An 'additional insured' is a person or organization not automatically included as an insured under an insurance policy, but for whom the policyholder has extended coverage. This arrangement is common in franchise operations, where a franchisee might add the franchisor, or a contractor might add a client, as an additional insured to their policy. This inclusion provides shared protection in certain circumstances, such as liability arising from the franchisee's or contractor's operations.

Imagine you're a painting contractor working on a residential home. You have a general liability insurance policy. By adding the homeowner as an additional insured, you ensure that both you and the homeowner are protected under your policy for any incidents related to your painting work. This can be crucial if an accident occurs, like paint spilling and damaging the property, leading to a claim.

Having an additional insured can:

• Strengthen business relationships by sharing risk protection.
• Provide peace of mind to clients, knowing they're also covered under your policy.
• Potentially avoid costly disputes over liability in case of an incident.