What Is a Certificate of Insurance (COI)?
A Certificate of Insurance (COI) serves as a vital document issued by an insurance company or broker. This certificate functions to validate the existence of an insurance policy and neatly outlines its crucial details. For instance, a standard COI typically includes the policyholder’s name, the effective date of the policy, the type of coverage provided, policy limits, and other relevant policy specifics.
Without a valid COI, businesses, and contractors may encounter challenges in securing clients, as potential clients are often reluctant to assume any potential financial risks that could arise from the actions of the contractor or provider.
Key Takeaways
- A Certificate of Insurance (COI) is an official document issued by insurance companies or brokers to confirm the existence of an insurance policy.
- Small business owners and contractors typically require a COI to provide protection against liability for workplace accidents or injuries while conducting business.
- When receiving a COI from a business, always check the coverage dates and policy limits.
How Certificates of Insurance (COI) Work
Certificates of Insurance (COIs) are essential in scenarios where liability and substantial losses are concerns, typically required in most business contexts to prove insurance coverage.
Small business owners and contractors often hold a COI to demonstrate that they are insured against liability for workplace accidents or injuries. When acquiring liability insurance, an insurance company commonly issues an insurance certificate.
The absence of a COI can hinder a business owner or contractor from securing contracts. Clients hiring contractors typically seek assurance that the contractor possesses liability insurance to avoid assuming any risks associated with damage, injury, or substandard work.
It is advisable for companies engaging services of contractors or entities to obtain and verify a copy of their up-to-date COI.
Validating a Certificate of Insurance
Usually, clients should request a certificate directly from the insurance company rather than the business owner or contractor. It is essential for clients to ensure that the name of the insured on the certificate matches the company or contractor being considered.
Additionally, clients should verify policy coverage dates to confirm the policy’s current effective date. If the policy is set to expire before work completion, obtaining a new certificate is necessary.
Details of a Certificate of Insurance
Certificates of insurance feature distinct sections for various types of liability coverage such as general, auto, umbrella, and workers’ compensation. The term “insured” refers to the entity covered by the insurance policy listed on the certificate.
In addition to coverage details, the certificate includes the policyholder’s name, address, and outlines the operations that the insured entity conducts. Contact information for the issuing insurance company and the insurance agent is provided, including details of additional involved insurance companies.
When a client requests a COI, they become a certificate holder with their contact details indicated, along with the insurer’s obligation to notify them of policy cancellations.
The certificate summarizes the insured policies and the limits for each coverage type. For instance, the general liability section outlines limits based on categories and specifies whether coverage applies per claim or per occurrence. Workers’ compensation coverage usually shows no limit due to state regulations, while limits for employer’s liability coverage should be clearly stated.
How to Get a Certificate of Insurance
When requesting a COI from a contractor or business, they can provide it directly or offer contact details of their insurance company for verification. While obtaining a COI is crucial, caution should be exercised when relying solely on the vendor’s submission, as cases of fraudulent COIs have been reported.
Who Needs a Certificate of Insurance (COI)?
If hiring an independent contractor or business for services on your property, a Certificate of Insurance (COI) is essential. Similarly, contractors or businesses should possess a COI to demonstrate insurance coverage to clients.
How Long is a Certificate of Insurance Good For?
It is advisable to retain any COI indefinitely to address potential issues that may arise regarding completed jobs or work carried out on your premises.
When Should I Get a Certificate of Insurance?
Request and obtain a COI before any work commences on your property, ensuring that insurance requirements outlined in the contract, including coverage and limits, are validated through a COI.
The Bottom Line
In various scenarios, securing a Certificate of Insurance (COI) is crucial. Clients typically access the COI directly from the insurance company to confirm adequate insurance coverage. When engaging contractors, even if previously worked with, it is advisable to obtain a COI from their insurance company to stay informed of any coverage changes.