Insurance companies issue a certificate of insurance (COI) to verify that the contractor, subcontractor, or company has an insurance policy. Clients may request to see this document at any time that you are working for them.
A COI is also known as a certificate of liability insurance or simply proof of insurance. Most commonly, your clients will verify that you have the correct insurance to cover any mishaps before they begin working with you.
5 Most Common Certificate of Insurance Requests
Businesses must carry an insurance policy. The 40% of companies that do not operate with insurance put themselves at unnecessary financial risk and potential compliance issues.
Some companies have insurance but do not have adequate coverage. Insurance policies do not cover the same circumstances. Think of it in terms of your auto insurance policy.
Automobile liability coverage ensures that the insurance policy covers the costs of damage or injury to someone else. Comprehensive and collision policies, cover the costs of damage to your vehicle and personal property.
Business insurance works similar to this. However, instead of waiting for an accident to happen, clients will want to know you have insurance before something goes awry. They will make a COI request.
Depending on the work you are doing for the client, the client may ask for one of these three most common COI requests.
1. General Liability
You will probably receive a request for a general liability endorsement more than any other COI request type. It is a "blanket" endorsement that covers claims made for:
- Bodily injury accidents
- Damage to property
- Personal injury
For instance, your general liability policy will cover the medical costs of anyone injured while at your place of business or on a job site. It will cover any costs of damaged property and compensate owners for any financial losses they incurred as a result.
General liability insurance is the most common business insurance policy. That is why it is the most commonly requested COI.
2. Professional Liability
This policy will cover you in cases of negligence. You will need a professional liability endorsement for services that do not fall under your general liability policy. It covers those who perform professional services for their clients, like:
- Accountants
- Physicians
- Lawyers
- Contractors
While not every company will carry this type of policy, it is still a common COI request made by clients. If you offer professional services, your clients will want to see proof that you carry this endorsement.
3. Umbrella/Excess Policy
Sometimes you may need additional coverage above what a general liability insurance policy will cover. Excess liability insurance (or an umbrella policy) will protect your company's assets. Think of it like GAP insurance that you may carry when purchasing a brand-new vehicle.
The reason clients will request a COI for an umbrella policy is that, like your professional liability policy, it protects you against risks unique to your industry. So, you will need to ensure that this endorsement covers your specific company's risks.
4. Waiver of Subrogation
Clients will request a COI for a Waiver of Subrogation endorsement because it protects your business clients from insurance company recuperation. It waives the right of an insurance provider from being able to sue a negligent third party.
Your clients will want to ensure you have this contractual clause in your insurance policy because it covers them if they are responsible wholly (or in part) for the loss. They will most likely request this COI while negotiating your contract.
5. Primary and Noncontributory
Your clients will want to ensure that you have this type of endorsement on your policy because a primary and noncontributory policy stipulates the order in which multiple policies will cover the incident. Clients will request this COI to know whose insurance company will cover each area of loss.
Why You Need a Certificate of Insurance
Unfortunately, according to a survey published in the Insurance Journal, 75% of companies operating in the United States are underinsured. Sadly, 40% of businesses do not reopen after a disaster due to a lack of sufficient insurance coverage.
It's essential that your company carry insurance and that you can show proof of that policy. By having a COI on hand, you can quickly show clients, or potential clients, that you have coverage against loss, damage, and other liabilities.
Since one in three businesses (just over 35%) experiences an incident that requires them to file an insurance claim, you may want to request a COI from other companies, like your suppliers. This COI allows you to know that you are working with a trustworthy partner.
When you obtain your COI for your own business, make sure that it contains the following information:
- Company name and contact information
- Business owner's name
- Insurance company's name and contact information
- Policy number and expiration
- Type of insurance with amounts of coverage
- Names and contact information of anyone covered under the policy
How to Get a Certificate of Insurance
You can get your COI from the insurance company that issued the policy. You may be able to use an electronic version as proof, depending on the state in which your business operates.
Make sure you know if this is allowed in your state before proceeding with this form of documentation. You can also go online and print out your COI if your insurance company has a client portal that allows online access.
Costs of a Certificate of Insurance
Insurance costs vary depending on several factors, such as what industry you are in and how much coverage you have, and the type of insurance you carry. However, to obtain your COI, you may pay as much as $50 for each certificate. Although, some insurance providers will provide you with one free of charge.
The Time it Takes to Get a Certificate
The time it takes to obtain your COI varies depending on your insurance company, the methods they use to give it to you, and whether state regulation allows you to carry an electronic version of this document. You could get one in only a few minutes, or it could take several weeks.
Keep in mind that you can only obtain a COI if you are the policyholder. You can request that the insurance provider of the company with whom you partner show you their COI, but you should never be in possession of another entity's COI.
It’s a good idea for anyone to receive proof of insurance for a company they plan to do business with directly from the issuer. That way you can ensure that you do not receive a fraudulent COI that a contractor could have altered.
Ensuring Certificates of Insurance Best Practices
You will need to maintain a database of your COI expiration dates to ensure there is not a lapse in coverage. If you have requested a COI from another company you do business with, you will want to maintain records of their renewal dates. That way, you can request an updated version when necessary.
However, maintaining manual records or a documentation database can be tricky without the right software. At C2COI, our COI management platform is your risk-mitigating software solution.
With our platform, your business has the tools to manage COIs for every business partner and query policies by date and type. You will also receive automatic notifications via email regarding expiration dates.
Let us help you improve your organization's risk compliance and COI management. Contact us today to start your 14-day free trial.
