Certificates of insurance (COI) continue to be one of our most popular topics with a variety of frequently asked questions. Today, businesses are quite familiar with them; however, our brokers are often asked to explain their exact purpose and when they are required.
What is a certificate of insurance, and why is it important?
Whether it’s a supplier or contractor who is often on site, or an organization that hosts events on your property, it’s important to clarify whose insurance will respond in the event of an incident or loss when you have business arrangements with another company.
A certificate of insurance is a document issued by an insurance company or broker, that is used to verify the existence of insurance coverage under specific conditions granted to listed individuals.
A certificate of insurance is not a formal contract between the two parties. It is an informational document showing proof of insurance. It also does not constitute a contract of insurance between the certificate holder and the issuing insurance company/broker.
Ideally, there is a contract between your organization and the other business that clearly outlines any insurance obligations, and the certificate of insurance requirements. In the absence of a formal contract, you should obtain a certificate of insurance that shows your organization (with full legal name and address) as an additional insured.
If additional insured status is granted to your organization on the certificate of insurance, an endorsement making the amendment to the other party’s insurance policy must be issued.
When is a certificate of insurance required?
A certificate of insurance is required anytime a third party enters your property or premises to perform a task outside of your control.
For example, pretend a third party called “Bigger Than Life (BTL) Entertainment”, is hosting an event on your company’s property. You don’t want to be liable for any damages, losses, or claims associated with their event, so you ask BTL Entertainment for a Certificate of Insurance.
BTL Entertainment would have to ask their insurance company or broker to extend their liability to cover the additional risk from the event. Your company would be added as an Additional Insured on BTL Entertainment’s insurance policy, but only for the duration of the event (start and end dates) and the certificate would outline the coverage under specific conditions granted to your company as Additional Insured.
BTL Entertainment’s insurance company or broker would issue the Certificate of Insurance, on which your company would be listed as “Additional Insured”. BTL Entertainment would provide you with the certificate, which acts as proof of insurance, showing that BTL Entertainment has insurance coverage for its event and that you have been added as Additional Insured for any damages, losses, or claims that may arise from this event (It’s a good idea to forward a copy of the certificate to your insurance company or broker for review.).
Any responsibility for damages is with BTL Entertainment, not your company, as it is not your event. You are merely offering a service/venue to BTL Entertainment.
What steps do I take if I’m asked for a certificate of insurance?
Let’s say you’re hosting a wedding at another venue that is not owned by you. The wedding venue asks you for a certificate of insurance to prove that you have insurance to cover the event. You would follow the same steps as BTL Entertainment:
- Ask your insurance company or broker to extend your liability to cover the additional exposure and add the wedding venue as an Additional Insured on your insurance policy for the duration of the wedding.
- Your insurance company/broker will issue the Certificate of Insurance.
- Keep a copy and provide one to the wedding venue as proof of insurance for the big day.
What should I look for when presented with a certificate of insurance Checklist
We’ve included a checklist below to ensure all of the appropriate details are included in the certificate of insurance presented to you by a third-party:
- Issuing brokerage name and address – confirm this is on the certificate
- Insurer – shows the insurance company name that provides coverage for the named insured
- Insured – shows the legal name and address of the company or organization insured who is providing you with the certificate
- Commercial General Liability – this section will show the following items:
- Policy number
- Effective and expiry dates (sometimes only expiry dates are shown)
- Limit of Liability ($5,000,000 minimum is suggested)
Note the limit of insurance will vary from policy to policy. When reviewing the certificate, you need to ensure that you feel the limit of insurance is adequate for the exposure that is presented by the activity taking place.
- Occurrence limit and aggregate limit indicated
- Cross-liability clause indicated
Any other coverages that might be applicable will also show on the certificate of insurance with the same information as above (e.g., Excess Limits or Umbrella Limits):
- Description of operations, locations or special items List the event, dates of the event and activities taking place during the event. It will also show any special provisions relating to the event coverages.
- ADDITIONAL INSURED STATUS INDICATED
- Certificate Holder – This section needs to show your full legal name and address
- Cancellation – The policy needs to have a 30-days notice of cancellation clause
- Authorized Representative – Ensure the certificate is signed and dated
BrokerLink is here to help!
Wondering if you need a certificate of insurance and not sure how to get one? BrokerLink business insurance specialists are ready to answer your questions and offer what you need to get your next project started. To request a Certificate of Insurance, or any other insurance-related documentation required for your business, visit us online, give us a call or stop by one of our local branches.
FAQs for Certificate of Insurance
Do I need a new certificate of insurance even if I have worked with a certain company before?
Yes, it is important to always have an updated certificate of insurance. A certificate of insurance is created for a specific time frame and a specific occasion or job. You shouldn’t assume that the coverage has remained the same from one circumstance to the next.
What types of businesses require a certificate of insurance?
Any business that hires a person or another business to operate on its property; use its resources and equipment, or hire another third party to do a job, can request a certificate of insurance.
Is it okay to ask for a certificate of insurance from businesses I work with?
Yes. As part of your annual process, you should obtain certificates from all concessionaires that operate on your property. Generally, if you are at risk by the actions of other parties performing a service for you, a certificate should be obtained.