What Are Certificates of Insurance & Why You Need One
Gain essential insights into Certificates of Insurance (COIs). Understand their purpose, components, and the steps to effectively obtain or validate this critical proof of coverage.
A Certificate of Insurance (COI) serves as a standardized document providing proof of insurance coverage for a policyholder. It outlines the key details of an existing insurance policy, acting as a summary that confirms specific coverage is in place without replacing the comprehensive policy itself. Across various industries and business transactions, a COI is frequently requested to demonstrate an entity’s insured status, allowing parties to quickly ascertain coverage details relevant to their engagement.
What is a Certificate of Insurance
A Certificate of Insurance (COI) is a formal document provided by an insurance company or broker, confirming an insurance policy’s existence and summarizing its essential terms. Its purpose is to offer quick, verifiable evidence that an individual or entity holds specific insurance coverage at a particular moment. It does not, however, grant new rights or modify the underlying insurance policy.
COIs are frequently requested in business contexts to manage risk. For instance, landlords often require COIs from tenants to ensure liability coverage for rented property. General contractors demand COIs from subcontractors to confirm adequate insurance for potential job site incidents. Clients often ask service providers for COIs before engaging their services, ensuring protection against unforeseen events. This practice helps safeguard the requesting party from financial responsibility should an incident occur involving the insured entity.
Understanding COI Components
A Certificate of Insurance typically follows a standardized format, often utilizing an ACORD form, to present specific details about the insurance coverage.
The document begins with the “Producer” information, detailing the insurance agent or broker who issued the COI, including their name, address, and contact information. The “Insured” section identifies the policyholder, providing their legal name and address. This ensures the COI is tied to the entity whose coverage is being verified.
The COI lists the “Insurer(s) Affording Coverage,” indicating the insurance companies providing each policy type. The “Policy Information” section details specific policy numbers, effective dates, and expiration dates for each listed coverage type. This allows the recipient to confirm the coverage is active and when it will lapse.
The “Types of Coverage” section itemizes the various insurance policies held by the insured, such as Commercial General Liability, Automobile Liability, Workers’ Compensation, or Professional Liability. For each coverage type, the “Limits of Liability” are displayed, representing the maximum amount the insurer will pay for covered losses. For example, a general liability policy might show a “per occurrence” limit and an “aggregate” limit, indicating the maximum payout for a single event and over the entire policy period.
The “Certificate Holder” section identifies the entity or person requesting the COI, including their name and address. An “Additional Insured” endorsement, sometimes included, extends coverage from the policyholder’s insurance to the certificate holder under specific conditions, often for work performed by the insured. This provides an extra layer of protection to the requesting party.
Finally, the “Cancellation Notice Provision” specifies how many days’ notice the certificate holder will receive if the policy is canceled before its expiration date, commonly ranging from 10 to 30 days. This allows the certificate holder to take appropriate action if the coverage is terminated.
Obtaining a Certificate of Insurance
Acquiring a Certificate of Insurance (COI) for one’s own business or operations involves a straightforward process, primarily initiated by contacting the insurance provider. The first step involves identifying the specific need for a COI, which often arises from contractual obligations or client requirements. For example, a new construction project may stipulate that all subcontractors provide proof of liability insurance before commencing work.
Once the need is established, the insured party contacts their insurance agent or broker. This can be done through a phone call, email, or an online portal provided by the insurer. Many insurance companies offer online platforms that allow policyholders to request and generate COIs directly.
To ensure the COI is accurate and meets the recipient’s requirements, the insured must provide specific information to their agent. This includes the exact legal name and mailing address of the entity or person requesting the COI (the certificate holder). The insured needs to specify the types of coverage and the minimum limits of liability required by the requesting party, usually outlined in a contract or agreement.
Any special endorsements, such as additional insured status or a waiver of subrogation for the certificate holder, must be communicated to the agent. These endorsements modify the policy to extend certain protections to the requesting party. Before finalization, the insured should review a draft of the COI to verify all details, ensuring it accurately reflects the requested information and fulfills all contractual stipulations.
Validating a Certificate of Insurance
Upon receiving a Certificate of Insurance, the certificate holder should review it to ensure authenticity and accuracy against their specific requirements. This initial review involves cross-referencing all details on the COI with the terms outlined in any contract or agreement. This includes verifying the correct names of the insured and the certificate holder, checking that policy effective and expiration dates cover the required period, and confirming that the types of coverage and limits of liability meet the specified minimums.
Particular attention should be paid to any requested endorsements, such as additional insured status or waiver of subrogation, to ensure they are explicitly noted on the COI. The most reliable method for verifying a COI’s authenticity and current status is to contact the issuing insurance agent or broker directly. Use the contact information provided on the COI itself, rather than any contact details supplied by the insured, to prevent potential fraud.
During this direct verification, the certificate holder should confirm that the policies listed are active and that the coverage details match what is presented on the COI. Recipients should be vigilant for red flags that might indicate an altered or fraudulent COI. These can include blurry text, inconsistent fonts, missing information in key fields, or unusual contact details for the insurance provider. A legitimate COI is clear, complete, and verifiable through the listed agent.