In the real estate industry, there are various cases where you may need to verify someone’s insurance coverage before hiring them. When a situation like this arises, you’ll use a COI, meaning a certificate of insurance services, to prove that they have the insurance policy and level of coverage that they say they do.
COIs are a crucial piece of any company’s risk management strategy and ultimately help you control your liability exposure. Follow along to learn what a COI means in real estate.
What Is the Meaning of COI When Referring to an Insurance Policy?
A COI refers to a certificate of insurance, an official legal document. Its significance is related to insurance policies, specifically in that it can prove the existence of an insurance policy and provide the key details of one’s coverage. This could mean liability coverage, property insurance, or any other kind of relevant coverage a business owner might need.
This is important in many industries, including real estate, because businesses that hire contractors and other third parties or manage tenants without verifying their insurance protections can get involved in major headaches and costly situations due to underinsured claims.
What Is a COI in Legal Terms?
From a legal perspective, a certificate of insurance is often used to verify that a party involved in a business transaction or contractual agreement has the needed type and amount of insurance coverage to address potential risks and liabilities that could stem from their work. In short, a COI proves that the vendor in question has valid coverage from an insurance company. COIs confirm that a policyholder has met their obligations to maintain insurance as specified in your contract or by other regulatory insurance requirements.
What Does COI Mean in Real Estate?
A COI’s meaning in real estate is similar to that in other industries: proof of someone’s insurance coverage. There are a multitude of situations that could come up where a COI is required or recommended in the real estate industry. A few of these are renovation project COIs, tenant lease agreement COIs, and property management COIs:
- Renovation project COIs. Real estate development projects or property renovations often involve construction improvements from third-party hires like contractors or subcontractors. In these cases, you, as the property owner or developer, should request COIs from the contractors involved to verify that they have appropriate insurance coverage, such as general liability insurance or workers’ compensation insurance, to protect against potential risks during the renovation process.
- Tenant lease agreement COIs. In commercial real estate, leasing agents and landlords can require tenants to provide a COI as part of their lease agreement. These COIs will demonstrate that a tenant has obtained insurance coverage, such as commercial general liability insurance, to protect against potential claims or damages that could occur during their occupancy. They will help ensure that both the tenant and you, as the leasing party, are protected in case of accidents or incidents on the premises.
- Property management COIs. When a property owner hires a property management company to oversee their real estate assets, they’ll usually require a COI from the property management company. This is so that they can ensure that the property management company has the necessary insurance coverage, such as general liability insurance or professional liability insurance, to protect you as the property owner from potential risks and liabilities associated with managing the property.
Why Do You Need A COI For A Commercial Real Estate Property?
Certificates of Insurance play a huge role in mitigating risks for landlords, property owners, and tenants alike. COIs serve as firm evidence that the parties involved in a lease agreement or property transaction possess up-to-date and valid insurance coverage. COIs are crucial for property owners because they provide assurance that tenants have adequate liability and property insurance. This safeguards owners from any potential legal or financial liability due to damages, accidents, or incidents that happen on the premises. COIs also describe policy details and coverage limits, which allows property owners to ensure that tenants have appropriate insurance for the property’s specific requirements.
Tenets also benefit from COIs because they can easily demonstrate that they care in compliance with the terms of a least. This creates a better relationship between tenants and landlords and minimizes the potential for any legal or other issues.
Why Do Companies Ask for Certificates of Insurance?
Companies ask for certificates of insurance for a number of reasons. COIs are typically requested in order to verify insurance coverage, establish compliance with contractual obligations, or assess potential risks and liabilities. This includes understanding what and who the insurance covers, as well as all the essential details of the insured party.
COI certification collection helps ensure that parties involved in business partnerships have taken appropriate measures to address potential claims or damages that could come up during the course of their business activities—and as we all know, the fewer claims headed your way, the better.
Who Asks for a Certificate of Insurance as Proof of Insurance Coverage?
In real estate, many people ask for a COI. You, as the hiring party of a contractor or third-party service provider, or as the leasing company managing occupancy for tenants, will be the one who asks someone for a certificate of insurance. Depending on the kind of contract you have with them, you can lay out COI requirements there, but we recommend sending a formal COI request email to anyone you need proof of coverage for.
Upon your request, the policyholder needing to provide evidence of their coverage will make an official request to their insurance agency (FYI, the only party able to issue their COI), obtain the document, and provide it to you for verification.
Who Is the Certificate Holder of COI for Liability Insurance?
On any COI, the certificate holder is the entity that requests evidence of someone’s coverage. You will actually be listed on the official document as a way of linking you to the request and to information about the policy. The “job” of a certificate holder is to receive the COI and validate that it meets their needs for the job or contract in question.
How myCOI Makes Real Estate COI Compliance a Cinch
Collecting, verifying, organizing, and managing the timelines for COIs from various tenants, contractors, or third parties, can become overwhelming. myCOI is a state-of-the-art insurance certificate management platform that can help you streamline your efforts, improving your efficiency when it comes to compliance and reducing your overall level of financial risk. Contact us today to learn more.