What Does COI Mean in Contracting?

May 22, 2023

Let’s say you work at a construction company and are in charge of hiring contractors to help complete work on a job. When searching the marketplace for contracting talent, there’s a lot to keep in mind, from years of experience to positive reviews. One factor to make sure you don’t forget about any time soon? Their insurance coverage.

It’s hugely important for contractors to have sufficient insurance coverage in place, not just to protect themselves but to protect any business that works with them. That’s where you come in. 

You don’t want to put your construction company at any risk of financial losses if something goes wrong on the job. Therefore, it’s imperative to verify that any contractor you’re working with has an insurance policy with adequate coverage levels and effective dates you need for them to work with you. To provide proof of such coverage, they’ll supply you with a COI, or certificate of insurance.

Prepare for the foreseen unforeseen in contracting insurance compliance with this blog. We’ll explain what a COI is and how it pertains to the construction industry, as well as how to request one from the contractors you want to work with. 

What Does COI Mean in Contracting?

In the world of contracting, a COI refers to a certificate of insurance which is a document that serves as proof of insurance coverage. COIs are generated by a contractor’s insurance company or broker and lists a summary of their policy’s major details. COIs can provide proof of any type of business insurance, but contractors are typically asked to provide proof of a liability policy and workers’ compensation. 

COIs help protect you and the third parties involved in your business from financial risks associated with accidents or losses, making them a vital document in any contracting partnership. They should give all parties involved a clear understanding of the insurance coverage that the contractor has in case of potential liabilities and provide peace of mind going into working together.

As a business hiring contractors, it’s important to request a COI from each contractor you work with and to make sure that it’s accurate and up to date throughout the duration of the project. This will ensure that their insurance coverage is valid and will cover any losses that may occur on the job. 

What Happens When a Contractor Doesn’t Have a COI?

COIs are especially common in contracting due to the dangerous nature of construction work. It’s popular for businesses hiring contractors to flat-out require a COI as a prerequisite to working with them, sending them the signal: no coverage, no business.

The absence of a COI can result in a breach of contract leading to legal disputes and financial losses for a contractor. For example, if a contractor is supposed to have liability coverage for property damage but does not have the proper coverage in place and an accident happens, it may be the property owner who’s responsible for paying for the damages, not the subcontractor or their insurer.

How to Request a Certificate of Insurance from a Vendor

Any business owner or person who cares about the business they’re working at will agree that it’s vital to prioritize financial protection and risk management. It’s critical to keep this in mind any time you hire a contractor, vendor, or other third party and to go ahead and request a COI before commencing work with them. 

Requesting a COI from a vendor is simple: you just have to ask. The contractor will be the one to take steps to generate a COI for their insurance policy from their insurance agent. All they’ll need from you in order to do so is a bit of information. 

For instance, what kind of insurance coverage are you requiring from them? Typically, this is general liability insurance, but sometimes hiring entities will also ask for worker’s compensation insurance or other policies. 

Another piece of information they’ll need from you is how long they’ll need to be covered (hint: this should be at least long enough to complete the job). Talk to the contractor you’re working with to make sure you’re on the same page in terms of what your needs are for this particular project. 

Requesting a certificate of insurance from contractors you work with is a crucial step to make sure that they have enough coverage in place for themselves to cover anything that could later become a claim throughout the project. You’ll need to do this for each and every contractor you work with in order to keep your business protected. 

Managing Contractor COIs is Easier with myCOI 

You get the COI from your contractor. We’ll take it from there. Better yet, we can get the COI from them too.

Don’t spend any more time juggling with all of the documents, spreadsheets, and mental notes. myCOI will ensure that the contractors you work with are correctly covered and that no lapses in coverage will catch you off guard. 

Talk to our team of insurance experts today to learn how your business can stay compliant.

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