Certificate of Liability Insurance: What It Is & How To Request One

A certificate of insurance (COI), sometimes called a certificate of liability insurance, is a one-page document that summarizes your coverage and can be shared as proof of insurance. It includes policy details like your specific coverage, limits, and effective dates, but it isn’t an insurance contract. Companies often require businesses they partner with to carry liability insurance because they don’t want to risk being held solely responsible. In those situations, the company will request proof of insurance or a COI.

Business owners needing liability coverage and COIs immediately should apply with Next. It’s a small business insurance provider who, online or through its app, can create free and instant COIs, which you can then share as many times as you need to. It has recently released a COI analyzer that increases the speed and ease of generating a COI for your business.

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How To Request a Certificate of Insurance

You should receive a COI when you receive your initial policy documents. However, you may need additional copies as your business grows or if you need to change coverage. You can request a COI through the insurance provider who originally sold you the policy. This can be the carrier, agent, or commercial broker.

If you need to change coverage, then you can obtain a new COI by following this process:

• Step 1: Find out what coverages and limits you need. If the company requires higher limits than what you already have, getting your COI may take a bit longer as you wait for your coverages to be adjusted.
• Step 2: 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.
• Step 3: 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.
• Step 4: 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.

Some insurers charge up to $50 per COI, while others provide them for free. 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.

Some providers are making it easier for policyholders to instantly create, obtain, and share COIs—and some are even free. Next even allows you to do it online or through its mobile app.

When Do You Need a Certificate of Insurance?

There are certain situations where general liability insurance is required. For example, you’ll usually be asked to provide a COI when you’re involved in bidding for a project, or a contract. In a bidding situation, the project manager will often request proof of insurance to be submitted along with the bid.

Clients typically will 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. As a business owner, you may also want to request another business you work with show proof of liability insurance.

Some examples of when a business owner needs a certificate of liability include:

• A food truck owner wants to work at a food truck show, but the venue requires proof the food truck carries at least $1 million in general liability insurance to participate.
• A fitness instructor wants to teach at a new studio, but the owner wants to see a COI first.
• A cleaning business owner is bidding on a large commercial contract and the company is requiring a COI showing general liability and workers’ compensation.
• A painter has an opportunity to work on a construction project but the general contractor only works with subcontractors who have their own workers’ comp insurance.

When To Add Certificate Holders

Certificates are often needed when a business owner signs a new contract, applies for a professional license, or signs a commercial lease. In these situations, your agent creates a certificate with the other party’s name listed as the certificate holder, and each certificate holder gets a copy for their records.

If another party has a financial interest in your business, they may need to be more than a certificate holder. In those situations, it may be necessary to make them an additional insured. This is 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. So, too, general contractors may ask for additional insured status to protect against lawsuits stemming from a subcontractor’s work.

What a Certificate of Liability Insurance Looks Like

There are nine sections in a COI that summarize what insurance policies a business owner has, the limits for each policy, the name of the insurer, and several other key details.

Having a COI can help protect you in a variety of situations, but understanding the information contained within it is almost as important as the certificate itself. Here are the key sections of a certificate of insurance:

1. Disclaimer: A statement explaining the COI and the intended use of information.
2. Producer: The insurance company, broker, or agent representing the insured.
3. Insured: The named person or entity listed on the policy.
4. Insurers Affording Coverage: The insurance companies that provide the coverage listed in the COI.
5. Coverages: Descriptions of the specific policies, purchased by the insured.
6. Description of Operations, Locations & Vehicles: Detailed information about elements of the business.
7. Certificate Holder: The person or business to which the certificate is issued.
8. Cancellation: An explanation of cancellation notification requirements for the insurance company.
9. Authorized Representative: The insurance company, agent, or broker authorized to sign the certificate.

Bottom Line

A COI is a certificate that serves as proof that you have active 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 COI on hand. Even if it’s not requested, presenting the COI demonstrates a high degree of professionalism and can help you win contracts and bids on projects.