A certificate of insurance (COI) is a document that provides proof that your company is covered by insurance, such as general liability or worker's compensation insurance, at the time of its issuance. Businesses or individuals often must verify that a contractor, vendor, or other party has liability insurance coverage before being given a job or selling a product.
Your insurance agency usually issues a COI, which lists the types and limits of liability insurance the policyholder has in place. It is requested to show liability insurance coverage is in force. Read on to learn about the key aspects and conditions of a COI.
How to Get a Certificate of Liability Insurance?
General liability insurance: To get a COI, purchase a general liability insurance policy. This can help pay for third-party bodily injuries and property damage caused by your company. Once your general liability is placed, your agent can issue a COI.
In addition, general liability insurance can help protect your company against advertising injuries, including defamation—libel (written), slander (spoken)—and copyright infringement.
Employer's liability insurance: Employer's liability is included in most workers' compensation policies. This coverage helps pay for legal costs if an employee's family decides to sue for damages due to an employee's work-related injury. The coverage pays attorney fees, court costs, and settlements for covered claims.
Errors and omissions (E&O) insurance: If you are a licensed professional, you could purchase errors and omissions (E&O) insurance and get a COI. Such coverage helps protect you from lawsuits over unsatisfactory services and is also known as professional liability insurance.
E&O helps when it comes to a client's financial loss caused by your company's failure to provide the services promised, work mistakes or oversights, and allegations of negligence. It can help pay for legal expenses and settlement costs for insured claims.
Business Auto Liability: When you insure your business autos, you may need proof of auto liability to drive onto a job site. Auto liability covers bodily injury and property damage liability caused by negligent driving, which causes an accident.
To obtain a COI, you request from your agent, customer service representative or request online for an instant certificate of insurance on your agency's website, like at InsuranceAdvisor.com.
What's On a Certificate of Insurance?
A COI typically includes the following information:
- The name and contact information of the policyholder
- The name and contact information of the insurance company and agency
- The types of insurance coverage in place (e.g., general liability insurance, business auto liability, employers liability, or professional liability.)
- The policy limits for each type of coverage
- The policy's start and expiration dates
- The policy number
- Any additional endorsements or waivers, if applicable
- An additional insured, if applicable
Why is a Certificate of Insurance Important?
A COI is important for many reasons, including the following:
- It can satisfy contractual requirements as a client could agree to your service only if you have such documentation. Clients always want to know whether your company has the right insurance coverage in case of injury or property damage.
- If you rent space for your company, landlords may ask for a COI before finalizing the lease agreement. Landlords are looking to ensure that you have the right business insurance to protect them if your business causes bodily injury or property damage to others in the rented space.
- Showing a certificate of insurance to clients can provide peace of mind, especially in industries that carry many risks. For instance, suppose you hire a subcontractor for your construction project and don't get a COI from the sub. His employees accidentally damage the property they are working on, and you find out his company is uninsured. You may ultimately be responsible for paying for those damages from your pocket if you don't have liability insurance.
- When applying for a contractor's license, you may be required to show proof of general liability coverage on a COI.
- Certain industries, such as real estate, may ask for evidence of insurance from a real estate agent to know whether they have professional liability coverage in case an error occurs. Similarly, clients could ask cleaning business owners to provide a COI to show they can pay for potential damages or injuries resulting from their work.
Things to Remember when Reviewing a COI
If you are planning to work on a project with a prospective company or hire a subcontractor, make sure to keep the following points in mind when reviewing a certificate of liability insurance:
- A legitimate authorized insurer in the state must be listed.
- The insured name must match the name of the person or company you're hiring
- It must have the required limit of coverage
- The types of coverage must be listed
- It must include the policy number with an effective and expiration date.
- Note that a certificate provides a snapshot of coverage in force when issued. If you receive an outdated COI, it's possible the insured may not have made a payment, and coverage could have been canceled.
If you think that the limit the vendor has isn't enough to cover potential risks, ask them to increase the limit and get an updated COI.
How Much Does a Certificate of Insurance Cost?
Business insurance providers don't charge for the issuance of COIs to existing policyholders. However, you will need to purchase coverage to get a COI. The costs of business insurance will depend on the size of your business, number of employees, location, claim history, policy limits and deductibles, business revenue, and more. There's no one-size-fits-all policy, so that the insurance cost can vary across companies.
Get a Certificate of Liability Insurance Today
In conclusion, a certificate of liability insurance is an important document that provides proof of insurance coverage when issued. It can help ease business transactions, satisfy contractual requirements, and provide peace of mind to your business partners. If you’re working with a contractor or vendor, it’s always a good idea to request a COI to ensure that they have coverage in place.
Insurance Advisor is your go-to platform for purchasing commercial insurance policies and getting insurance certificates for your business. Talk to our friendly agents to answer your questions, and use our optimized digital platform for convenient payment options and affordable quotes.