How to Read a Certificate of Insurance

A Certificate of Insurance (COI) serves as a concise summary of an insurance policy, providing proof of coverage at a specific point in time. It is not an insurance policy itself, but rather a snapshot detailing key aspects of an insured party’s coverage. Individuals and businesses frequently encounter COIs when entering into contracts, hiring contractors, or engaging in various transactions where verifying adequate insurance is necessary. Understanding this document helps ensure contractual obligations are met and provides peace of mind regarding potential liabilities.

Understanding the Standard ACORD Form

The ACORD form is the most widely adopted standard for Certificates of Insurance, used by approximately 90% of insurance industry professionals. ACORD, or the Association for Cooperative Operations Research and Development, is a non-profit organization that developed these standardized forms to streamline data exchange and enhance efficiency within the insurance sector. The ACORD 25 form, specifically, is a common one for liability insurance.

Upon reviewing an ACORD COI, the “Producer” section identifies the insurance agent or broker who issued the certificate, along with their contact information. This detail is useful for any follow-up questions. Below this, the “Insured” section states the policyholder’s legal name and address.

The “Certificate Holder” section identifies the entity or individual requesting the COI, such as a client or landlord. The “Policy Information” area provides details for each listed policy, including policy numbers, effective dates, and expiration dates.

The “Coverages” section outlines the types of insurance included, such as General Liability, Automobile Liability, and Workers’ Compensation. This section offers an initial indication of the coverage limits. The “Description of Operations/Locations/Vehicles” box is a free-text area where special conditions, specific projects, or additional details related to the insured’s operations are noted.

The “Cancellation” section specifies the notice period for policy cancellation. It outlines how many days’ notice the certificate holder will receive if the policy is canceled before its expiration date. Familiarity with these sections allows a reader to quickly locate relevant information.

Deciphering Coverage Details

Understanding the specific limits and terms within the “Coverages” section is important for a comprehensive review. For General Liability coverage, two primary limits are “per occurrence” and “general aggregate.” The “per occurrence” limit represents the maximum amount the insurer will pay for any single incident or claim, while the “general aggregate” limit is the total maximum the insurer will pay for all covered losses during the policy period, typically one year.

Automobile Liability coverage may be presented as a “combined single limit” (CSL) or “split limits.” A combined single limit provides one overall maximum amount for all bodily injuries and property damage resulting from a single accident. In contrast, split limits break down coverage into three separate amounts: bodily injury per person, bodily injury per accident, and property damage per accident.

Workers’ Compensation insurance includes statutory limits, which are mandated by state law for medical expenses and lost wages, and “employers’ liability” limits. Employers’ liability protects the employer against lawsuits arising from work-related injuries, with typical limits such as $100,000 per accident, $500,000 per disease per policy year, and $100,000 per employee.

Umbrella or Excess Liability policies provide additional layers of protection that extend above the limits of primary policies. Umbrella policies can broaden coverage to include claims not covered by primary policies, while excess liability policies primarily increase the limits of underlying policies. These policies are important for covering catastrophic losses that exceed standard policy limits.

The COI also lists policy numbers and their effective and expiration dates. It is important to verify that these dates are current, ensuring continuous coverage throughout the period of engagement. Key endorsements like “Additional Insured” and “Waiver of Subrogation” may be noted in the “Description of Operations” section or indicated by checkboxes. An “Additional Insured” endorsement extends coverage from the policyholder’s insurance to another party for claims arising from the policyholder’s work. A “Waiver of Subrogation” is a provision where the insurer gives up its right to seek reimbursement from a third party for a loss, often used to prevent lawsuits between parties in a contractual relationship.

Confirming and Applying COI Information

After reviewing the coverage details on a Certificate of Insurance, confirm the COI’s authenticity and apply the information to specific requirements. The most reliable method to verify a COI is to directly contact the insurance producer or carrier listed on the document, using their contact information provided on the COI itself. This direct contact allows for confirmation that the policy is active and that the details match those presented on the certificate.

Once verified, compare the COI’s details against any contractual requirements, such as minimum liability limits or specific types of coverage. Ensure that all necessary endorsements, like additional insured status or waiver of subrogation, are correctly noted and meet the agreed-upon terms. If the COI does not meet the specified requirements, communicate with the issuing party to request necessary adjustments or updated documentation.

Maintaining proper documentation of COIs is a practical step for future reference and compliance. Keeping digital copies, alongside any associated agreements or contracts, facilitates retrieval if a claim arises or for audit purposes. Establishing a system for monitoring expiration dates and proactively requesting updated certificates helps prevent gaps in coverage and ensures ongoing compliance.