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The world of insurance is one ridden with fraud and misrepresentation. Though there are thousands of people who work to make it better, some evil companies and people will still slip through the cracks. Why is this important to you as a business owner of a general contracting company?
The reason is simple. First, as a general contractor, you are looking for subcontractors to do work for you. With this, you will need to obtain their certificates of insurance just as the company you are working for wants yours. Knowing how to spot an excellent fake COI can save you thousands of dollars and legal repercussions, in the long run, should something happen. An example of a place you don’t want to be is if the subcontractor completes substandard work. If you find out that their certificate of insurance is fake, you could and probably will be held liable. If you don’t know how to spot a fake, they could come in, make money, and hurt your site and business.
Getting a Fake is Easy but Why do it?
When a subcontractor looks to get fake proof of insurance, they might have one of many reasons. They could be in a difficult spot with money, or they could want to save money by not purchasing liability insurance or workers compensation.
How would they do this? Usually through Google Searching. Though there are other options to obtain an insurance certificate, there is a surprising amount of highly accurate ones through a simple online search.
Another option? The doctoring of an old certificate. This method is the route that those with new money troubles can often take if they don’t see another way out. It could be someone you have worked with before. When you asked them to bid on this new job, you didn’t know that their insurance policy lapsed due to nonpayment. Since they need the money to pay for the insurance, they decide to doctor an old certificate of insurance to look current.
In the last example, what if someone breaks out from an old employer to become a business owner themselves? They might not have enough money to obtain an insurance policy. With just a little editing of their former employer’s certificate of insurance, they have their coverage and protection to do work. It doesn’t matter how honest or truthful an individual is. If they get thrust into a situation out of their control, they might take action to fix it.
What can help you spot a phony certificate?
Do you and your COI administrator know what to look for to make sure that a certificate is real? With just a few things, you can increase the protection your business has by preventing subcontractors for faking business insurance. In 2014, SEMI posted a useful checklist that should still be used today for industries that have to work with certificates of insurance.
Make sure it’s an Acord 25 Certificate
If you are working with a trustworthy contracting business, they will use a good insurance agency. This insurance company should use the Acord 25 form to display the proof of insurance of their clients. To determine this, check the bottom left-hand corner of the document. It should be a massive red flag if “Acord 25” is not listed on the form. Another great tip is to check the document for a box that says “clear all.” If you find this box, there is a high chance that the certificate of insurance was made on a PDF reader and found online.
Make Sure the Insurance Company is Real
On the top right of the certificate, you should see the name of the insurance company that is offering the certificate of insurance. If you have any questions, you can contact your insurance agency to make sure the document is from a real company. If you still have worries, visit the AM Best Company’s website. This website will allow you to look up the insurance company in question. From there you will be able to use the “ratings and analysis” section to verify that the insurance company listed. It should be a massive warning for the company to not exist from either your insurance agent’s perspective or this online registry. On that note, call the insurance company listed on the document. If they can’t are unable to answer your questions, then you should look for another subcontractor.
Does Everything Match Throughout the Document?
One big give away of document editing, it mismatching fonts or handwriting. Most of the time this examination will not require an expert but just an observant eye. Take a look at the policy’s effective and expiration dates as well as the description of operations section. If something isn’t aligned, say one row of text is too high, this might be a sign that the document was edited. Also, make sure that the handwriting is an exact match and that anything typed used the same font. It can be hard to get everything perfect when editing a document so be observant. If you notice any discrepancies, this is a warning.
Don’t Wait to Check
It may already be clear that this is an important topic. However, if it is not clear, this isn’t something that you should wait on. If you are asking for evidence of insurance on general liability insurance or any other type of insurance, you should be checking the COIs right when they come in the door. If you choose to wait, it could be forgotten. If you do forget, then you run the chance of something happening on site and finding out that the COI was not real too late.
Always check everyone’s COI. Even though you have worked with a subcontractor in the past, they could still send you a fake COI this time. As we talked about, everyone can hit a rough patch and do what they think they need to survive. However, you don’t want to be paired up with that should something go wrong!
Make Sure You’re Covered!
Insurance serves a vital role in the protection of both business and business owner on both sides of the work. You should always take care to make sure that your coverage limits are enough for the risks that you could be facing. If you think that your liability policy is too small for your growing business or the subcontractors that you work with, it’s time to talk to an insurance agent. If you are not sure about the insurance you have, contact us to get a quote! We can make sure you have the appropriate insurance coverage based on your business needs. We’ll look at the types or type of policy that would suit you best and get you a new certificate to make sure you can prove your fully covered and ready to take on jobs.