured(s), and effective periods.

This document does not amend the details of the coverage, but serves as a summary of the insurance policies and limits.

To explain the differences between policyholders, certificate holders, and additional insureds, let’s use an example of a construction project.

Differences Between Policyholders, Certificate Holders & Additional Insureds

Policyholders

The policyholder is the person or entity who has purchased a policy from an insurance provider, and is usually one of the named insureds on the policy.

Upon request, a subcontractor or vendor in a construction project will provide their client with a COI to prove they are policyholders, and therefore have coverage in the event of bodily injury, property damage, advertising, or personal injury. Policy coverage may also extend beyond the completion of a project.

Certificate Holders

In this scenario, the client gains the title of certificate holder, but becoming such does not incur any policy-given rights. Again, the certificate is simply a snapshot of the insurance policy.

In our construction project example, the subcontractor holding a certificate is not insured against claims for damage, personal injury, or so on. Only the policyholder is.

Additional Insureds

An additional insured endorsement is a provision made to a commercial general liability policy that effectively extends the subcontractor or vendor’s coverage to the client (general contractor, real estate owner, hotel management company, etc.), and other relevant parties (lender, joint-venture partner, etc.) as long as they are listed as an additional insured on the endorsement and sometimes the COI.

For example, in the event of a personal injury sustained at a subcontractor’s job site, both the subcontractor and any client parties could be sued. Without an additional insured endorsement, the general contractor, development firm, and property owner could all be held liable for damages.

However, there is constant tension between insurers, who aim to limit the scope of coverage under their issued policies, and the policyholders, who want to ensure coverage for all potential risk factors threatening their business.

Specific Versus Blanket Additional Insured

There are two types of provisions within additional insureds: specific and blanket endorsements.

Specific additional insured endorsements are limited within the policy to named entities, meaning only parties specifically identified in the endorsement are covered.

In contrast, with blanket additional insured endorsements, policyholders do not provide insurers a list of named additional insureds; instead, they simply provide groups or classes of people who should be protected by the policy.

While adding blanket additional insureds may seem like a safer solution for those seeking to minimize risk exposure, these endorsements can create gray areas and coverage lapses if not managed appropriately.

For example, if a blanket additional insured endorsement referencing “where required by written contract” is being used, parties should carefully review the language to ensure all persons seeking additional insured status are covered for an appropriate time period.

Insurance providers are unable to provide any notice of cancellation to affected parties with blanket additional insured endorsements—making additional insureds on the policy more susceptible to lapses in coverage, and subsequently, failed loss transfer.

How bcs helps

Accounting for these nuanced stipulations in thorough insurance reviews can be a complex business.

However, bcs's full-service solution relieves you of the stressful responsibility of parsing verbose insurance jargon and spending hours poring over required paperwork.

Passing the administrative baton to bcs means:

  • Improving Your Insurance Status
  • Never Mishandling Coverage Lapses
  • Mitigating Inadequate Insurance Language
  • Avoiding Costly Litigation
  • Achieving Desirable Loss Transfer When Claims Arise

These combined benefits empower you to maintain the bandwidth necessary to focus on making safer connections and running your business.

bcs is a preeminent vendor management solution with full- and self-service tracking options designed for streamlined hiring, onboarding, vendor management, and so much more. To optimize your processes and embrace the full benefits of modernization, contact us today or schedule a demo.

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