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Certificate of Insurance (COI) – What Is It and Do I Need One?

Your fledgling painting business is about to score its biggest contract to date. A big-time real estate developer in your city wants to hire you to paint the interior of a new 120-unit apartment building. The job will keep your team busy for weeks and net the business tens of thousands of dollars in profit. 

There’s just one problem. The developer needs written confirmation you’ve met their insurance requirements. And fast, or you might lose the job to a competitor. For that, you need something called a certificate of insurance from your business insurance company. But you have no idea what that is or where to get it.

What Is a Certificate of Insurance?

A certificate of insurance is a proof-of-insurance document that summarizes your business insurance policy. Your insurance company can provide a copy signed by an insurance company representative or your insurance agent at your request.

You can get a certificate of insurance, commonly known as a COI, for a personal insurance policy as well, though that’s less common.

For example, a bank or lender might ask you for a certificate of car insurance. But that usually only happens if the lender has reason to believe you canceled or scaled back your coverage. When you apply for an auto loan, the lender should ask only for your policy’s declarations page, which isn’t the same as a certificate of insurance. 

A certificate of insurance is brief, usually covering a single page. It typically includes:

  • The name and address of the policyholder
  • A description of the services the business provides, if applicable
  • The name of the business’s representative, usually an owner, partner, or executive, if applicable
  • The name and address of the insurance company or companies that issued the policy
  • The type of coverage or policy, such as general liability or workers’ compensation
  • The effective date and policy expiration date
  • The policy’s coverage details, including coverage limits and exclusions
  • Other important details of the policy, including the policy number
  • The name of the certificate holder, usually the business requesting the certificate
  • A notice of cancellation clause stating that the insurance company will notify the certificate holder if the policyholder cancels the policy

When requesting a certificate of insurance form, ensure it’s in a proper format. One of the most common is the ACORD 25 form, known as an ACORD certificate.

Why You Need a Certificate of Insurance

You need a certificate of insurance to prove you have the insurance coverage you claim to have. For people and businesses serious about protecting themselves, an ID card or screenshot of an email from your insurer won’t cut it.

Expect to be asked to provide a COI if:

  • A general contractor or project manager hires you as a subcontractor.
  • Another company hires you to provide labor or services.
  • You contract with a government or municipal entity to provide labor or services.
  • A homeowner hires you to do work on their home or property.
  • You sign a lease agreement to rent or sublet commercial property.
  • You rent or lease commercial equipment, such as construction vehicles.

Without a valid certificate of insurance, you might be passed over for potentially profitable contract work or leasing arrangements vital to your company’s success.

How a Certificate of Insurance Works

A certificate of insurance assures the people and companies you do business with that your company has adequate insurance. 

A person, company, or government you work with must generally request a COI from your insurance company, making them a certificate holder. Their name and contact information appear on the certificate they receive, and the insurance company must notify them if you cancel your policy before the expiration date.

It’s possible to get proof of business insurance coverage without formally requesting a COI. If you’re a homeowner hiring a contractor for a one-off job, you can ask them for their insurance company or agent’s contact information, then call or email to ask for proof of valid insurance. They can send you an electronic certificate of insurance — or a policy document showing similar information — without adding your name to it.

However, if you’re a business owner hiring a subcontractor or vendor, a formal COI is best. Otherwise, they can cancel the policy without telling you, leaving you exposed to a financial catastrophe if they’re involved in a serious accident on the job.

Types of COIs

You can get a certificate of insurance for any type of insurance policy. But some are more common than others. The most commonly requested types of COIs are those for liability insurance, workers’ compensation coverage, and personal or commercial vehicle coverage.

Certificate of Liability Insurance

Liability insurance ensures your company won’t create a financial burden for anyone who hires you if you or someone who works for you causes property damage or injury. If something happens, they can rest easy knowing your insurance company will cover the damage.

A certificate of liability insurance proves your business has enough general liability insurance coverage to satisfy the person or business requesting it. If your business has other types of liability coverage, such as professional liability, it also spells these out. For each, it lists  important policy details like coverage limits and exclusions.

Certificate of Workers’ Compensation Insurance

Most states require small businesses to carry workers comp insurance once they reach a certain size. If your business has only a few employees, you might not need it, but companies with 10 or more employees generally do.

A certificate of workers’ compensation insurance proves your business has valid workers’ compensation insurance. Workers comp coverage pays employees who can’t work due to job-related illness or injury. If your business has it, the person or business hiring you can rest assured they won’t have to pay lost wages and medical expenses out of pocket.

Certificate of Auto Liability Insurance

A certificate of auto liability insurance shows that your personal or commercial auto insurance policy has at least the minimum coverage required in your state for bodily injury, property damage, and uninsured motorist coverage. 

A certificate of auto liability insurance is useful for businesses hiring subcontractors that use company-owned vehicles and businesses hiring or contracting with individuals who use their personal vehicles for work.

Certificate of Insurance FAQs

If you’re a small business owner in an industry with a high risk of property damage or bodily injury, someone will ask for a certificate of insurance sooner or later. Ensure you know the answers to these questions before the need arises.

How Do I Get a Certificate of Insurance?

You can get a COI from your insurance provider. If you work with an insurance agent, you can also get one from your insurance agency.

In the past, you had to call or write to your insurance company to get a paper copy. Today, many insurance companies offer them online or through their mobile apps.

How Much Does a COI Cost?

You shouldn’t have to pay anything to get a certificate of insurance, though you might have to pay extra for overnight or express shipping if you need it fast and your insurer can’t give you a digital copy.

How Long Are COIs Good For?

A certificate of insurance is valid at least until the policy expiration date unless the policyholder cancels it earlier. After expiration, it’s the certificate holder’s responsibility to contact the insurance company for a new one. If the policyholder cancels it, the insurance company will notify you.

Regardless of the expiration date, keep each COI on hand for at least five years from the date the certificate is generated.

What Is an Additional Insured?

Being a certificate holder on a COI doesn’t mean you’re an additional insured. You’re only covered by the policy if you’re added to it with a formal additional insured endorsement. 

An additional insured is a person or business added to a commercial general liability policy. They’re then covered by the policy just like the main policyholder. General contractors often demand their subcontractors add them to the subcontractors’ insurance policies, providing another layer of financial and legal protection if the subcontractor causes property damage or injury on the job. 

Subcontractors who work for multiple general contractors can add them all to the same insurance policy without removing previously added contractors or affecting their liability protection.

Final Word

Failing to submit a COI could seriously hurt your prospects.

Fortunately, getting one isn’t difficult. You just need to call your insurance company or insurance agent and have them send it to the certificate holder-to-be. And some insurers and insurance agencies now provide electronic certificates of insurance that don’t have to wait for the post office.

Yes, it’s one more item to add to your to-do list, and a not-so-fun one, at that. But it’s more than worth the effort.

Brian Martucci writes about credit cards, banking, insurance, travel, and more. When he's not investigating time- and money-saving strategies for Money Crashers readers, you can find him exploring his favorite trails or sampling a new cuisine. Reach him on Twitter @Brian_Martucci.

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