We receive dozens of requests a day for certificates of insurance from and for our clients. A certificate of insurance (also know as an insurance certificate or COI) is a document showing evidence of insurance for one party that can be provided to another party. The certificate shows which coverages are in place (general liability, workers compensation, commercial auto, professional liability, etc), the time period of the policies, the carrier, and the broker or agent.
The certificate is only evidence of insurance coverage at the time the certificate is issued – it is
not an insurance policy nor does it provide the certificate holder with any rights.
Why am I being asked to provide a certificate of insurance?
Typically a construction or vending agreement will require the party providing the good or service to provide a certificate of insurance. While the contracts you sign with a general contractor or vendor may have specific insurance requirements, the COI is another way to show that you have the required coverages in place to fulfill contractual compliance during a specific period of time. If your agreement is for a period exceeding the term of your (typically) annual policy, you will probably be asked to provide an updated certificate every year.
Why should I request a certificate of insurance?
There are a few reasons to request a certificate of insurance. Unfortunately, not everyone is honest. If you’re looking into hiring a contractor for a home renovation, they are probably advertising that they’re licensed and insured. Ask for copies of both – it’s
not an inconvenience to the contractor and if they balk then it should raise a flag regarding their credibility.
Are you a contractor that occasionally has to hire subs? If you’re not asking for a certificate of insurance from these subs, then you’re on the hook for any payments made to them for your general liability and workers compensation. This always creates an issue during the audit process so make sure you request them upfront!
Just because someone has insurance, it doesn’t necessarily mean it’s adequate. An electrical subcontractor could burn down a $2,000,000 commercial office building and if he only has a $500,000 general liability limit there are undoubtedly going to be some problems. What if that same contractor doesn’t have commercial automobile insurance and one of his employees injures a homeowner while renovating their kitchen? If the certificate you’ve received looks fishy – send it to your local insurance agent for review and guidance – that’s why we’re in show business!
