July 21, 2021

COIs Are Critical for Small Businesses

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Uninsured subcontractors could be putting your company at great financial risk, especially if they hurt someone while in your employ.

You need a certificate of insurance for business protection.

Can your small business handle costly insurance claims or expensive litigation?

You need a certificate of insurance for small business survival.

A certificate of coverage insurance is no mere document. It’s what stands between your company’s protection from uninsured claims and costly litigation.

A COI Can Save Your Business

Non-compliant subcontractors expose your company to the risk of being held financially responsible if they injure someone or damage property while on the job. Your company could be held liable even though the subcontractors are  at fault. Claims payouts or legal settlement may  have to be covered by your company’s insurance, if the subcontractor is underinsured or uninsured.

If you want to reduce the chances of this happening to your company, then you must require all subcontractors to procure  insurance. You must also require them to prove their coverage status in the form of a certificate of insurance.

What is a certificate of coverage for insurance?

A certificate of coverage insurance, or a certificate of insurance (COI), is proof that subcontractors and other third parties possess active and sufficient coverage.

The responsibility of having insurance coverage and proving it should rest on subcontractors. Your company is responsible for making sure their coverage is valid.

Unfortunately, you can not rely on your subcontractors simply telling you they are covered. They can be untruthful. It might be a good practice to not trust any subcontractor who tells you they are covered but refuses to provide a COI. It might sound harsh but the reality of what could happen to your company if it hires an uninsured subcontractor should trump any hard feelings.

The importance of COIs is firmly established. Now the issue of how to get a certificate of liability insurance from subcontractors remains.

It’s Not Only Okay to Ask, It’s Smart

Requesting COIs from your subcontractors is not difficult. You can verbally ask for one or email a request. You can draft a template from a sample letter confirming insurance coverage.

The most effective method to ask for COIs is to include the request in the language of their contracts. If the terms include delivery of COIs and your subcontractors refuse to provide these, then they are breaching their contracts. Using a legally-binding document to require insurance compliance with your company’s insurance guidelines supports you if subcontractors claim they never received a request. Making it clear early on that you demand subcontractors be insured can prevent possible problems.

What if you ask a subcontractor for a COI and they do not have one because they do not carry  insurance?

In this instance, you should urge them to find coverage if they want to work for your company.

What if a subcontractor is adequately covered but does not have a COI?

They should contact their insurance agent or broker and find out how to get a certificate of insurance. Some insurance companies allow their customers to obtain a certificate of insurance online. Downloading a certificate of insurance PDF from the issuer’s website can be finished in a matter of minutes.

When They Demur, Insist

Subcontractors can easily get COIs from their agent or broker. These forms are usually free of charge. There really is no reason for honest subcontractors to not get one.

Not receiving COIs can be a huge red flag. Perhaps the subcontractor does not carry any insurance. Hopefully, they will not work for your company much longer. Every second they are on the job increases your small business’s chances of paying out damages.

What if they never injure anyone? Do they still need to carry insurance?

Would you stake your company on that possibility? All of the time, energy, and money you put into your company could all be sacrificed because of one uninsured, negligent subcontractor.

You should also beware of fraudulent forms. Downloading a blank certificate of insurance ACORD form, the standard COI used across the United States, is easy. Filling it out with bogus information is just as simple.

Requesting COIs is critical for small businesses. Verifying their information and legitimacy is another matter altogether.

Do you know what to look for on an authentic certificate of liability insurance form? Do you have the time to examine it from top to bottom?

If you don’t, then you can seek solutions to help you manage every COI you collect. One solution is myCOI. This easy-to-use COI management platform automates certificate tracking and compliance communication. You can use myCOI to scan, read, and organize your company’s COIs to make sure every document is accurate and valid.

COIs are crucial for small businesses. So are the tools to manage them.

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