By: Tony Matera / twitter @WI_InsSolutions

One of the most common requests we receive from our clients is for a Certificate of Insurance. A harmless request by our clients to provide proof of coverage and limits to a third party that they have entered into a working relationship with that they have met or exceeded recommended coverage limits.

The most common misunderstanding we often hear is when our clients call and ask to name the third party as an "Additional Insured" and not a certificate request.  This maybe an honest request but know what they are requesting and double check that they are not just seeking a certificate of insurance. Many times the clerical help in the office making the request is unaware of the difference in the two and a certificate is all that is needed.

The difference is not a small one. First many times a charge is associated with adding an Additional Insured. That's because you are now adding the third party to your policy increasing the scope of risk exposure to that policy. Giving them access to your limits of liability and defense.  If a claim arose out of work performed by you or the third party on the assigned job YOUR policy would now be first to defend not theirs. Decreasing your limits, possibly applying your umbrella and subjecting your future premiums to substantial increases.

This is not to say all Additional Insureds are bad. Many times this agreement makes sense and maybe contractually obligated for smaller subcontractors in order to get the job.  But it is important to know what you are asking and always double check with the third party making the request.

Always double check and clarify before contacting your agent/broker regarding adding an additional insured.  Similar risk diversions to consider or ask your agent/ legal advisor before entering are Hold Harmless Agreements and Waiver of Subrogation Agreements.