Certificates of Insurance or Proof of Insurance
A certificate of insurance provides evidence of the levels of insurance that an organization carries. It provides proof that coverage in force complies with the requirements of the requesting organization.
It is a document used to provide information on specific insurance coverage. The certification verifies the insurance and usually contains information on types and limits of coverage, the insurance company, policy number, named insured, and the policies' in-forced periods.
It is usually a reliable source of information or proof of insurance coverage, but will not substitute the insurance policy's wording.
Opposite parties usually request certificates in an agreement, contract, or transaction to ensure the other party has the appropriate insurance coverage.
An insurance company or broker issues a certificate of insurance (COI) that verifies the existence of an insurance policy and summarizes the policy's key aspects and conditions.
Without the insurance certificate, a company or contractor cannot prove that they are insured, and most hirers will not want to take on and assume the risk of any costs caused by them.
Why are certificate of insurance requested?
They are proof of insurance for clients or businesses to mitigate their risks by ensuring they are protected.
For example, financial institutions often request insurance certificates before lending money to ensure their financing is protected.
If you buy a home and need a mortgage, your lender will require a particular type and amount of insurance for the property. They will request a proof insurance in the form of a certificate.
If you finance a car, the lender will require collision and comprehensive coverage and request an insurance certificate to prove you have the vehicle protected to the right level.
Contractors require proof of insurance to protect themselves in the event of something going wrong during a project. It gives the customer the peace of mind that the business is covered and that they are protected. Savvy shoppers will often make this request when shopping quotes and proposals for renovations and other major projects. If you are a business owner with clients of this nature, it's a good idea to have the insurance certificate on hand before asking for it or even submitting it alongside other documents when bidding for a job.
A company with external contractors working on their project should obtain an insurance certificate from each contractor to ensure it is up to date before they are allowed to start to protect their financial interest.
Although proof of insurance protects the business from accidental damage or liability, it would not cover the consumer or clients from financial loss due to performance or obligate to complete the agreed project. To have this protection, you need Surety Bond.
How do I get a certificate of insurance?
Some insurance providers include the insurance certificate in the policy documents package they send you when you become a customer. Suppose your insurer doesn't do this, no need to fret. Getting the insurance certificate is easy, and insurers are obliged to provide one upon request. Your broker can handle this for you. Let them know, and they'll do all the necessary legwork.
In most business contexts where liability and significant losses are of concern, using a proof of insurance or certificate of insurance will provide peace of mind to those at risk.
Many companies and individuals hire contractors with insurance protection. When a business owner or contractor has liability insurance, they will not assume the risk if the contractor is responsible for damage or injury.
Validating a Certificate of Insurance
Typically, a client will request a certificate directly from the insurance company rather than the business owner or contractor. The client should confirm that the insured's name on the certificate matches the company or contractor they are considering.
Always check the policy coverage dates to ensure that the policy's effective date is current, and secure a new certificate if the policy expires before the contracted work is complete.
Always check with the following.
- Ensure the insurance company or broker issues the certificate and verifies an insurance policy's existence.
- Always check the policy coverage dates and the limits of the policy.
Details of a Certificate of Insurance
Certificates of insurance contain separate sections for different liability coverage types listed as general, auto, umbrella, and workers' compensation.
"Insured" is to the policyholder. It could be the person or company with the name on the certificate covered by the insurance. It usually has the mailing address on the certificate, but this is not necessary the "risk" address where insurance covers.
The certificate describes the insured's operations in addition to coverage levels. The issuing insurance company's address is listed, along with contact information for the insurance agent or the insurance agency's contact person.
There may be several insurance companies involved from time to time, so it would contain all names and contact information of individual insurers.
When a client requests a certificate of insurance, they become a certificate holder. The contact information and address should be in the bottom left-hand corner.
It should also contain statements showing the insurer's obligation to notify the certificate holder of policy cancellations.
The certificate should describe the insured's policies and limits provided for each type of coverage.