Pretend you’re a new employee at either a property management or construction company, two types of businesses that hire third parties like vendors and contractors. You’re responsible for the company’s certificate of insurance compliance. However, you’ve been thrown into the job without proper training. You don’t know what a COI is or what to do with one.
The ABCs of certificate of insurance compliance can give you a crash course in the basics. While no substitute for actual training, this article can address the fundamentals:
- What is a COI?
- When do I need a COI from vendors or contractors?
- How do I get COIs from them?
- What if I have too many COIs to track?
What is a COI?
Business insurance provides a level of protection that not only shields a company’s finances but also provides peace of mind. Business owners can operate their companies more effectively if they don’t have to worry about losing everything they’ve built due to unforeseen incidents.
As a new employee of one of these companies, your job is to ensure the hired third parties are covered. Adequate coverage can protect your company’s assets in the event of a claim.
How can third parties prove they own insurance?
A certificate of insurance (COI) confirms the insurance coverage of the named insured. A common COI is the ACORD 25 certificate of liability insurance.
Certificate of insurance compliance is the function companies perform to make sure the contractors, vendors, and other third parties they have hired have sufficient insurance coverage. An insurance compliance professional is expected to collect, verify, and maintain the COIs provided to their company.
When Do I Need a COI from Vendors?
The minimum insurance requirements for vendors vary by state. Regardless of statutes, sufficient coverage should satisfy all the insurance needs for construction projects. Companies should mitigate their liability risk any way they can. Ensuring the third parties they hire is an effective method.
Vendors, like contractors, often need to prove they possess sufficient insurance coverage.
When do you need a certificate of insurance from a vendor or contractor?
You should request a COI whenever a vendor or contractor is hired. It’s strongly recommended to get one before they start work. Any actions they take generate risk. Their insurance coverage can protect your company from any negligence they commit while on the job. Having a COI on hand is evidence that your company is protected.
How Do I Get COIs from Vendors?
Obtaining COIs from vendors and contractors should be a stress-free task. You can send the vendor or contractor a certificate of insurance request email or letter. You can always verbally ask the person, but it might be prudent to create a paper trail of sorts if the person claims they were never asked.
If the third party your company hired doesn’t have one, then they can contact their insurance agent or broker on how to get a certificate of insurance. Some insurance issuers allow their customers to ask for a certificate of insurance online.
What If I Have Too Many COIs to Track?
Now that you know the importance of COIs and how to acquire them, let’s imagine your company experiences an influx of vendors or contractors. You must have a COI on file for each new third party your company hires. For example, if your company hires ten vendors, then you will need to track, verify, and store ten COIs. You will also need to establish that each COI accurately shows the coverage your company or state demands.
Do you have the time and expertise to successfully finish this job?
If you don’t, but try anyway and can’t keep up or fail, then your inability can increase your company’s liability risk. Your employment can also be at stake.
It’s sometimes difficult to manage a vast amount of certificates of insurance. An automated COI management platform like myCOI can help businesses remain protected with the appropriate coverage.
Simply collecting certificates just to confirm they were received isn’t an effective solution. You have to guarantee that your company’s requirements are met. myCOI was developed and supported by a team of insurance professionals to ensure companies remain protected with the appropriate coverage.
Insurance compliance automation allows companies to collect certificates and confirm compliance while reducing data entry errors and the time spent physically handling paperwork. It also lets companies increase their efficiency with managing COIs as well as their liability awareness.
There are numerous intricacies involving COI compliance. Cloud-based solutions can help resolve a number of these and make the task easier to complete. Knowing the basics can go a long way in securing compliance in different situations.