Valid, compliant certificates of insurance are the primary tools companies can use to control risk, especially if they hire third parties such as subcontractors. One of the common certificate of insurance (COI), is called a general liability insurance certificate or a certificate of liability insurance, confirms the liability insurance coverage of the named insured. Companies can use COIs to provide evidence they carry insurance coverage for claims they cause, such as personal injury and property damage.
Incorrect and fraudulent COIs are tools for third parties who want to hide their lack of proper coverage and want to remain employed. The wrong COI is just as bad as not having one at all. The false sense of security can result in your company paying hefty damages if the dishonest third party harms someone. If they are not covered, then your company could be liable to provide recompense.
You have to know where legitimate COIs come from, how to spot fake forms, and how you can ensure you receive only valid ones.
Where Do COIs Come From?
Insurance agents source the form from ACORD, the organization that issues and archives standardized insurance forms.
Certificate of insurance ACORD forms are the insurance industry’s standard forms. Third parties who want to deceive the companies that hired them can download the forms and complete them with believable yet false information. Therefore, it is important to remember that insurance agents must provide the COI, not the insured. Getting a certificate of liability insurance ACORD form from a third party who claims they just made it is a blatant red flag that something is amiss. This is not the only warning sign.
How Do I Know a COI is Wrong?
To determine if a COI your third party submitted is authentic, ask yourself the following questions:
- Does it look fake, handwritten, poorly photocopied, etc? If the physical appearance of a COI looks suspicious, then it might not be legitimate. COIs should be typed in one font and properly aligned.
- Does it cover the current effective dates and expiration dates of the policies? Does the COI provide active evidence of insurance coverage? eaning, it is not expired. If a COI does not have any dates whatsoever, then you should investigate it further.
- Does it match your minimum coverage requirements? If it does not, then you should contact the third party.
A good rule of thumb: You should only trust COIs that are provided by an agent. Insurance tracking platforms like myCOI can ensure you’re receiving accurate and valid COIs, taking the guesswork out of the validation process.
Although the basics of COI compliance seem simple, the reality is much more complicated. Knowing what information belongs on COIs requires a keen eye for detail and insurance knowledge. Oversights can allow fake COIs to pass scrutiny. myCOI can shrink the window that bad COIs can slide through.
How Do I Get Good COIs?
Obtaining COIs from third parties does not have to be as burdensome as it sounds. You can request one via email or letter. You can always verbally ask the person. However, one of the most effective methods is to request one before the third party signs a contract. Putting your company’s insurance requirements into your request forbid processes can give third parties the heads-up that you take liability risk seriously. If they want to bid on your project, then they will have to adhere to your guidelines.
Another way to make sure you receive genuine COIs is to explicitly state your insurance requirements in your contracts. If third parties cannot abide by the contract’s terms, then they can be found in breach of contract. You should be active in any negotiations of these insurance requirements.
Sometimes, third parties do not know how to get a certificate of insurance. Any insurance agent or broker should be able to tell them how to get a certificate of liability insurance so they can start work.
Is There a Solution to Help Me Verify My COIs?
A certificate of insurance for business cost should be free for third parties when they buy a policy. The coverage itself, however, is invaluable. Requiring a legitimate certificate of liability insurance for small business is a smart rule. You should protect your company from expensive claims and litigation. Not collecting a general liability insurance certificate from each third party could expose your company to financial devastation.
You can download a certificate of liability insurance sample to learn the basics of the form. Third parties can, too. Getting a certificate of insurance online opens up opportunities for fraud.
Verifying COIs can be overwhelming. There are solutions to help you verify every personal certificate of liability insurance that crosses your desk. myCOI, designed and supported by a team of insurance professionals, can help you assess the validity of each form. You do not have to scour over each piece of paper. You do not have to track down any third party who does not have an effective COI. myCOI automates the verification and communication processes that make up insurance tracking. When you partner with myCOI, you will receive the right COIs to prove your insurance requirements are fulfilled.