Certificate of Liability Insurance: What It Is & How to Request One
Tricia has nearly two decades of experience in commercial and federal government lending. Her expertise is highlighted throughout small business loan content on Fit Small Business.
This article is part of a larger series on General Liability Insurance.
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.
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.
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.
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 it emails certificates within an hour of binding and never charges for the service.
When Do You Need a Certificate of Insurance?
Business owners should ask for their certificate of insurance from their insurance carriers when they bind policies so that 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.
Small business owners are wise 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.
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.
How to Request a Certificate of 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 others 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.
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, like Next and Thimble, are making it easier for policyholders to create, share and obtain instant COIs. Both of them have this as an option on their mobile app.
Certificate of Liability Insurance Example
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.
- Disclaimer: A statement explaining the COI and intended use of information.
- Producer: The insurance company, broker, or agent representing the insured.
- Insured: The person or entity that purchased the insurance policies listed in the COI.
- Insurers Affording Coverage: The 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: The person or business to which the certificate is issued.
- Cancellation: An explanation of cancellation notification requirements for the insurance company.
- Authorized Representative: The insurance company, agent, or broker authorized to sign the certificate.
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 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 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.
Insurers usually issue certificates of insurance with your policy. However, some charge policyholders up to $50 per certificate. That may not seem like much money, but for firms that bid on numerous contracts regularly at once, the cost can add up quickly, so you may want to look for insurers that offer free certificates.
Bottom Line
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. 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.
