Certificate of Insurance
Certificates act as a proof of insurance that can land your business a job — and further insulate hiring companies from liability claims.
Written by
Andrew Flueckiger in an insurance writer for TrustedChoice.com. He's a licensed insurance agent who has earned his CIC designation and has written extensive insurance articles for many publications.
What Is a Certificate of Insurance?
A certificate of insurance (COI) is a document that proves that a business has liability insurance that’s actively in force. They are normally requested by people or businesses looking to hire another company for work and want to make sure that the prospective company has insurance.
The certificate of insurance is normally issued by the business’s insurance agent or agency and contains information such as the type of policy the business has, the policyholder, coverage limits, and effective dates.
A COI is a snapshot of a business’s insurance. It functions similarly to the auto insurance ID card that you keep in your car or on your phone. It’s a quicker way of showing proof of insurance rather than sending any other type of insurance documents, which can be many pages long in some cases.
A separate COI may need to be submitted for each relevant line of business. For example, you could have a certificate of liability insurance, a certificate of workers’ compensation, and a certificate of commercial auto liability insurance. The particular needs of the job will determine which certificate(s) are needed.
Why Is a Certificate of Insurance Important?
Certificates of insurance are important because they demonstrate that a business has insurance, which may be a requirement for getting the job in question.
Contractors and trucking companies normally have to show certificates of insurance before they get hired for a job because the hiring company doesn’t want to be liable or on the hook for property damage or injuries that could happen during the job. A certificate of insurance shows that the prospective contractor or company does have insurance and would be able to turn in a claim to an insurance company if they caused any damage or injuries.
Certificates of insurance also normally come with additional insured requests. The hiring company may ask the contractor or business to be named as an additional insured on their insurance. This allows the hiring company to use your insurance company rather than their own insurance if they are brought into a lawsuit because of damage that you or your business caused.
A certificate of insurance can show who the additional insureds are for that policy and serves as proof in case a claim happens.
Who Should Request a Certificate of Insurance?
Certificates of insurance are most widely used with contractors and trucking companies. If a developer is hiring a contractor for a construction project, they’ll want to see a COI before hiring the contractor. Similarly, with trucking companies for hire, a business will want to know that the trucking company has insurance.
More broadly speaking, anyone who hires a person or business to operate on their property or possessions or who is hiring somebody to do a job can request a certificate of insurance.
For example, if you hire a roofing contractor to fix your house, you’ll likely want to ensure they have proper insurance, especially general liability and workers’ compensation. If the roofing contractor drops supplies from the roof and hurts a neighbor, you’ll want to know that the contractor’s insurance is there to respond. Or if the contractor’s employee slips and falls and gets hurt, you’ll want to know that they have workers compensation to respond to that injury instead of having to pay out of your own pocket.
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What Should I Look for on a Certificate of Insurance?
While having your insurance agent produce a certificate of insurance very quickly is nice, it’s perhaps more important that it’s accurate.
A certificate of insurance typically can include the following information:
- The named insured, or who is carrying insurance
- The type of insurance coverage in force
- Liability limits
- Effective dates of the policy
- A description of the operations or job
- Who is an additional insured on the policy
- Waiver of subrogation
- Whether the insurance is primary and noncontributory
If the expected completion date of your project is past the contractor's expiration date, you'll want to request another certificate showing that a renewal policy will be offered by the insurance company. Your trusted independent insurance agent can break down your policy for you and can explain what each of these items means, along with the consequences if there is a claim.
What Is Certificate of Insurance Tracking?
Proper documentation is critical for businesses to whether or not they have liability insurance when they enter into contracts. Contracts, especially multiple contracts between businesses over time, can lead to a lot of paperwork. If a claim and lawsuit happen at some point and your business is named, you’ll want to be able to prove that either your contractor had insurance at the time and/or you were listed as an additional insured on their policy for your project.
But just keeping track of all of these certificates of insurance can be a daunting project. Certificate of insurance tracking is actually a niche business that can be outsourced to a third-party business. Similar to having an accounting firm take care of your payroll, these are businesses that specialize in organizing and tracking all of your certificates for you.
There are also software programs you can buy that allow for certificate of insurance tracking. These are simply possible solutions that your business can consider to stay organized and prevent any documentation problems if a claim happens.
Of course, you can always keep track of all of your certificates in-house, but if your business deals with a large volume of certificates, investing in a certificate of insurance tracking service may be worth the extra cost.
The Best Way to Deal with Certificates of Insurance
Certificates of insurance are normally issued by an insurance agency or broker. But this doesn’t mean that the speed, accuracy, and level of service are the same between all insurance agencies. Knowing that you can trust your insurance agency with a quick and accurate certificate of insurance, with all of the information and additional insureds in place, brings peace of mind and is a good business practice because you can’t afford any mistakes in your work.
Using an independent insurance agent for your commercial insurance and certificates of insurance can ensure that your business is not only properly covered but that you’ll be able to quickly and accurately receive your certificates of insurance almost immediately. Independent insurance agents are proven professionals who will act as an operating partner in your business.