A certificate of insurance (COI) is a legal document that provides proof of someone’s insurance coverage. Typically, it’s provided by an insurance company or agency and is used to verify that a policyholder has the necessary coverage in place to manage risk and protect their assets, especially when it comes to their hired third parties.
Certificates of insurance are used in many business interactions and are especially prominent in industries like construction, finance, and real estate. There are many types of coverages that will be noted on COIs too, such as general liability, workers’ compensation, and auto liability, among others.
If you need a certificate of insurance for vendors, contractors, or your small business, you have come to the right place. Read on to learn when and why a company would need a COI and some best practices for obtaining them.
Certificates of Insurance Best Practices
When collecting COIs from all necessary parties, you’ll want to make sure that you review each one to ensure that every detail is accurate. Doing so could save your company millions in preventable losses.
Here are some best practices regarding certificates of insurance:
- Ask your vendors early. If you need a certificate of insurance from a contractor or other third party, we recommend requesting it early, and definitely before they begin working with you. Any action that they take on the job is a potential risk, so be sure to certify that they have the necessary coverage before they get started.
- Require specific language or additions. Consider calling for specific language to be included in the COI, such as stating that you are an additional insured or for the policy to provide primary and noncontributory coverage.
- Scrutinize each certificate carefully. Before accepting a COI from someone, review it thoroughly to ensure that it meets your requirements. Look over all of the minutiae, from the expiration date to the coverage details to the names and addresses of all involved parties. Even things like misspellings could void coverage should you need it.
- Keep accurate records. It’s imperative to keep accurate records of all COIs that you receive and review. Not only can it help demonstrate compliance with contractual requirements and regulatory obligations, it can also provide a history of coverage in the event of a claim. Relatedly, when requesting a certificate of insurance from a vendor, instead of asking them in person, opt to send them a certificate of insurance request by email or letter to create a paper trail and keep that correspondence with your other records.
- Set expiration reminders. Don’t get caught off guard by a lapse in coverage due to an unforeseen expiration date. As soon as you finalize a COI, set a reminder to review it again before it expires.
- Utilize top technology. Managing multiple COIs from tenants, subcontractors, franchisees, and more can get confusing quickly. Consider using technology to track and manage COIs, streamline your processes, and reduce the risk of errors. myCOI’s platform, for example, was created to eliminate the disruptive impact of insurance claims by providing an innovative SaaS solution for requesting, reviewing, and managing COIs so you can boost your compliance.
Why Would a Vendor Request a COI?
There are several reasons why a company may need a certificate of insurance. For example, you’ll typically want a certificate of insurance from a vendor when they are on-site and could cause a claim for example. Typically, companies request COIs from their vendors – not the other way around.
Here are some examples of why a company would go about requesting a COI from a vendor:
- Contractual requirements. Many contracts require proof of insurance coverage from one or more of the parties involved. A certificate of insurance provides the simplest way for a company to show that they have the required coverage in place.
- Compliance. Certain industries may require proof of insurance coverage to comply with legal or regulatory requirements. For example, contractors may need to provide proof of insurance coverage to get a license to operate in certain jurisdictions.
- Risk management. Companies obtain business insurance to protect their assets, manage their risks, and insure their business from unforeseen incidents. By requiring vendors and subcontractors to provide proof of insurance (usually in the form of adding the hiring party as an additional insured), a company can ensure that they are not held liable for any damages or losses caused by the third party.
- Verification. A COI is used to verify that a company has the appropriate insurance coverage in place. This can be especially important for businesses that work with government agencies or other organizations that require coverage verification.
- Peace of mind. Finally, knowing that your company has the necessary coverage in place can provide peace of mind to you, as well as your employees, contractors, vendors, clients, and even your customers.
Stay Protected with myCOI
Protect your organization and ensure end-to-end compliance with myCOI, the best certificate of insurance tracking software. Enjoy an easy-to-use platform and a single place to view your COIs, compliance, and risk reporting for your vendors, suppliers, tenants, subcontractors, franchisees, and carriers.