What is a Certificate of Insurance?

September 8, 2023
What is a Certificate of Insurance?

Business partnerships are built on trust. But trust alone is not enough to uphold a successful contractual relationship—in most cases, you need proof of things like insurance coverage in order to walk into a new partnership with confidence. 

Modern business relationships, in any case where liability is present, and insurance is necessary, are held up by special little pieces of paper called certificate of insurance services, or COIs. 

In this article, we’ll cover the important details and customs surrounding these ever-important insurance documents. Stick around if you’d like to learn who needs them, how and by whom they’re issued, certificates of insurance best practices, and how you can manage various vendor COIs without feeling all of the hassle.

What Is a Certificate of Insurance?

Let’s get into it. Certificates of insurance are documents that cover the pertinent information of an insurance policy. They are important because, although not actually insurance policies, they do a great job of providing a quick snapshot synopsis of one. Since they can only be produced by the insurance provider granting coverage to a policyholder, they are official legal documents and can be trusted as evidence of someone’s insurance coverage.

COIs are used in business relationships all over the world in order to safeguard companies and individuals alike from risky incidents that could occur on the job. For example, let’s say that you hire a contractor for a job, and sadly, they injure themselves the first day on the job from misuse of a jackhammer. It turns out that they didn’t have any insurance coverage in place, and so all of the resulting medical bills and other corresponding costs associated with the accident had to come straight out of their pockets rather than an insurer’s. 

Being savvier than they were before they decided to do a dangerous job with insurance, they sue you, as their hiring party, for not mandating their coverage—a real case that comes up more often than you’d think. Now, it’s not just the damages you have to deal with but a costly lawsuit, all stemming from the fact that you didn’t do your due diligence of verifying their coverage with a certificate of insurance.  

Is a Certificate of Insurance a Policy?

You may be asking ‘Is a certificate of insurance the same as an insurance policy?‘ Think of it this way—when you have car insurance, you typically keep an insurance card in your glove compartment in the case of an accident, being pulled over, or otherwise having to provide proof of your coverage. The insurance card isn’t a policy itself but a brief look at the carried coverage that you can provide when needed. 

That’s pretty much what a certificate of insurance is like. A COI Certification is a special document that provides evidence of an insurance policy and highlights its most important details so someone can give it a quick scan to see if it meets their needs.

What Is Included in a Certificate of Insurance?

COI Insurance certificates must include a few critical pieces of information in order for parties to verify them as evidence of an insurance policy. Here are the big questions that a COI can answer:

  • Who is receiving the insurance coverage? The person covered under the policy in question will be included in the COI as the policyholder. When verifying someone’s COI, make sure you are doing so for the intended recipient.
  • What kind of insurance coverage are they receiving? The type of insurance policy will be included in the certificate.
  • Who is providing the insurance coverage? The insurance agency or brokerage providing the insurance coverage to the policyholder will be denoted on the certificate. 
  • How much insurance coverage are they receiving? This will be included in the COI as the policy limits, which refer to the maximum amount of monetary protection the insurer is willing to provide based on their contractual agreement. 
  • How long are they covered? The effective dates of coverage will explain this piece, with the expiration date of coverage importantly indicating when the policy is set to expire.
  • Who is asking for the verification of insurance coverage? The party who begins the COI requesting and verifying process (usually the party that is hiring a vendor) will also be noted on the document as the certificate holder, as the document will be provided to them once created. 

What Is a Sample Certificate of Insurance?

You can get a good idea of what certificates of insurance will cover from all of the major details we’ve listed above. If you’re looking for a more specific visual, check out our other resources online, including this blog, where we highlight a sample COI. Please note that these sample forms are just for educational purposes and should under no circumstances be used to attempt to fill in a COI on your own.

Who Asks For a Certificate of Insurance?

Business owners, people who work with third-party service providers, and all kinds of parties ask for certificates of insurance. 

Here’s how to request a certificate of insurance from a vendor:

  • Consider your requirements as they pertain to your business, the work being done, and the timeframe of the project. For example, in some cases, it may make sense to require the contractor you are hiring to list you as an additional insured on their COI, adding your business to their policy’s coverage. Be sure to lay out all of your specific needs before you make a request so that your vendor can comply. Here is more about Certificate of insurance for contractors.
  • Send an official certificate of insurance request by email, letter, call, or in-person ask. We recommend sending an email or letter so that they have those words, and all of your specific needs, in writing. (If you would like to see a sample request for a certificate of insurance before you make your own, be sure to check out our previous blogs on the topic.)
  • Expect it to take a few days. COIs are usually issued fairly quickly but can take anywhere from a few business days to a few business weeks to produce and make their way back to you, so don’t get impatient—and be sure to ask in advance when you actually need one. 

Who Is Issued a Certificate of Insurance?

In the insurance world, only insurance providers can issue COIs. They typically generate them at a policyholder’s request, following that policyholder getting a request from a new prospective employer or business partner to verify their insurance coverage. 

The party that is issued a certificate of insurance is the vendor or contractor themselves. Upon receiving a certificate of insurance request, they’ll go to their insurer (the one providing the specific coverage in question), ask for a COI proving it, and receive it within a few business days. This can also sometimes be done through an online portal, depending on the insurance provider. The vendor will deliver the document to the party who requested it from them, who then becomes the certificate holder.

Can I Issue My Own Certificate of Insurance?

Under no circumstances should you ever attempt to issue your own certificate of insurance. Insurance agents and brokers are the only entities with authority to produce a COI—this follows because they are the ones providing the insurance coverage and, thus, the only party who can verify it. To reuse the metaphor, it would be like creating your own vehicle insurance card.

“Issuing” your own COI is fraudulent behavior and can have costly consequences for you and your business and any partners you choose to work with. Again, while you can view samples online for informative purposes, you should only be working with your insurance agent or be sure that your relevant vendors are only working with theirs to produce them.

Services like myCOI can help you identify “DIY COI” attempts so that you never have to wonder whether you’re dealing with counterfeit certificates. 

Should I Ask For a Certificate of Insurance?

In conclusion, yes, you absolutely should ask for a certificate of insurance. Whether you’re hiring a new third-party service provider, working with a contractor, managing tenants, or partnering with any other kind of vendor, you should ask for a COI. 

By obtaining and verifying certificates of insurance from all of the vendors that you work with, you’re making sure that they have an appropriate level of insurance coverage to mitigate potential risks that could come along with their work. Therefore, if accidents, damages, or losses happen (which they unfortunately often do), they won’t be held financially responsible, and neither will you. Their insurer will cover the damages, and both of your businesses will be protected.

Why Do Companies Need a Certificate of Insurance Services?

While businesses large and small have begrudgingly had to learn lots of the ins and outs of insurance policies, liability, and litigation—many have opted to avoid the hassle and instead choose to work with a COI management team.

Companies can benefit from COI services (tracking, management, etc.) for a number of reasons. Here are five:

  1. It’s easier to remain compliant with contractual agreements and regulatory standards.
  2. You can save time—no more stacks of paper, no more sleepless nights.
  3. You can save money. While premium COI services aren’t free, they will save you money by reducing your chance of costly litigation stemming from coverage cases.
  4. It’s easier to ensure the accuracy and validity of the COIs you receive. And you can even get auto-reminded when your third-party workers’ COIs are set to expire.
  5. You get a team of insurance experts that’s there for you 24/7… what could be better than that?

Need help managing your COIs? We’ve got you covered.

Managing your downstream risk can be difficult, time-consuming work, and the more years of experience you have working in and around insurance, the easier it becomes. In many cases, it takes a team. Find out why myCOI’s team of industry experts is the one for you.

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