What is a certificate of insurance?
A certificate of insurance, or COI, is most commonly associated with small business insurance and often refers to liability coverage. This document acts as proof of insurance coverage and is issued when you buy a small business liability insurance policy. In the following sections, we will outline when you need it, what it covers and other details.
What does a certificate of insurance look like?
A COI verifies the existence of an insurance policy, and the document itself contains all the standard information often included on a declaration page or insurance binder. A standard COI will list the policyholder’s name, effective dates, coverages, policy limits and key details.
When do you need a COI?
Certificates of insurance are used most often in small business transactions and provide proof to the client or customer that the business is insured. This is particularly important where liability or significant losses are of concern, making COIs synonymous with certificates of liability insurance. COIs come up most frequently in the following situations:
Even if you’re just starting out in your new business, having insurance tells your potential customers that you have the financial backing to cover losses if they occur. This increases your dependability and heightens your reputation, making customers more likely to feel safe doing business with you.
Whether you are working with a partner business or doing work for a customer, contracts are essential. Clients may request a COI in the terms of the contract. An insurance policy protects you and your clients against potential losses, so it’s never a bad idea to hold one.
If a business hires you as a contractor, they want to know that they will not be held responsible should a loss occur due to contractor mistakes. With liability insurance, losses are typically covered and don’t need to involve the hiring company.
What does the COI say is covered?
Certificates of insurance for small businesses typically contain sections for different types of liability insurance. Usually, these are listed as general liability insurance, commercial auto insurance, umbrella insurance and workers’ compensation. It covers the “insured” — a person, the name of the business or the additional insureds.
The general liability section lists the coverages and their limits: premises and operations exposure, products and completed operations exposure and indirect/contingent exposure. Auto liability covers bodily injury and property damage. The umbrella section provides excess coverage and the workers' compensation section includes limits for each accident and/or disease.
It’s also important to note what a liability policy doesn’t cover, but these sections can be covered by other types of insurance. Liability insurance won't cover damage to your own business property or if your business must temporarily close due to events like storms or fires. These are covered by commercial property insurance and business interruption insurance, respectively.
For the purposes of your transaction with a client, only the liability section is necessary to prove, rendering a certificate of insurance sufficient.
Other considerations of COIs
When a client requests a certificate of insurance, they become a certificate holder. There is a special section on each COI that contains the client’s name and contact information, as well as statements showing the insurer’s obligation to notify the client of any policy cancellations.
All insurers involved in the small business will be listed on the certificate if there is more than one. The general liability section will indicate whether coverage applies on a per claim or per occurrence basis. While workers’ compensation is mentioned on the COI, each state has its own laws determining limits. On a standard COI, the section for workers’ compensation will show no limit.
Frequently asked questions
When do I need a certificate of insurance?
Should I ask for a COI from my contractor?
Is a certificate of insurance the same as an insurance policy?
How do I get a certificate of insurance?
About The Zebra
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