What Is A Certificate Of Insurance And When Will You Need One?

What Is A Certificate Of Insurance?

A certificate of insurance (COI) provides proof of an existing insurance policy to a third party who requests it. The document provides a summary of liability coverage on the insurance policy.

Certificates of insurance provide proof that businesses are adequately protected in case something goes wrong. Most business owners will have to prove that they have business insurance at some point. 

Why Are Certificates Of Insurance Necessary?

A COI is commonly requested in business contracts. Almost any independent contractor, freelancer or other business owner has likely had a client request a COI before beginning the arranged work. Many clients, especially those hiring for large jobs where something could go wrong, will refuse to make business arrangements with contractors or business owners who can't provide one. Usually, the party asking for a COI wants to ensure you have proper coverage. Even if you are confident nothing will happen and take every possible risk management precaution, an accident or false accusation could happen, landing you and your client in hot water. In such an instance, insurance protects you and your client against these claims. A COI proves the holder is adequately insured and thusly protected in such an event.

For example, let's say you're an electrician hired to install wiring in a new building. To protect themselves, the company overseeing the construction may require you to prove that you have electrician insurance. The company in charge will require this of all contractors working on the project. . Those hosting events or making significant decisions for clients, like accountants, may also be requested to provide a certificate of insurance.

When Is A Certificate Of Insurance Required?

If you are a small business owner or independent contractor, there will likely be instances where a potential client requires a certificate of insurance In other business situations, another contractor or company will only work with you if you have the correct insurance. Not having a certificate of insurance could cost you the opportunity to work on a job. Many of these jobs are likely big opportunities. By not having a certificate of insurance, you are potentially losing out on these opportunities.

Who Might Ask Me For A Certificate Of Insurance?

There are many instances where you might be asked to show a certificate of insurance. These include:

  • Someone hiring you for a large project where the risk of something going wrong is higher than normal
  • Someone hiring you to do a project for them in their home, such as home renovations
  • Anyone hiring you as a subcontractor
  • Someone who owns the property you are leasing or renting
  • The property owner of a place you renting to host an event
  • A bank loaning you funds to purchase expensive equipment of which they will have an interest in
  • A trade show or event you are attending

Please note that these are only some potential individuals or companies who may ask you for a certificate of insurance. 

Can I Request A Certificate Of Insurance From Others?

Yes. Requesting a certificate of insurance is entirely reasonable and recommended when you are renting a location to a third party to do business from, or hiring a contractor to do work for you to protect you from shared liability. Just like there are situations where you are opening up someone else to potential risk, there are situations where someone else could be opening you up to the same risks. Some people you could reasonably request a certificate of insurance from include the following:

  • A contractor with whom you share risk
  • Any subcontractors whom you hire
  • Anyone who leases property that you own, whether short-term or long-term
  • A tenant you are considering renting to

What Is The Difference Between A Certificate Of Insurance And An Insurance Policy?

An insurance policy is a highly detailed legal document that outlines the agreement between the insurance company and the insured individual. It contains a list of possible situations in which the insurance provides protection, costs, deductibles, maximum insured amount, exceptions and a wealth of other information. This document type is often much more significant and contains legal jargon and complex terms rarely used outside the insurance industry. For this reason, it will be more complicated.

On the other hand, a COI is a much simpler document. A COI is a one-page document containing a basic summary of the information in an insurance policy. It is straightforward and only contains key aspects of your insurance policy that a third party requesting the certificate would require. A certificate of insurance requires an insurance policy already in place.

What Information Is On A Certificate Of Insurance?

The information on a certificate of insurance is straightforward and easy to understand for someone unfamiliar with the complexities of insurance... A standard COI includes the following information:

  • The name and address of the insured party
  • An overview of liability coverage
  • The name of the insurance company the insured is with
  • The name of the insurance brokerage providing the COI
  • The date the COI was created
  • The insurance policy number
  • The expiration date of the policy
  • Coverage limits of the policy
  • A signature belonging to a Registered Insurance Broker who provided the COI

How Much Does A Certificate Of Insurance Cost?

A copy of a COI should not cost you anything, as insurance brokerages offer it for free. If you have an insurance policy, your brokerage should be able to give you a certificate of insurance at no cost. 

How Long Does It Take To Receive A Certificate Of Insurance After I Request One?

A COI can be done within 24 hours unless there are specific requirements that need review and approval from your insurance company.

Where Can I Get A Certificate Of Insurance?

You can get a certificate of insurance by calling or emailing your insurance broker. For example, if you are currently a client of Morison Insurance, you can email your Morison Insurance Broker or call 1-(800)-463-8074 to speak to a registered insurance broker.

This content is written by our Morison Insurance team. All information posted is merely for educational and informational purposes. It is not intended as a substitute for professional advice. Should you decide to act upon any information in this article, you do so at your own risk. While the information on this website has been verified to the best of our abilities, we cannot guarantee that there are no mistakes or errors.

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