A certificate of insurance also known as a COI is a document issued by your insurance company, broker, or agent, that establishes proof of your business insurance. The one-page document summarizes your coverage limits and policy information for easy verification for everyone involved.
When is a certificate of insurance needed?
Certificates of insurance are typically required when you enter into a contract with a 3rd party to either show proof of your insurance or for you to obtain the other party’s proof of insurance.
Any time you hire a 3rd party company or subcontractors to perform services, tasks, or projects for you or with your company, you will want to make sure they have their own insurance so you don’t end up responsible or taking on any of the 3rd party’s risks that may arise.
What does it mean to add as an Additional Insured?
An additional insured endorsement to your policy will give the 3rd party who is added some of the benefits and coverages to your policy under certain circumstances. In those circumstances the additional insured that is added will be able to file a claim against your policy for applicable damages.
When you are requesting certificates of insurance from other parties you are hiring, you will also want to request to be added to their policy as an additional insured so you will be entitled to these rights if needed.
What is a Waiver of Subrogation?
A waiver of subrogation is another type of endorsement that can be added to an insurance policy that waives the right of your insurance carrier to seek compensation for losses from a negligent 3rd party. In other words, if subrogation is waived then the insurance carrier can’t go after the other party once a claim has been settled, in order to recover damages for covered losses.
This is another item you will want to make sure is included in your contracts and shown on certificates of insurance from any subcontractors or other parties you hire to do work for you or your company.
What should I look for when presented with a certificate of insurance?
Here is what you will want to verify on the COI when you collect it from a 3rd party:
- The issuing Insurance Brokerage or Agent name and address
- The Insurer, this is the insurance carrier/company names that provides the coverage
- The Insured, this is the legal name and address of the organization that is insured and providing you with the proof of coverage
- Commercial General Liability, this section will show the following items:
- Policy number
- Effective and expiration dates
- Limits of Liability (these limits can vary; you will want to make sure the 3rd party has adequate coverage for the exposure and to at least match your own insurance limits.)
- Additional Insured and Waiver of Subrogation Status, you will want to make sure these are indicated on the certificates
- Description of Operations, this is where any additional notes can be input such as project locations or special provisions
- Certificate Holder, this is the section that will show your legal name and address
- Authorized Representative, make sure the certificate is signed and dated
No matter what type of business or operations you’re in, at some point you will depend on or hire another party to carry out a service for you and it can open you and/or your company up to many risks. Obtaining certificates of insurance will ensure that the other parties you are in agreement with have the insurance needed to avoid you having to take on their negligence as your own. While a certificate of insurance is not a formal contract between you and the other party, the document is important to obtain for businesses entering into contracts with other organizations to make sure all parties have sufficient insurance coverage.
Make sure to talk to your agent and discuss the importance of asking for these documents and if you have any other questions about your insurance.
