| John Bosman | 1,020 words
A general contractor sends over a subcontract. Somewhere past page five, it asks for two things: add them as an additional insured, and waive subrogation. It's easy to sign, forward the request to your insurance advisor and move on.
Those two lines sound alike, but they do very different jobs. Additional insured status can extend specified liability coverage to another person or business. A waiver can limit the insurance company's right to recover a claim payment from a specified party. Both depend on the policy wording. Here's what each one does, so you can read the contract before you sign it.
At a glance
- Additional insured status can extend specified liability coverage to another person or business.
- A waiver can limit recovery rights against a specified party after a claim payment.
- Both depend on the policy wording and any needed policy changes.
- A certificate summarizes insurance information; it doesn't change the policy.
If you'd like the bigger picture on contractor coverage first, start with Contractors insurance explained. This post sticks to these two contract terms.
What additional insured status does
An additional insured is a person or business added to your policy for a specific relationship, usually the job you're doing for them.
In practice, it means the general contractor, property owner or landlord who hired you can look to your liability policy if someone makes a claim against them that's tied to your work.
It doesn't hand them your whole policy. It also doesn't mean every claim against them is covered. How far it reaches depends on your policy wording, the policy change that adds them, the contract and how the claim happened.
Most of the time this sits on your general liability policy. If you want the foundation under it, our general liability insurance page covers what that policy is designed to do.
Why contracts ask for it
The business hiring you wants a layer of protection if a claim comes out of your part of the job.
You'll see it in a lot of places:
- A general contractor asking a subcontractor.
- A landlord asking a tenant.
- A property manager asking a vendor.
It's especially common in construction. The contract may ask for several insurance arrangements. Whether a policy responds, and in what order, depends on the policy wording and the claim.
What a waiver of subrogation actually gives up
Start with subrogation itself, because it's one of the more interesting ideas in insurance.
Subrogation means the insurance company can step into your shoes. After paying a covered claim, the insurance company may be able to seek repayment from the party responsible.
When the policy allows it, a waiver limits the insurance company's recovery rights against the party specified, such as the general contractor or property owner named in the contract. It doesn't settle every issue between the businesses.
The catch is that your policy has to allow it. Some policies need a policy change (an endorsement) to make the waiver valid, and some insurance companies charge for it. So the contract and the policy need to agree. Whether yours do depends on the exact wording of both.
Waivers show up on more than one policy. A contract may ask for one on your general liability, your commercial auto and your workers' compensation, and each policy handles it separately.
Side by side
| Additional insured | Waiver of subrogation | |
|---|---|---|
| What it does | Can extend specified liability coverage to another party, within the policy's terms | Can limit the insurance company's right to recover from a specified party |
| Who it helps | The party added (the general contractor, owner or landlord), within the policy's terms | The party specified in the waiver, within the waiver's terms |
| What changes on your policy | Usually a policy change that adds them | Usually a policy change that allows the waiver |
| Which policies | Usually general liability, sometimes auto or umbrella | Can apply to general liability, auto and workers' compensation |
| What to check | Whether your policy allows it for this contract | Whether your policy allows it, and whether there's a charge |
Here's the useful distinction: additional insured status concerns coverage for another party. A waiver concerns recovery rights after a claim payment. The policy wording determines how each works.
A certificate isn't the same as the policy change
A contract will usually ask for a certificate of insurance (COI) showing the additional insured and the waiver. The certificate is a summary of your coverage. It doesn't add anyone or change anything on its own.
What matters is that the policy actually includes the change the certificate describes. For the other side of certificates, see subcontractor certificate requests.
What to check before you sign
Before you sign a contract that asks for either one, it helps to have:
- The exact contract wording. Who must be added, for which job, and on which policies.
- Your current policies. Whether your policies already allow the requested additional insured status or waiver, and whether a policy change is needed.
- Any other phrases in the insurance section. Contracts often add terms like "primary and non-contributory" or ask for coverage after the job is finished. Those are separate requests and worth asking about.
- Timing. Review the request before the job starts, not after.
Why contracts like this exist
Agreements like this are a big part of how small businesses in the US get onto bigger jobs. A two-truck crew can work a large commercial project partly because the paperwork spells out, before anyone starts, how risk will be shared if something goes wrong.
The short version
Additional insured status can extend specified liability coverage to another party. A waiver can limit the insurance company's right to recover a claim payment from a specified party. Both depend on your policy and the contract wording.
If a contract is asking for either one, it's worth looking at before you sign, not after the job starts. If it would help, start a coverage review and we'll explain how your policy handles the insurance request. Ask your attorney about the contract's legal obligations.