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 parties other than the initial policyholders that coverage has been extended to.

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

Key Takeaways

• Policyholders play a central role by purchasing insurance policies, holding contractual agreements with insurers, and benefiting directly from coverage.

• Certificate holders, external to insurance contracts, request and hold Certificates of Insurance (COIs) as proof of coverage, providing transparency in business transactions.

• Additional insureds are third parties granted limited protection under the policy, extending coverage beyond the initial policyholder to safeguard against liabilities in specific circumstances.

What Is a 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 a document issued by an insurance company or broker to provide proof of insurance coverage. It includes details such as the insurer's information, policy number, effective dates, policy limits, and specific coverages. While the COI is not the actual insurance policy, it serves as a concise verification of coverage.

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

Contractors, for instance, use COIs to demonstrate their insurance coverage, assuring clients that they are protected against potential liabilities during the specified policy period.

What Are The Differences Between Policyholders, Certificate Holders & Additional Insureds?

Understanding the nuances of insurance terminologies is crucial, especially in the realm of business transactions and risk management. Three key roles often come into play: policyholders, certificate holders, and additional Insureds. 

What Are 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.

What Are Certificate Holders?

The certificate holder is the party, often external to the insurance contract, requesting and holding this document. 

Businesses commonly request COIs from contractors, vendors, or partners to ensure that adequate insurance coverage exists before entering into transactions or agreements. It doesn't confer any rights or coverage but acts as evidence that insurance is in place. Again, the certificate is simply a snapshot of the insurance policy.

What Is an Additional Insured

An additional insured is someone, other than the main policyholder, covered by the insurance policy. This means they get protection from the risks and liabilities mentioned in the policy. This is crucial in industries where partnerships and shared responsibilities require a more extensive coverage than what the main policyholder alone would have.

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.

Watch: The Difference Between Policy Holder, Certificate Holder, and Additional Insured

“Upon request, a subcontractor or vendor will provide their client with a Certificate of Insurance to prove that they are indeed policyholders, and therefore have coverage in the event that bodily injury, property damage, advertising or personal injury occurs throughout the course of a project.”

Read the Transcript

Who Can Be Named an Additional Insured? 

Anyone other than the primary policyholder can become an additional insured. This designation is not limited to individuals, and can extend to entities such as businesses or organizations. 

The decision to include additional insured parties is often influenced by collaborative projects, contractual agreements, or shared responsibilities where multiple parties need protection under the same insurance policy. 

Whether it's a business partner, contractor, landlord, or any other relevant party, this flexibility allows for a diverse range of stakeholders to be covered, aligning with the specific needs and arrangements within various industries.  

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 can bcs help you?

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

However, bcs's full-service solution relieves you of the stress 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.