Difference between named insured and additional insured in a liability policy

 

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We all know for a fact that doing business today involves aspects such as contractual agreements, client partnerships, outsourcing agreements or vendor relationships, In such a scenario liability will have to shared and its accompanying risks can overlap. This is important especially for liability insurance policies.

 It is crucial to know who is covered and to what extent when a loss occurs or who is eligible for claim protection. To make these aspects clear liability policies have the terms ‘named insured’ and ‘additional insured’. Many liability insurance policyholders are not clear on these terms.

  In this blog we will break down these terms and the difference between them so that you as policy holder will know what to do when a claim dispute occurs.

 

What is ‘named insured’ in a liability policy?

The named insured is the additional policyholder in addition to the primary insured — the individual or business entity in whose name the insurance contract is issued.

The named used along with the primary insured owns the policy, pays the premium, and has full rights to make changes, renew, or cancel it. The named insured is the additional beneficiary of the liability coverage.

For example, if a project owner covers the principal contractors, viz., ABC Builders Pvt. Ltd. Under its Commercial General Liability (CGL) policy, then  ABC Builders Pvt. Ltd  is the named insured. The policy protects the ABC Builders Pvt. Ltd  against third-party claims for bodily injury or property damage arising out of its business operations.

The liability policy for the named insured covers the operations and liabilities which are related to the business. Similarly in the case of a DnO policy, the policy will cover all the employees, partners and directors of the company. The named insured has the broadest coverage under the policy 

What is additional insured?

An additional insured is a third party who is added to the named insured’s policy through an endorsement (a formal addition to the policy). This extends limited coverage to that party, usually for liability arising from their connection with the insured’s operations.

To take the same example, if ABC Builders engages the services of an architect firm for designing a commercial project, they can add the architect firm as an additional insured in their professional indemnity policy to protect them from any liability claims related to the work of the architect firm. 

In this scenario, the architect benefits from ABC’s policy coverage — but only for claims arising from their services to ABC’s on that specific project.

The point to remember is that the additional insured does not own the policy. Their protection is limited in scope and duration, depending on the endorsement terms.

Why have an Additional Insured?

Adding an additional insured is a common risk transfer mechanism in business contracts. It ensures that when multiple parties are involved in a project, liability doesn’t rest unfairly on one party. The other common reasons for including an additional insured can be contractual obligations because many client agreements in India require one party to list the other party as additional insured.

The additional insured endorsement facilitates risk sharing and prevents one party’s liabilities arising out of the other party’s actions.

This also helps to have clear coverage and reduces the scope for legal conflict in case of accidents or third-party claims.

Here are some real-world examples where an additional insured endorsement is required.

·       Construction: A developer adds contractors and subcontractors as additional insured.

·       Event Management: An event organizer adds a venue owner to its liability policy.

·       Logistics: A manufacturer adds its transport partner who transports its goods.

This practice is common in sectors where joint responsibility and shared risks are common.

Common misunderstandings when including an additional insured in a liability policy

There are some common confusions and misunderstandings when including an additional insured endorsement in a liability policy. These include:

·       Assuming additional insured will get equal coverage: Additional insureds do not get the same breadth of protection as named insureds.

·       Relying on contracts alone when adding an additional insured whereas the insurer must issue an endorsement — contractual mention isn’t enough.

·       Coverage may apply only to certain acts, projects, or time frames, this implies going through the endorsement with care.

·       When both parties hold liability policies, disputes can arise over whose coverage applies first.

To avoid these issues, businesses should review policies carefully and know the difference between named insured and additional insured. 

Difference between named insured and additional insured

Feature	Named insured	Additional insured
Objective	Protection as  the main policyholder	Protection against claims made on the additional insured due to their contractual agreement or business association with the main insured
Title	Co-owner of the insurance policy	Treated as an additional beneficiary of the policy
Coverage	Full policy benefits	Only those benefits are limited to their contractual or business association with the main insured
Responsibilities	Has to pay the premium, choose coverage, report claims, etc.	No major responsibilities, as they are only beneficiaries
Common applications	Contractors under a general liability policy, associate entities in DnO policy	Property owners might prefer to be an additional insured in a contractor’s policy to get protection from potential lawsuits as a result of the contractor’s work on their property

 

Things to watch out for when including an additional insured

·       Review contracts — Identify if you need to add or be added as an additional insured.

·       Define liability clearly — Avoid ambiguity in contractual risk-sharing clauses.

·       Maintain documentation — Keep copies of all endorsements and policy certificates.

·       Consult your broker — Tailor the coverage structure to each project or partnership to ensure optimal protection.

·       Reassess regularly — Update endorsements as business relationships evolve.

 

In liability insurance, the named insured is the policy owner with broad rights and protection, while the additional insured has limited, situation-specific coverage. Businesses in India should treat these designations not as formalities, but as critical parts of their risk management strategy. 

Before signing contracts or starting projects, ensure that all involved parties are properly covered — and that necessary endorsements are in place.

It is best to consult a professional insurance broker to structure your liability policies correctly. Get in touch with Zen Insurance for better clarity on your liability policy.

Disclaimer:

Zen Insurance Brokers is an IRDA-registered broker that provides prompt and adequate insurance broking services. We deal with only regulator-approved products of insurers. We do not underwrite the products.