What is a Certificate of Insurance?

If you own a company, you have probably had to provide a certificate of insurance (COI) at some point. A certificate of insurance is a document that proves you have insurance coverage.

Here is an example of a Certificate of Insurance.

A certificate of insurance is usually required when a prospective business partner, vendor, or customer needs to know that you are covered before doing business with you. The COI summarizes your coverage, including details such as restrictions, policy terms, provider branding, and so forth.

A COI informs prospective business partners that you have received insurance to protect yourself from a number of potential injuries and disasters that can arise during the course of your day-to-day business operations.

Anyone doing business with you wants to assure themselves that if a problem comes up, your insurance will cover it. This includes vendors, clients, customers, landlords, and other business partners. For example, a landlord may require a certificate of insurance for a business that leases space in a warehouse. The certificate of insurance will let the landlord know that a fire caused by their tenant will be covered.

Do I need a Certificate of Insurance?

A COI is essential for both client and vendor relationships. Before doing business with you, potential clients can ask for evidence of insurance, and if you are unable to provide one, you may lose business. Clients and vendors want to enter into a business arrangement in which both parties have comprehensive support to instill trust in the partnership and mitigate risks.

In order to receive a certificate of insurance, you must have an appropriate insurance policy in place, such as a product liability policy or a general liability policy.

A COI is provided by your insurer or its agent and is often included in the set of documentation you get when you buy your policy. This one-page guide summarizes the most important aspects of your company insurance policy, including:

  • Your full legal name and contact details
  • The insurance company that offered the policy
  • The policy number, effective date, and expiration date.
  • The form of protection provided (e.g. professional liability or general liability)
  • Insurance limits and deductibles are expressed in monetary terms.
  • The party demanding the COI (also known as the “Certificate Holder”)

What are the benefits of a COI?

COIs often benefit other categories of companies, such as small business owners, freelancers, and entrepreneurs. For example, if you’re an IT contractor who offers web development or monitoring services, your clients will want to know that they’re safe from future losses caused by site downtime or a server crash. Your COI should put their fears to rest.

Almost all companies that hire contractors would require the contractor to have a letter of intent. Although less common in other transactions, such as those between service businesses, anticipating the task and supplying your prospective client with a COI during the sales process will go a long way toward earning their confidence and company. It’s a strong indication that you take your company seriously and are committed to its success.

Clients also request to be added as an Additional Insured to the policy in order to ensure they are compensated if they are sued as a result of harm or injury caused by you. A COI may also be identified as an Additional Insured on your policy.

How does a business get a certificate of insurance?

It’s very simple: get an insurance policy. After purchasing a policy, you can request and then receive your COI, which is typically a PDF that is mailed or emailed to you.

What kind of condition would require requesting a certificate of insurance?

Any situation in which there is a high risk of large loss and liability for example, suppose a company wants to hire a roofing company to repair the roof on their house. They will request a certificate of insurance to ensure that the roofing company has adequate coverage for the project and that the company is not held liable for any damages.:

  • Injuries to you, your family, or your employees, or the general public
  • Property damages
  • Poor workmanship

Is it necessary for any COI to be ACORD-approved?

The document you send as evidence of insurance does not have to be ACORD certified in order to be admitted, but you can get an ACORD COI if possible. ACORD certificates are free, globally recognized, and used by almost every insurance company in the world, so there aren’t many excuses not to have one.

ACORD documents guarantee standardization, which means that companies receive the same document and information from their insurers regardless of which carrier offered them their coverage.

ACORD COIs are also easier to verify, always up to date, and process quickly. The ACORD stamp is a reliable sign in the insurance industry.

When insurance companies use standard ACORD forms, their precision improves and their ambiguity decreases. To put it another way, if your insurance provider is not issuing ACORD certificates and paperwork, it could be a red flag that you should consider switching carriers.