A certificate of insurance (COI), sometimes called a certificate of liability insurance, is a one-page document that summarizes your coverage and can be used as proof of insurance. The form includes policy details such as coverage limits and effective dates, so business owners can find and share them easily without revealing other, more private information.
Business owners who need liability coverage and certificates of insurance immediately should apply with Hiscox. As a small business specialist, Hiscox understands how important it is to get your proof of insurance as soon as coverage is in place, so they email certificates within an hour of binding and never charge for the service.
What Is a Certificate of Insurance
Certificates of liability insurance provide important information about a business’ insurance policies, such as coverage amounts and types, policy start and end dates, and the policy numbers. These details are important to have on hand if you have to file a claim or if a client wants proof you have liability insurance.
Companies often require businesses they partner with to carry liability insurance because they don’t want to risk being held solely responsible for any damages stemming from the collaboration. For example, say a company hires a contractor who doesn’t have general liability. That company could end up paying for damages or injuries caused by the contractor’s work. However, if the contractor can show they have coverage, the company knows the contractor can stand behind their work.
When to Get a Certificate of Insurance
Business owners should ask for their certificate of insurance from their insurance carriers when they bind policies so they have it whenever someone requests proof of liability insurance. These requests are common when bidding on jobs or signing contracts. Similarly, you may want to request any business you work with to show proof of liability insurance.
According to Greg Szymanski, SPHR, CCP, CBP, Geonerco Management, LLC:
“A certificate of liability is usually requested by a business from a business wishing to provide some product or service to the requesting company. For example, Company A makes a product and wants to contract with Company B to ship the product. Company A requests certificate(s) of insurance from Company B to determine if Company B has sufficient insurance coverage to perform the shipping services. Usually the insurance requirements Company A wants are specified in a contract for the services Company B is providing.”
Small business owners are smart to keep a certificate of liability insurance as a proactive measure. Being able to present proof of insurance immediately demonstrates a degree of professionalism and trustworthiness that can help you secure larger contracts and grow your business.
How to Request a Certificate of Liability Insurance
Insurers often include certificates when they issue policies, but you may need additional copies as your business grows. You can request certificates through the provider who originally sold the policy—typically the carrier, agent, or a commercial broker. Some insurers charge up to $50 per certificate, while other provide them for free.
The steps you may need to take to obtain a certificate of liability insurance include:
- Find out what coverages and limits you need: If the company requires higher limits than what you already have, getting your certificate of liability insurance may take a bit longer as you wait for your coverages to be adjusted.
- Confirm coverage limits with your provider: If you need to increase your limits, you can adjust the policy or you may be able to purchase a rider to cover the duration of the contract. Your insurance agent can help with this process.
- Request the certificate after making any changes: This requires filing the paperwork required to adjust your coverage adjustment, submitting payment, and requesting the certificate listing the appropriate limits.
- Give the certificate to your client: Some companies require a paper copy they can keep on file, while others are satisfied with an emailed PDF.
To see what a COI looks like, be sure to download our sample form below.
Certificate requests can take anywhere from minutes to days to complete. Yours may take longer if the company you’re working with requires unique wording on your certificate, if your insurer creates certificates manually, or if you make an error in the certificate holder’s information.
Certificate of Liability Insurance Sample
A certificate of insurance is a relatively simple, one-page document business owners can use to demonstrate they have coverage. Liability certificates have nine sections that summarize what insurance policies a business owner has, the limits of each policy, the name of the insurer, and several other key details.
Certificate of Liability Insurance Form Explanations
|Disclaimer||Statement explaining the COI and intended use of information|
|Producer||Insurance company, broker, or agent representing the insured|
|Insured||Person or entity that purchased the insurance policies listed in the COI|
|Insurers Affording Coverage||Insurance companies that provide the coverage listed in the COI|
|Coverages||Descriptions of the specific policies purchased by the insured|
|Description of Operations, Locations & Vehicles||Detailed information about the business|
|Certificate Holder||Person or business to which the certificate is issued|
|Cancellation||Explanation of cancellation notification requirements for the insurance company|
|Authorized Representative||Insurance company, agent, or broker authorized to sign the certificate|
The nine sections on a COI include:
This section states the purpose of the certificate of insurance, which is solely to provide information. A certificate of insurance is not a contract, so the information on it can’t change what’s in the policies it describes. If details on the COI and the policy don’t match, the policy trumps the certificate.
Just below the disclaimer in the upper-left portion of the certificate of insurance is the section that names the producer. An insurance producer is anyone involved in insurance sales, so you may find the name of the insurance company that issued the certificate, or the agent or broker acting on behalf of the insurer. The producer’s name and address are entered in box on the left, and their contact information is listed on the right.
This section provides the name and address of the individual or business that purchased the coverage. If more than one entity is covered by the insurance, the entity listed in this section is the primary insured. The others are called additional insureds and are notated in the coverage section, if applicable, and in the section describing the company’s operations.
4. Insurers Affording Coverage
Next to the insured section, certificates of insurance lists the insurance carriers that issued the policies and the National Association of Insurance Commissioners (NAIC) number for each insurer. Business owners may have more than one insurance carrier listed if they purchased policies from different carriers through a broker, and then used the broker to get their certificate of insurance.
The coverages section is the largest portion of a certificate of insurance because it includes the details for each liability policy. The section begins with a paragraph explaining that the following coverage has been purchased by the insured listed on the certificate and is dependent upon the actual policy terms. The paragraph also notes that the limits listed may have been reduced by claims.
Next comes four subsections describing the various policies the insured carries. Each subsection includes the policy number, start and end dates, additional insured information, and both per occurrence and aggregate limits (the amounts insurers pay on each claim and over the policy term, respectively). Depending on the policy, each subsection may contain additional information.
The additional information in the coverage subsections includes:
- General liability: Notes if the policy is written on a claims-made or occurrence basis
- Automotive liability: Indicates if you’ve purchased coverage for any auto, all business-owned autos, hired and non-owned autos, or only autos listed in the description of operations section
- Excess or umbrella liability: Shows if you have excess liability, which extends limits on a single underlying policy, or umbrella insurance, which extends limits on multiple underlying policies, and if coverage is claims-made or occurrence
- Workers’ compensation insurance: Notes if partners, members, executives, or sole proprietors are excluded, as well as the injury limit, disease limit, and policy aggregate limit
Below the workers’ compensation subsection is a blank spot for writing in other key coverages, the most common being professional liability insurance.
6. Description of Operations, Locations & Vehicles
This section describes the nature of the insured’s business operations; its locations, job sites, or contract numbers; and any additional insureds (i.e., individuals or entities other than the primary insured first named in the certificate). The certificate of insurance is not a guarantee that the additional insureds hold the listed coverage.
7. Certificate Holder
The certificate holder is the individual, business, or contractor who requested the certificate of insurance—not the insured who purchased the policy. Certificate holders are not necessarily covered by the policies listed on the certificate of insurance unless they are named as an additional insured in the policy. If they are named as an additional insured, they should also appear in the description of operations section of the certificate of insurance.
According to Teri Beckman, Agent, Farm Bureau Financial Services:
“There is a big difference between being listed as a certificate holder and being listed as an additional insured. For example, if you are a vendor and require your suppliers to have general liability insurance, asking for a certificate of insurance is one way to get proof that the individual or business has current insurance.”
Beckman goes on to say, “However, you may want to go one step further. You could ask to be listed as an additional insured (which costs money to the party you are requesting it from) that will release you and your insurance company from claims that are levied against that supplier. For example, if you are listed as an additional insured and then there is a claim that is levied against the supplier’s business, their insurance company will represent them and you in the suit.”
The cancellation section of a certificate of insurance states the insurance carrier is required to try to notify the certificate holder in writing if the policies listed on the certificate are canceled before the expiration date. The notice also indemnifies the insurer from obligation or liability should the insurer fail to provide the notice to the certificate holder.
9. Authorized Representative
The authorized representative is either the insurance company that is authorized to sign the certificate or the agent or broker representing the company. When the authorized representative signs a certificate of liability insurance, they are representing that the insured and any additional insureds listed are covered under the policies described.
Having a certificate of liability insurance can help protect you in a variety of circumstances. But understanding the information contained within it is almost as important as the certificate itself.
When to Add Certificate of Liability Insurance Certificate Holders
Business owners often need certificates when they sign a new contract, but they might also need one when they apply for professional licenses or sign commercial leases. In these situations, your agent creates a certificate with the other party’s name listed as a certificate holder, and each certificate holder gets their own copy for their records.
When the other party has a financial interest in your business, they may want to be more than a certificate holder. They may ask to be an additional insured, a status that grants them some of the protections found in your liability insurance. For example, commercial landlords usually want to be additional insureds in case your injured customer sues them for damages. General contractors may also ask for additional insured status to protect against lawsuits stemming from a subcontractor’s work.
Liability Insurance Certificate Holder Examples
Business owners typically need to create certificates for certificate holders when they’re about to enter contracts that require liability insurance coverage. Essentially, the party you’re contracting with wants to know if you’re financially stable, and your certificate of insurance shows that you’re able to pay if mistakes happen.
Some examples of when a business owner needs a certificate of liability insurance include:
- A food truck owner wants to work the county fair, and the county requires proof that they carry at least $1 million in general liability insurance if they want a spot.
- A yoga instructor wants to teach at a new studio, but the owner wants to see a certificate of liability insurance first.
- A cleaning business owner has an opportunity to get a big commercial contract, and the company requires a certificate of liability showing general liability and workers’ compensation coverage.
- A semi-truck driver wants to be an owner-operator working under their own authority and needs a certificate proving liability coverage and the respective limits.
- A plumber has an opportunity to work on a construction project, but the general contractor only works with subcontractors who have their own workers’ compensation coverage.
There may also be times when you may want proof of insurance from a partner. Perhaps you’re considering a new subcontractor, manufacturer, or third-party logistics company and want to make sure they have the financial means to meet their obligations. The information on their ACORD certificate is evidence that you may be able to recoup your losses if things take a turn for the worse.
Certificate of Liability Insurance Frequently Asked Questions (FAQs)
Certificates of liability are valuable tools for business owners looking to sign commercial leases, bid on major projects, and win big contracts. Here are the answers to some of the most frequently asked questions about COIs.
Why is my client asking for my certificate of insurance?
Clients typically ask to see your COI because they want to protect their business. When they see you have liability insurance, they can trust you have the financial resources to cover any allegations of damages, injuries, or substandard work that result from your business dealings.
Is a certificate of liability insurance a legal document?
A certificate of insurance is a form issued by an insurer or its authorized agent that establishes a business entity carries insurance. However, certificates are not contracts. Certificates only outline the specifics of the coverage and do not extend coverage to the certificate holder.
How much does a certificate of insurance cost?
Insurers usually issue certificates of insurance with your policy. However, some charge policyholders up to $50 per certificate. That may not seem like a lot of money, but for firms that regularly bid on numerous contracts at once, the cost can add up quickly, so you may want to look for insurers that offer free certificates.
Bottom Line: Certificates of Liability Insurance
A COI provides proof of insurance and lists all the essential information about the policies your small business carries. Almost any business owner who works with the public should have a certificate of insurance on hand. Presenting the COI, even if it’s not requested, demonstrates a high degree of professionalism and can help you win contracts and bids on projects.
You can show your potential clients and partners that you’re a dependable business owner by working with Hiscox. Not only can you get affordable coverage with Hiscox, but they send you free certificates of insurance in under an hour.