A certificate of insurance (COI) is a way for your business to provide quick access to the terms of your insurance policy. Providing your clients with Certificate of Insurance builds confidence in your business because it tells your customers you’re insured. While a COI doesn’t offer a guarantee for every claim, it shows that your company takes responsibility.
What is a Certificate of Insurance?
A certificate of insurance (COI) is a document that summarizes the terms of your business insurance policy in an easily digested format to provide quick access to coverage details. Instead of slogging through an entire multi-page policy to find certain points of information, your COI provides a one-page snapshot of the vital details. The following basic information should always be located on your COI:
- Policyholder’s Name
- Policy Effective Date
- Type of Coverage
- Policy Limits
- Name of the Insurance Provider
- Additional insured (the names of other parties protected during the project)
The ability to provide a COI can offer many benefits to your business. It proves your insurance status, letting your customers know you’re a reputable business. A COI also provides quick access to your insurance information when you need it. So, if you’re competing for a contract, your potential client won’t have to wait for days to hear back. Having a COI could mean the difference between you getting a job instead of your competitor. Additionally, careful documentation of the chain of insurance for any project reduces liability for your company.
Types of COIs
The most common type of COI is provided in a document called ACCORD 25. This document comes in a standardized template to represent each type of insurance policy. The ACCORD 25 form lists the name of the policyholder and any additional insured. There are 3 main types of COIs. They each provide different levels of protection based on the coverage you need for your business.
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- Certificate of Liability Insurance: This should protect the project owner, the project manager, and a lender if applicable. Your certificate of liability insurance should include the names of all insured parties, a description of the type of work you do, and a waiver of subrogation.
- Certificate of Worker’s Compensation Insurance: Workers’ compensation insurance provides coverage for employees in the event they’re injured while working on a project. Workers’ compensation laws vary from state to state, and the document should be written to comply with the laws in the state the project is completed.
- Certificate of Auto Liability Insurance: In Massachusetts, all drivers are required to purchase auto insurance with liability coverage. Commercial auto insurance may also cover employees that drive company or personal automobiles as part of their job. A certificate of auto liability insurance should be examined to find all owned, leased, non-owned, and hired vehicles are protected by the policy.
How a Certificate of Insurance Works to Protect Your Clients
Providing a COI sounds a lot like simply giving your customers a copy of your policy summary. However, a COI includes the client. If you’re a third-party contractor supplying a service to a company that is at risk in the event your work leads to a negligence related injury, your COI can be adapted to include the company as an additional insured. An additional insured is defined as a person or organization who is insured under an insurance policy in addition to the policyholder. While the additional insured can’t make changes to the policy, they will be covered in the event that they are sued.
When a customer hires you to do a job, they may require you to have a certain amount of insurance coverage. The most common request is a liability. While a COI assures your clients they are covered in the event of negligence or a claim, it doesn’t actually change your coverage. When your customer requests proof of insurance, you simply contact your insurance provider to request a COI. You should receive the document quickly.
How to Get a Certificate of Insurance
When a potential customer asks you for proof of insurance, they generally expect you to provide a certificate of insurance. While you likely already have insurance, this is a good time to ask your client some questions about their expectations. Your potential customer will likely be able to explain their expectations for minimums and limits of coverage.
When you call your insurance agent with this information, your agent will be able to tell you if your policy already includes the necessary coverage. If you don’t have the required coverage, your insurance agent can supply information about a rider (an extension or addition to your coverage) that will supplement your policy. When you have the necessary coverage, your insurance agent will create a COI and send you the printed document. Obtaining one is complementary from your insurer.
Customers who request a COI aren’t acting on a lack of trust. The purpose is to minimize risks in case of a potential problem in the future. It’s common for long-term clients who have worked with a business many times to always request a COI. It is a good practice to retain a copy of the COIs related to every project. Your ability to furnish this document reveals your continued professionalism and reliability.
How to Read Your Certificate of Insurance
Your certificate of insurance provides your clients with essential information about your ability to complete a project. As a professional in any industry, you need the ability to share this information confidently with your clients. Nine sections make up the details included in a certificate of insurance. Breaking down the sections of a COI can make it easier to understand.
Your COI begins with a disclaimer to explain that the document is for informational purposes. It’s merely a representation of your existing coverage and does not extend or change your policies. The disclaimer goes on to say that a COI is not a contract.
The producer of the COI is your insurance company. This section includes the name of your insurance provider and the name and address of your insurance company.
As a contractor or business, you are the insured. This section includes the legal name and address of your business. If you include subcontractors or other companies on your insurance policy for a temporary basis, they will be listed as Additional Insured in another section of the document.
4. Insurers Affording Coverage
Your business insurance coverage is likely made up of a combination of policies that provide complete coverage. This section lists all of the insurance companies that you have policies under. Insurance companies are listed with corresponding letters A through F. These letters are used as identifiers when policy types are listed below.
Each section of your COI includes important information, but the coverages section can be considered the meat of the document. It’s the longest section and describes the types of insurance coverage you have for your business. Coverages are broken down into the following subsections.
- INSR LTR (Insurer letter): Located to the left of the Type of Insurance, this column will provide a letter that refers to the list in the Insurers Affording Coverage section. For instance, if the letter C is listed, it relates to the company listed under C in the Insurers Affording section.
- Type of Insurance: This simply lists the type of coverage the policy includes, like general liability or property insurance.
- ADD’L INSRD (Additional Insured): This column will list an X if the person covered by the COI is an additional insured on the policy.
- SUBR WVD (Subrogation Waived): This column will list an X if the certificate holder (usually the client) denies the right of the insurance company to pursue legal activity. It’s important to note this stands even when the certificate holder is directly responsible for the damages.
- Policy Number: Your individual policy number is listed in this column.
- Effective Dates: Policy EFF lists the date when the policy begins. Policy EXP lists the date the policy is set to expire.
- Limits: The final column to the very right shows the policy limits.
6. Description of Operations
This section covers specific information about the project or job the COI was obtained for. It includes specific operations, locations, and project numbers or other identification. It also lists the details of additional insureds and subrogation waivers, if the columns are marked.
7. Certificate Holder
The certificate holder is the individual or business requesting the certificate. This may be your business, your client, or another organization. The certificate holder’s name and address are listed here.
In the event the policy is canceled before the expiration date listed above, the certificate holder will be notified. This section simply states the number of days before cancellation that such notification will take place. Thirty days is standard.
9. Authorized Representative
The final section is where your insurance agent authorizes the document with a signature.
Proof of insurance is a common request for individuals and organizations seeking to have jobs completed by a separate professional company or contractor. Knowing you have insurance isn’t enough. Learning more about your business insurance coverage and the details in your COI can help show your professionalism for potential customers and potentially acquire more projects in the future.
Certificate Holder vs Additional Insured: What’s the Difference?
Whether you’re a business owner, a contractor, or an individual, this guide will help explain the difference.
1. Certificate Holder
A Certificate Holder is an entity or person named on the insurance certificate. They receive proof of the policy but have no actual rights or coverage under the insurance policy.
- Notification: The certificate holder will be informed if the policy changes or is canceled.
- No Coverage: Being a certificate holder does not grant any specific rights or coverage.
- Common Use: Often required in business contracts, leasing agreements, or subcontractor relationships to prove insurance is in place.
2. Additional Insured
An Additional Insured is an entity or person added to an insurance policy, receiving coverage and protection under the policy’s terms.
- Protection: Additional insured enjoy protection for liabilities or damages related to the primary policyholder’s actions or negligence.
- Broad Coverage: This status extends coverage and rights beyond mere information and proof of insurance.
- Use Cases: This is common in various business relationships, such as partnerships or vendor agreements, where additional protection is necessary.
While both terms relate to insurance certificates, the key difference lies in the rights and protections afforded. Certificate Holders are merely informed of policy details but have no coverage, while Additional Insured are granted specific rights and protection under the policy.
Learn More About Understanding Certificate of Insurance
COI can prove insurance. The document actually minimizes risk for businesses and their clients. At LoPriore, our motto is insurance to fit your lifestyle. Contact our agents to learn more about commercial insurance and how to obtain a COI.
Frequently Asked Questions about Certificate of Insurance
What’s the difference between an additional insured and a certificate holder?
The certificate holder is the individual or organization that requested proof of insurance. This is often the client who wants a job completed. Additional insured are any individuals besides the insured that will be covered by the policy for the specific project. This may include subcontractors or other temporary employees.
How much does an insurance certificate cost?
Nothing. A COI is designed to provide proof of the insurance coverage you’ve already purchased. If you don’t have adequate coverage, you may need to purchase additional policies to satisfy the terms of your client. As soon as you have adequate coverage, your insurance agency will provide a complimentary COI at your request.
Who needs a certificate of insurance?
Any business or contractor completing work for an individual or organization might be required to provide proof of insurance before working on a job. There are a range of business types that may be required to furnish a certificate of insurance. Any business where an employee, customer, or another business could be hurt or lose money may need to supply proof of insurance in the form of a COI. Additionally, some businesses provide a COI with proposals they submit for a job contract or when bidding on a project.
How long is an insurance certificate valid?
A COI is valid for the term of the policy, which will be disclosed in the coverages section of the COI under the Effective Dates column. Policy EXP declares the date the policy is set to expire. If the policy is canceled early, the certificate holder will be notified of the cancellation.
Can I issue my own certificate of insurance for my policy?
No. Insureds don’t have the authority to issue their own certificates. However, getting a certificate from your insurance agent is easy. A simple call to your agent will allow you to confirm you have the appropriate amount of coverage and your agent will send you the COI free of charge.
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