A Certificate of Insurance (COI) is one of the most important documents for businesses working with clients, vendors, or subcontractors. Whether you’re hosting an event or hiring a third party, understanding how COIs work can help protect your business from costly risks.
When you have business arrangements with another company, understanding the responsibilities and risks is important. A Certificate of Insurance is a document that verifies the existence of insurance coverage. Luckily for you, isure has everything you need to know about COIs. But before you begin planning the festivities, here is a breakdown of the most commonly asked questions about Certificates of Insurance.
What is a Certificate of Insurance?
A Certificate of Insurance (COI) is a document that verifies a business has active insurance coverage and outlines key policy details, such as coverage type, limits, and dates.
What people want to know about Certificates of Insurance
What does a Certificate of Insurance (COI) do?
A COI essentially summarizes the key aspects and conditions of a policy. This is also known as a certificate of liability insurance or proof of insurance. Usually, no more than one page, it includes the most important basic information regarding your coverage. This includes:
- The policy’s expiration date
- The policy’s effective date
- Who has coverage under the policy
- What type of coverage it is (general liability insurance, property insurance, etc.)
- Your policy’s limits
It provides a quick and easy way to prove that it has insurance coverage. It’s a document that verifies the existence of insurance coverage under specific conditions granted to listed individuals.
When learning what a COI entails, it is important to note that a COI is not a formal contract between the two parties. It is an informational document showing proof of insurance. It also does not constitute a contract of insurance between the certificate holder and the issuing insurance company/broker.
Why is a Certificate of Insurance Important?
Certificates of insurance are important for everyone that you do business with: you, your partners and your customers.
- For you: Providing proof of insurance makes it much easier for you to enter into partnerships and grow your business.
- Those you want to do business with: Businesses looking to hire will usually ask bidders to include a COI with their bid. It can be a great advantage to be able to prove that you have proper insurance if competing bidders cannot.
- When you are looking for business: If you often hire subcontractors for projects, you need to request proof of insurance from them. If your subcontractors make a mistake that results in costly property damages/injuries and they do not have coverage, you can easily be sued for those damages.
- Audit: A COI may be required to avoid paying additional premiums on general liability or workers’ compensation policies.
When requesting a COI from another business, be sure to verify the information on the certificate. Make sure the name of the business that you are working with matches the certificate. You should also check that the correct effective and expiration dates are listed.
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When is a Certificate of Insurance a requirement?
A COI is a requirement anytime a third party supplies you with goods for your products or enters your property to perform a task outside of your control. Whether you should have one depends on the role your company is playing in a cooperative arrangement with another company. You typically need a certificate of insurance when:
- hiring subcontractors
- hosting events on your personal property
- signing business contracts
- working with vendors or suppliers
What happens with your business when you need a COI?
Your company will be added as an Additional Insured on their insurance policy. However, it will only be for the duration of the event (from start to end dates). The certificate will also outline the coverage under specific conditions given to your company as the Additional Insured.
What is an ‘Additional Insured’?
Several different entities are in a COI, which is why it’s important to know the difference between each of them:
- The person or business that purchases the policy is known as the Named Insured.
- The certificate holder is the person or entity that requests and holds the COI.
- An Additional Insured is a person or business that benefits from another entity’s coverage in some way.
One of the most common ways is that the Additional Insured can make a claim under a policy they did not purchase. It is important to note that it’s common for a certificate holder to request to be named as an Additional Insured on the policyholder’s policy.
You may need to purchase an endorsement that automatically adds third parties as Additional Insureds on your policy. Essentially, an Additional Insured endorsement on your policy provides coverage for parties working with you!
How much does a Certificate of Insurance cost?
It actually costs nothing to obtain a Certificate of Insurance! This is a complimentary service given by the company that sold you your business insurance. However, if the job in question requires additional coverage that your policy does not meet, then you might have to pay an additional premium to cover those costs.
How do you obtain a COI?
If you need to request proof of insurance from your insurer, these are the usual steps you’ll need to go through:
- Get the details: Find out the minimums and limits the coverage should have. Get your client’s name, address, and tax identification number in case you have to increase your premium.
- Call your broker: Explain to them what the minimum coverage amount is and that you need proof of insurance. If your policy already meets the requirements, then the broker will contact your carrier to secure the COI. If you need to purchase a rider to increase coverage for the project, your broker will provide the details and the paperwork you need to complete and submit.
- Get your certificate: Your broker will create the COI and send you a printout of the Certificate of Insurance, after which you will need to send it to your client.
What is the time frame for obtaining a COI?
Obtaining the Certificate of Insurance from your broker can take a few days or even weeks. Depending on when you contact your isure broker, how quickly they can complete all the necessary paperwork and provide you with your COI can vary greatly from case to case.
When it comes to obtaining a Certificate of Insurance, one of the biggest misconceptions is that you can obtain a COI without an active policy. This is not the case. Your policy must be active to receive a Certificate of Insurance.
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What is the takeaway for COIs?
At the end of the day, a Certificate of Insurance is a simple but essential tool for protecting your business, helping confirm coverage, reducing liability risks, and building trust with partners and clients. Always verify that the insured party has proper coverage in place before you enter into a business agreement. Need help securing a Certificate of Insurance or reviewing your coverage? Contact an isure representative today to make sure your business is fully protected.
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