What is the risk of adding an additional insured

1. Coverage Limit Erosion

When you name someone else as an Additional Insured, your coverage limits become shared. A single $1 million limit now protects multiple parties—raising the risk of depletion from shared claims.

2. Increased Premiums & Claim Exposure

While the endorsement may cost little upfront, it exposes your insurer to more liability. This increases the likelihood of claims and can impact your loss history and premium rates.

3. Policy Dependence & Cancellation Risk

The Additional Insured’s protection depends on your policy. If your policy lapses or is canceled, they lose coverage, potentially leading to contract disputes.

4. Narrow and Conditional Coverage

Endorsements often cover only liability arising from your actions—not the Additional Insured’s own negligence. Review the policy language carefully to ensure it reflects the intended coverage.

5. Complex Claims & “Other Insurance” Conflicts

When multiple insurers are involved in the same claim, disputes over defense costs and liability can arise. This can delay claims and increase legal costs.

6. Certificate vs. Endorsement — A False Sense of Security

A certificate of insurance does not grant any rights. Only an actual endorsement added to your policy provides coverage for the Additional Insured.

7. Legal & Exclusion Pitfalls

Some policies exclude Additional Insureds entirely—especially in professional liability or cross-liability cases. Others impose strict limits on what’s covered.

✅ Smart Strategies Before Adding an Additional Insured

• Review your policy limits to ensure they remain sufficient when shared.

• Request specific endorsement language that defines exactly what is and isn’t covered.

• Obtain and store the actual endorsement, not just a certificate.

• Clarify primary and non-contributory language in contracts to avoid insurance conflicts.

• Evaluate the other party’s financial stability before extending your policy to them.

• Consult a broker or insurance attorney for complex or high-risk endorsements.

💡 Final Takeaway

Adding someone as an Additional Insured can help streamline contracts and project requirements—but it brings hidden risks. From shared limits and increased premiums to legal pitfalls and narrow protection, the consequences can be serious if not handled carefully. Always assess the request thoroughly, and protect your own interests first.