In liability policies, what does "additional insured" refer to?

The term "additional insured" in liability policies refers specifically to a person or entity that is granted coverage under the policy beyond the primary insured. This inclusion allows the additional insured to have certain protections under the policy without being the primary policyholder. The intent is to extend the coverage to parties that may have an insurable interest, such as contractors, vendors, or other entities that might be involved in a business transaction with the primary insured.

By adding an additional insured to a policy, the insurer agrees to cover certain liabilities that may arise related to the operations of the primary named insured, which can provide peace of mind and wider protection in business dealings. This coverage is commonly seen in contracts where one party is required to provide insurance for another party, thereby ensuring that both entities have protection against specific risks.

In contrast to this definition, the other choices do not accurately reflect the meaning of "additional insured." For example, paying extra premiums does not define the status or rights of an additional insured. Likewise, the term does not refer to a legal distinction among policyholders or suggest that an additional insured lacks rights to claims; rather, they do have certain claims rights, albeit possibly limited compared to the primary insured.