What Is a Certificate of Insurance?

December 10th, 2020 by admin

What Is a Certificate of Insurance

In the world of insurance, you’ll come across a lot of fancy words and strange jargon that can be extremely challenging to understand. If you’re a contractor, for instance, and you’re speaking with a potential client on the phone, it might seem things are going smoothly, and then they ask you for proof of insurance coverage.

You might automatically think they want to see a copy of your current policies and then come to find they’re requesting for you to provide a certificate of insurance (COI).

But, do you know what this is exactly and what it does? To help you make the differentiation, you’ll learn more about a COI document and what it means to hold one.

1. What is a Certificate of Insurance?

So, what is a COI form? It’s essentially a form your insurance agent or company provides you to verify you have insurance. It won’t change your coverage, and it isn’t a part of your regular policy.

It provides information about your policy.  This document is used to show your clients the coverages provided by your policy that will protect them from the fallout of claims or negligence on your part.

Often, a contract requires you to hold specific levels of liability insurance coverage. The certificate of general liability insurance is your client’s way to check that you have the proper coverage for the job. They’ll ask to have a certificate of insurance (COI) in hand before you begin any work. 

2. Why Do You Need a Certificate of Insurance?

A COI is requested when large property losses and liability claims are a concern. So, if you own a landscaping business, for instance, a client might require you to show your COI to prove you’re covered for workers’ compensation and certain liabilities during the course of the project.

Regardless of the type of client you’re dealing with, being an insurance certificate holder and having proof of insurance protects both your client and you, giving you both peace of mind.

In some cases, it’s frequently a requirement for you to win a contract with some businesses. Many people and companies hiring contractors want to know they aren’t going to be held liable for things like:

  • Bodily Injuries
  • Property Damages
  • Substandard work-related losses

So, they’ll require you to carry liability and workers’ compensation insurance.

Even if your clients don’t ask you to show your certificate of insurance, having proof your business is covered is still an added benefit. Your insurance agent should include your COI in your initial insurance documentation. If they don’t, ask them to provide you with one.

3. What’s Included on your Certificate of Insurance?

You’ll be named as the policyholder on the certificate of insurance – because you’re the insured. Other essential information on a COI includes:

  • The insurance company’s contact information
  • Your mailing address
  • Coverage limits
  • Policy effective dates
  • Type of coverage(s) provided
  • An additional insured (other companies or individuals on the policy as requested) if required by contract

For instance, a certificate of insurance for a company with small business insurance will have to outline its general liability insurance details, workers’ compensation, and commercial auto insurance coverage. 

After you request your COI, your name and contact information may also be on the certificate. 

4. What Does it Mean When a Client Becomes an Additional Insured?

Certain contracts will require the client to be added as an additional insured. For you to add your client as an additional insured, you’ll need to ask your insurance agent to process an endorsement and add them to your insurance policy. This is a policy addition that will adjust coverage and possibly increase your premium. The endorsement must be there in effect for your client to be seen as an additional insured.

When the client is an additional insured, your insurance also covers them. Therefore, if your business does something that gets you and the client sued, they’ll be provided coverage under your policy.

If the contract requires the client to get additional insured status, they might have to see a declaration on the certificate that says they’re indeed an additional insured.

Your policy might already include specific individuals as additional insured, which means there doesn’t need to be an endorsement. Certain policies are written so that any client the insured works for has a contractual responsibility to include the additional insured through the policy. So, you’ll want to talk with your agent carefully about this to ensure you’re clear on how the policy is handling additional insureds.

5. How to Get a Certificate of Liability Insurance

If you have to request proof of COI from your insurance agent, here are the basic steps you’ll have to take:

  • Ask the client requesting the COI what the coverage limits and minimums should be based on the contract requirements. Be sure to get their name, tax identification number, and address too in the event there’s an increase in the premium.
  • Contact your agent and let them know the minimum coverage amount(s) and that a client is asking for proof of insurance. If the requirements are already met in the policy, the agent will issue the COI. If you must increase coverage for the job, the agent will ask you to provide some details so an endorsement request can be prepared and submitted.
  • Once you’re all set, the agent will then create the certificate of insurance as required and send you out a printed COI. You’ll then send it to the client so you can sign the contract and begin your collaboration.

Although the process is relatively simple to understand, you should note that it could take several days to obtain the COI if changes to your existing policy are quired to comply with the contract, so keep that in mind when communicating with the client.

6. How Much is a COI?

There isn’t a cost to obtain a COI since it’s a complimentary service your insurance agent or provider is offering you in most cases.  If the project requires extra coverage that isn’t met already through your policy, you may have to pay an additional premium to cover the costs. However, other than this, the agent shouldn’t charge you a fee to provide you a COI.

Contact The Insurance Center of North Jersey

The Insurance Center of North Jersey is an independent insurance agency that represents many insurance companies. We provide a highly personalized service to ensure all your insurance needs are met adequately and efficiently.

If you’re looking into liability insurance or other types of insurance, contact our office for a quote.