As a business owner, you may be asked to show the certificate of insurance for your business, especially from your potential customers and partners. Below is everything you need to know about certificate of insurance for your business and how to get one.
What Is a Certificate of Insurance?
A certificate of insurance (COI) is similar to an auto insurance identification card. It’s a document issued by an insurance company or broker. It proves that you have business liability coverage and summarizes key aspects of it.
The typical COI includes the name of the policyholder, their address, what the company does, the date the policy is effective, coverages, policy limits and other important details of the business insurance.
The name and address of the issuing insurance company is included on a COI, along with contact information for the insurance agent, insurance agency or insurer. If several insurance companies are involved, all names along with their contact information are listed.
The certificate briefly describes the insured company’s policies and limits for each type of coverage. For example, the general liability section explains the limits the policy offers by category and indicates whether the coverage limits are on a per claim or per occurrence basis. Because state laws define the coverage and benefits provided to injured workers, the worker’s compensation coverage section will show no limit.
Why do businesses and contractors need a certificate of insurance?
Without a certificate of insurance, most businesses or contractors will find it difficult or impossible to get hired by clients. Businesses that hire other businesses or contractors do not want to assume the risk of having to pay the medical care, repair, legal and other costs related to accidents or incidents that are caused by the companies or people they hire. A certificate of insurance proves the hired business or contractor is willing to cover the risks and take responsibility for the work they do.
Rather than having to carry around a multi-page insurance contract to show prospective clients, a COI is an easy way to prove you’re insured.
Tip: COIs aren’t just a “must have”. They can be a “good to have”. It can help build confidence in your business with prospective clients, similar to online ratings and reviews and client references.
What types of businesses need a Certificate of Insurance?
It depends on the needs of your business and customers. However most businesses do. Any company or individual that does work or provides services that could result in high liability losses will likely be asked to present a COI. Many types of companies fall into this broad category, from caterers to tech companies, contractors to cleaning firms.
Tip: Some businesses include a COI with the proposals they submit for jobs or contracts. It could be required as part of the bidding process, and it also could give your business an edge over the competition if they don’t have comparable coverage.
How do businesses get a certificate of insurance?
You will be provided with a certificate of insurance from your insurer when you purchase any form of business liability coverage. Business liability insurance protects the financial interests of the companies and business owners that purchase the coverage. Types of business liability insurance include:
- General liability insurance which protects your business from a range of possible claims including bodily injury, property damage, copyright infringement, reputational harm and advertising injury. Learn more at the best general liability insurance companies and the cheapest general liability insurance companies.
- Professional liability insurance covers your business if you or someone working for you makes a mistake while doing business and it results in bodily injury or property damage. Learn more at the best professional liability insurance companies.
- Product liability insurance pays for damages if a product you manufacture or sell does not perform as intended. Learn more at the best product liability insurance companies.
- Business auto insurance pays accident related costs when you or an employee drive for business purposes. Learn more at the best commercial auto insurance companies.
- Workers’ compensation insurance pays for medical costs and other benefits if an employee is injured on the job or becomes ill for work related reasons. Learn more at the best workers comp insurance companies and the cheapest workers comp insurance companies.
- Umbrella insurance provides additional coverage above policy limits for large claims. Learn more at the best commercial umbrella insurance companies.
Will having a COI ensure that I get hired by a prospective client?
It will make it more likely, but there is one more complicating factor. Your prospective client will check that you have enough liability protection to meet their standards. If your levels are too low, they may go with a business that has more coverage, or ask you to increase yours. If you do, you’ll have to prove it by showing a new certificate of insurance.
How does a client know a certificate of insurance is genuine?
In most cases, as a final step, a client requests a certificate directly from the insurance company rather than the business owner or contractor.
Your client will check that the name of the insured entity on the COI is an exact match for the company or contractor they are considering. It’s important for businesses and contractors to be consistent about how they refer to themselves in order to prevent confusion.
Your client will check the policy coverage dates to ensure that the policy is current. The’ll require a new certificate if the policy expires before a project is complete.
When a client requests a COI, they become what is known as a certificate holder. Your client’s name and contact information appear on the certificate along with statements showing the insurer’s obligation to notify the client if the policy is cancelled.
Tip: The word “insured” on a certificate of insurance refers to the policyholder — the person or company — that’s covered by the insurance.
Is it okay to ask for a certificate of insurance from businesses and contractors I hire?
You should always ask for them, whether you’re having repairs made to your business location or having a tech professional install computer equipment or software. It’s the only way to know the businesses you work with are covered if they cause harm to your business, employees, customers or clients.
Tip: Check COIs each and every time you hire a contractor or business, even if you’ve worked with them before. It will help ensure coverage is current. Also, look out for alterations to a certificate like changes to the coverage dates or levels.
