Business owners need to get a certificate of insurance (COI) from their insurer. It provides the assurance customers, contractors, and other businesses need before they decide to work with you.
So, what is a certificate of insurance and why is it so important? Let’s take a look.
What is a Certificate of Insurance?
A certificate of insurance is basically a one-page document that summarizes your insurance coverage. A COI is also known as a certificate of liability insurance or proof of insurance. It is issued by the company that provides your business with insurance and verifies your specific coverages.
Why Do Others Ask for My COI?
Clients, contractors, and other businesses may want to see your certificate of insurance as proof that you have the right insurance, before they decide whether they should work with you.
For instance, your company may need to submit a COI when bidding on a contract. The general contractor wants to ensure you have an active policy with general liability coverage to protect them against bodily injury or property damage claims.
Companies involved in work that includes a high risk of damage or loss will almost certainly need to provide a certificate of insurance. Just contact your insurance agent and they’ll likely provide you with one at no cost.
Should You Ask for a Certificate of Insurance?
Yes, if you intend to hire a contractor or a company to work for you. They should have proper insurance coverage, otherwise claims can be filed under your insurance policies.
As an example, you might decide to hire a contractor to landscape your property. They cause $50,000 in damages when they cut down a tree and it falls on the neighbor’s building. The contractor doesn’t have liability insurance, so your neighbor’s insurance company seeks compensation under your home insurance policy. The claim leads to your insurer cancelling your policy. When you look for a new policy, you struggle and eventually pay much higher premiums.
Ask for proof of insurance and review it to ensure they have the correct insurance. If they can’t provide a COI, look for another company. They don’t cost anything to obtain, so there’s no excuse.
What Should You Check in a Certificate of Insurance?
Check for the following information to ensure the certificate is legitimate.
First, is it issued by a legitimate insurance company? A quick search on the internet can confirm this.
Second, does the name on the certificate agree with the name of the company or person you are hiring?
Third, do they have business liability insurance and commercial auto coverage? Do they provide sufficient coverage limits?
Finally, what are the effective dates of the policy? Will the policy expire in the middle of your project?
Don’t accept a certificate of insurance from anyone other than an insurance agent or an insurance company. Ask for a COI every time you hire a third-party, even if you’ve used them before. Insurance coverages can change or lapse and you always want to ensure that you have the most accurate and up-to-date information.
If you have any questions about this, or any other insurance related topics, please don’t hesitate to contact us at 401-723-8510!