Contractors Should Provide a Certificate of Insurance—Here's Why

The Importance of a Contractors Certificate of Insurance

Whether you're a roofer, an electrician, a mason or one of the dozens of other jobs that fall under the title of contractor, your work exposes you to some legal and financial risks. The best way to protect yourself against paying out of pocket for unexpected expenses such as legal fees, settlement costs, damage mitigation and more is by having the right contractors insurance in place.

But even though you've got the necessary business insurance, that doesn't mean prospective clients will just take your word for it. They need to know there's adequate insurance protection in place when you're working on their property. Fortunately, there's an easy way to prove that you've got the necessary contractors insurance coverage—simply provide them with a contractors certificate of insurance from your licensed insurance brokers at Morison Insurance.

What is a Contractors Certificate of Insurance?

A certificate of insurance (COI) for a contractor is basically a document issued by your insurance broker that proves you have insurance coverage by listing the essential details of your insurance policy. It's similar to the vehicle insurance card you keep in your truck or car in case you're asked to show proof of auto insurance requirements. A contractors certificate of insurance gives an overview of your relevant insurance coverage that you can show to prospective clients or anyone else who needs to know that you are protected by contractors insurance.

Why Do Contractors Need Certificates of Insurance?

Any business owner or individual who provides contracted labour services needs to be able to provide a certificate of insurance. They provide some major benefits to contractors, including the following.

Proof of Insurance Status

The primary role of a contractors certificate of insurance is to prove the existence of insurance coverage. This is so important for contractors of all types and descriptions because many clients will simply not work with a contractor who can't provide a certificate of insurance. They need to know that the individuals and companies working on their property have the necessary coverage to cover unexpected costs should something go wrong and someone gets injured or their property is damaged. Most contractors would hate to be turned down for a job and have the work go to their competitor instead because they couldn't adequately prove their insurance status. A contractors certificate of insurance is a simple way to prevent that from happening as long as you actually do have contractors insurance in place.

Assurance of Compatible Coverage

As a contractor, you may need to hire subcontractors from time to time who should have their own contractors insurance. It's important that you ask a contractor to provide you with a certificate of insurance so you can make sure their coverage meets your insurance requirements. By confirming they have the correct insurance protection, you reduce your liability risk because you can transfer loss to your subcontractor's insurance provider if they are responsible for injury or damage resulting from an insured peril.

Information at a Glance

Insurance policies can be complex, and it can be challenging to remember precisely which coverage types you have, the limits, and other pertinent information you may need access to on the fly. Suppose you need in-depth information about your policy or have specific questions. In that case, the best course of action is to call your experienced Morison Insurance broker and consult with them directly. But if you just need some quick information to jog your memory, having a certificate of insurance on hand allows you to save time by quickly accessing the information you need about your insurance policy.

What Types of Contractor Certificates of Insurance Are There?

When people talk about different types of certificates of insurance for contractors, they are more referring to the type of insurance coverage that is listed on the certificate. In that sense, you may have a liability certificate of insurance or a certificate of auto insurance, and so on. But it's worth noting that a contractors certificate of insurance can list multiple types of business insurance coverage or policies on a single form, including commercial general liability insurance, professional liability insurance, property insurance, auto insurance and more. So in essence, there aren't really different types of certificates of insurance so much as different types of insurance that may be listed on a certificate of insurance.

What is Generally Included on a Contractors Certificate of Insurance?

A contractors certificate of insurance is a printed form that generally doesn't vary much in the type of information it provides. Reading them can be a bit confusing at first if you're not very familiar with how everything is laid out, but once you know what you're looking for, it's pretty simple to find the information you need.

  • Names of Insured and Insurance Carrier: Near the top of the COI form, it should list the insurance company and the name and address of the insured party.
  • Types of Insurance: Each type of insurance that needs to be included on this particular certificate of insurance will be listed, along with information such as whether it's claims-made or per occurrence.
  • Policy Coverage Dates: The date the policy came into effect and the expiry dates will be included for each policy listed on the COI form.
  • Coverage Limits: The coverage limits for each policy will be listed on a certificate of insurance, as this is important information that may help those who requested the form to determine if there's adequate coverage in place from your insurance company.
  • Date of Issue for COI: The date that the certificate of insurance was issued should be up at the top of the page to indicate that the document is current. Keep in mind that a certificate of insurance only gives information about the coverage that was in place when the COI was issued. That coverage can, of course, change over time so the date of issue should be recent to ensure that the information is still accurate.
  • Special Conditions: The special conditions section of a contractors certificate of insurance lists pertinent information for the particular project that the COI is relevant to, which may include the address of the property where the work will take place, details of the job and any special requirements the contractor may have. It may also include the client as an "additional insured."
  • Signature: Finally, the document must feature a legitimate signature from the insurance broker who issued it, confirming that the information presented was accurate at the time the certificate of insurance was issued.

What Are Additional Insureds on a Certificate of Insurance For Contractors?

It's common for a potential client to request that a contractor provide a certificate of insurance that lists the client as an "additional insured," but what does that mean? The term additional insured refers to any party other than the primary policyholder who is also covered by the policy. That means the additional insureds listed on the certificate of insurance will have the right to claim against the insurance policy in question because you've extended that coverage to them for the duration of the project.

For example, if you are a framing contractor working on a building site for a new house, it would make sense for the property owner to ask to be included as an additional insured on your commercial general liability policy. If someone visited the job site and was injured when they tripped over a tool you left sitting out, they could choose to bring legal action against both you and the property owner to receive compensation. In that type of scenario, your commercial general liability coverage would apply to both you and the property owner, who is listed as an additional insured. It's important to understand that the additional insured would only be included on your policy for a certain time outlined on the policy, typically as long as you are working on that particular project.

How Do Contractors Get Certificates of Insurance?

When a contractor needs to get a certificate of insurance, the first step is determining if anything about your current policy needs to be changed. You may need to add additional insureds or remove an exclusion that is preventing you from having the full coverage necessary for a given project. Then, contact your insurance broker at Morison Insurance and ask them to make those changes to your policy. You may also have questions or concerns that you can address with your broker at this time. Next, ask your broker to issue a certificate of insurance that reflects those new changes. Or, if no changes are necessary, simply ask them to provide a new certificate of insurance with a current date of issue. Once you receive the contractors certificate of insurance, file a copy in your own records and provide a copy to the client who has requested proof of insurance to keep with their records.

When Do I Have to Provide a Certificate of Insurance?

Suppose you are pulled over by a police officer while driving and asked to show proof of insurance. In that case, you are legally obligated to do so because it's mandatory to have auto insurance for your vehicle. Most professionals, on the other hand, are not required to have business insurance. That means there aren't any situations where you as a contractor are legally obligated to show a certificate of insurance that proves you have commercial insurance coverage—but you may not like the consequences if you can't or won't provide proof of insurance.

For example, a client may refuse to work with you if you don't produce a COI, or a client's condo corporation may refuse to have you work on any part of the condo building—even the part that your client owns—without a COI that shows coverage meeting all their requirements. We've mentioned a few times that potential clients often request certificates of insurance, but there are also other scenarios that may prompt an individual or company to request a certificate of insurance, such as:

  • Suppose you plan to rent a commercial property such as an office space, workshop, or storage unit. In that case, it's common for the rental agency or property owner to request a certificate of insurance from a contractor. Hence, they know you can receive insurance compensation to handle repair or replacement costs in the event of property damage that results from an insured peril.
  • If it's necessary for you to get a business loan from a bank or lender, they will likely want to see a certificate of insurance from a contractor that proves you have the right coverage to protect their interests. If you were getting a loan to pay for a new piece of equipment, for example, they would want to know that you had insurance to cover that equipment should it be damaged or stolen.
  • A supplier who provides you with building materials or equipment for a contractor may ask to see a certificate of insurance so they can be assured that liability protection is in place should their product or tool cause damage or injuries.

Do Certificates of Insurance For Contractors Need to Be Updated?

Yes, they do. A  contractors certificate of insurance is essentially a snapshot of your insurance coverage as it stands on the day the COI was issued. But as we all know, insurance policies don't stay the same forever. Types of insurance, coverage limits, exclusions, endorsements, and more are all subject to change. That's why, even if your insurance policy hasn't changed at all since your last certificate of insurance was issued, clients and others will still want to see an updated version with a recent date of issue, so they have the assurance that the COI you present to them is currently accurate.

Where Can I Get a Contractors Certificate of Insurance?

If you are a business owner or individual who provides contracted labour services who needs evidence of insurance or you have questions about getting a certificate of insurance, contact your insurance brokers at Morison Insurance at 1-800-463-8074 so they can walk you through the process and make sure your insurance policy is updated for your current insurance needs.

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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