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Certificate of Liability Insurance Overview

A certificate of insurance (COI) is issued when a contractor needs official proof of liability insurance to bid or begin a project. The certificate itself is not an insurance policy; it is a form that notifies clients and third parties about the types of insurance your company holds, the additional insured included in those policies, and whether your company is compliant or non-compliant with State and local laws. 

Certificate holders carry a certain level of responsibility, ensuring they will continue with the premium payments and providing their clients with a greater understanding of their scope of coverage. The COI is a standardized summary of a contractor’s insurance coverage, organized in a readable, easy-to-digest manner. As a contractor, you will often be required by a client to provide a certificate of liability insurance as proof of insurance to either bid on or start a job.

What’s shown on Certificates of Insurance?

After requesting a certificate of insurance, you will receive a document with basic information on the named insured and a policy overview. The standard form to provide evidence of insurance is an ACORD Form or ACORD 25. This document covers things like:

Further, it will go into detail about those coverage types by including the following about each:

  • Insurance company name.
  • Policy numbers.
  • Policy limits.
  • Coverage limits.
  • The effective date of the policy.
  • Contact information for the insurance company.

It also includes other information, like:

  • Insured’s name and mailing address.
  • Insurance agency’s mailing address.
  • Information on what should happen if the policy gets canceled.

How does the COI help you?

For the most part, a Certificate of insurance for contractors is a way for you to get a job. Without one, you will have more difficulty bidding and obtaining jobs. With a certificate of insurance, your potential client can know you have business insurance. As mentioned before, this will let them know that they (& you) will be protected in case of property damage or another issue.

How does a certificate of insurance protect the site owner from those risks?

In reality, the COI does not offer any financial protection to the job site owner.

Why is it vital, then?

It’s all about proof. Let’s take an example. Say that you get pulled over. When the cop comes up to your window, they will ask for your driver’s license and proof of insurance. Though this is not your exact policy, it’s evidence that you have it. It’s also why you must ensure your certificate of insurance isn’t expired.

If it’s expired, how does the cop know you are really insured?

It works the same way with a certificate of insurance. It’s not the policy itself; it’s the poof you have it. However, on a COI, you often have more information than you have on your car’s proof of insurance.

How to Get a Certificate of Insurance

With the understanding that they are vital in the general contracting industry, now it’s essential to know how to get one. To begin, you need a general liability insurance policy and any other types of insurance the bid or law requires. If you don’t have that, try to get a quote from places that offer free and online COIs.

Obtaining a certificate of liability coverage is as easy as contacting your insurance provider if you already have insurance. They should be able to walk you through the steps of obtaining a certificate of insurance in the way their company offers them. 

That said, you should never have to pay for a COI. If you do, it’s time to find a new insurance company. May I suggest ContractorsLiability.com? We offer unlimited free and online COIs, so you never have to worry about waiting or paying. 

Before the certificate of insurance is authorized, it is a good idea to verify with your agent that your policies fulfill the client’s coverage requirements (as you may need additional policies for the specific project).

Example of a Certificate of insurance (COI)

Certificated of insurance (COI)

Important Information about Certificates of Insurance

If you notice an error on your certificate of insurance, contact your insurance agency immediately. The error could be an accident made by the insurance agent or a coverage gap you did not realize you had in your policy.

Your client may request to be named on the certificate of insurance as a certificate holder. That does not give them legal rights to the insurance policy; however, it indicates that they are formally accepting the conditions and coverage details of your insurance policy. Often, a client requests this to verify that you, as their contractor, have the correct protection for their job requirements as laid out in the contract.

The certificate of insurance is only proof of liability insurance; it is not an endorsement of the policy. If you require additional insurance to meet the requirements, it must be discussed with your client and insurance agent to update your policy.

Other Frequently Asked Questions

Why Do My Clients Track My Insurance Coverage?

There are many reasons why single-person business owners and large corporations might choose to track insurance coverage. Some of the more important reasons include:

  • Reviewing your contractual obligations with ease.
  • Ensuring that you are taking necessary precautions in the client’s best interest.
  • Allowing the client’s insurance company to perform audits smoothly and potentially lower your client’s insurance cost.
  • Guaranteeing that you are adhering to your client company’s service model and meeting local insurance requirements.
  • Minimizing the need to contact customer support or insurance experts in the case of a policy question or compliance issues.

How Has COI Management Changed Over the Years?

COI tracking used to be much more complicated when multiple vendors were involved. Not only do large clients require insurance certificates from their general contractors, but they also require these documents from food and material vendors, renters, and more. Insurance tracking in the past was handled by employed risk managers, third-party administrators, and even outsourced management systems that streamlined certificates of insurance. As a result, it became relatively more complex and more time-consuming for individuals within the company to access these records.

With insurance tracking services and software solutions, however, it became much easier for human resources departments to provide self-service access to insurance certificate tracking. Digital transformation and tracking software have played a vital role in changing how your clients keep track of your insurance certificates. This, in turn, has revolutionized the way insurance professionals handle their coverage and proof of it.

Who Handles My Certificates of Insurance?

It is natural to ask who handles insurance documents, as they often contain sensitive information. Ask your customer if you’re worried about who is overseeing this information. In most cases, a dedicated employee at your insurance company, experienced in insurance tracking software and certificate management, handles your documents.

How Long Do My Clients Keep Documentation of My Certificate of Insurance?

Your certificate of insurance is only valid for the length of your policy, which means that updating your client about the cessation or transfer of this coverage is optimal during the tracking process. If your policy lasts for a long time, or if you do not need to update your coverage terms, you might not need to update your provider about the terms of your insurance. Typically, certificates stay in large-scale tracking systems for no more than five years.

Always make it a point to discuss the terms of your work with your customers. If you have a long-term contract with them that requires continuous proof of coverage, ask for an updated certificate of insurance. Not only will this keep your insurance compliance iron-clad, but it will make you appear highly professional in your client’s eyes.

Summary

Though they may seem pointless, a certificate of insurance is the only way to prove to a new client that you have the insurance policies you claim to have. By giving them a copy of your certificate of insurance, you can not only say that you can do the job, but that should something go wrong, you will be covered.

When looking at exactly what it does, it’s essential to know it’s not real insurance coverage itself. It’s proof that you have the right policy. Getting a COI will usually come on an ACORD Form 25 with a lot of information. This information will include the policy’s limits, coverage dates, and conditions, among other things.

With the understanding of how it helps and what it is, you just need to get one. To do this, talk to your insurance agency on the phone or in person. They should be able to tell you how you can get one today and in the future without coming in. Should they charge or not offer one online, it may be time to look into a new insurance company.

Your insurance company will know what is best for you and how to meet the needs of your small business. They are willing and happy to discuss any questions you have about obtaining a certificate of insurance and when it is necessary. If additional coverages are needed to meet your client’s contractual needs, we can also help you through that process. Call (773) 207-5214 to speak with an agent at Contractors’ Liability about obtaining a free certificate of liability insurance or adding endorsements to your policy to meet your client’s needs and start working.

Avatar for John Brown
Written by: John Brown
John has more than 25 years of experience in the insurance industry. He grew from a star insurance producer to owning one of the largest agencies in the country; he's a reference regarding contractor's insurance, commercial insurance, and builders' risk insurance.