Understanding Certificates of Insurance – Complete Step by Step Guide
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 a COI 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.
- 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. 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 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.
The Bottom Line
COI can prove insurance. The document actually minimizes risk for businesses and their clients. At LoPriore, our motto is insurance to fit your lifestyle. Get in touch with our agents to learn more about commercial insurance and how to obtain a COI.
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