Commercial Insurance Blog

What is a Certificate of Insurance?

A Certificate of Insurance is a single page document that lists active, in-force insurance policies for a business's insurance program.  Certificates of Insurance (COI) are often requested when one business engages the services of another, and wants verification that the business has their own insurance program.  It is the default document to convey to an interested party what kind and amounts of insurance another business has.

Gordon Atlantic Insurance's standard for turning certificates around is 4 business hours. That means if someone asks you for a Certificate of Insurance, will will do everything we can to get that out in less than four hours!

A standard certificate will list the General Liability, the Automobile Liability, Excess Liability, and Workers Compensation policies. It will also provide the name of the insurance company and policy effective and expiration dates. The latter is most important particularly if the expiration of an insurance policy straddles the time that a job is being done. Thus, it lets the certificate "holder," or the company engaging another company, know when the subcontractors insurance runs out. It is a great management tool for verifying insurance of others in business.

Learn about business insurance certificates and how they work with commercial from andrew gordon incIn the construction field, COIs are requested for important cost reasons.  If an uninsured subcontractor causes damage at a job site resulting in a loss, the general contractors insurance may end up paying a claim for the subcontractor's negligence. Thus, when a general contractor engages the services of a subcontractor who has no insurance, the general contractor's insurance company will charge for the uninsured subcontractor at audit.  And of course any claims will end up on the general contractor's loss history as well.  The certificate, therefore, is an important document for preventing these charges from landing on the general contractor's risk and insurance program.  

Certificates also convey other important information that may be present between working parties. One of the most common is the Additional Insured.  The Additional Insured status is another step toward requiring subcontractors to assume full responsibility for their actions on a job site, and the Certificate of Insurance can confirm this status.  Another common Additional Insured scenario is with landlords and tenants, or regular service providers such as landscapers.

Another policy feature that may be required when different businesses collaborate on a project is the Waiver of Subrogation agreement. The certificate likewise provides a checkbox to acknowledge whether Waiver of Subrogation exists between parties.

Certificates are requested in many other business relationships. A landlord should require all tenants to have liability insurance so that a lawsuit from a tenant's actions does not come back to the landlord. The COI may be used to document compliance with this arrangement.

Another important insurance consideration disclosed on a certificate relates to Workers Compensation insurance. In Massachusetts, business owners may opt out from having Workers Compensation coverage in order to eliminate the cost of including Workers Compensation for themselves. A Certificate of Insurance can disclose whether the owner has opted out or not.  

Learn what a coi is for your business with commercial insurance from andrew gordon incWhen a bank wants to confirm whether there is insurance on a business's property, the certificate of liability insurance is not an appropriate document  An insurance binder, or the Evidence of Property Insurance is the more relevant form. These look very similar but there is an important distinction as these other forms typically don't show liability insurance.

Businesses that collect many Certificates of Insurance often organize these certificates by expiration date of their subcontractors insurance. Thus they will know when the insurance of the subcontractor ends as a reminder to confirm a renewal.

One important caveat: a certificate only shows insurance in place on a given day. There is no specific obligation by the insurer or by the agent or broker to notify a certificate holder if the subcontractor lets their insurance cancel. Generally speaking, when old claims make their way back to a general contractor, the subcontractors insurance often has expired.

Prefer to watch a synopsis of the above?  Click the 2-minute video done for BusinessTown:

 

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Geoff Gordon

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