What is a 'Certificate Of Insurance '

A certificate of insurance is a document issued by an insurance company/broker that is used to verify the existence of insurance coverage under specific conditions granted to listed individuals. More specifically, the document lists the effective date of the policy, the type of insurance coverage purchased, and the types and dollar amount of applicable liability. A certificate of insurance is often demanded in situations where liability and large losses are a concern.

BREAKING DOWN 'Certificate Of Insurance '

Small-business owners and contractors often have a certificate of insurance providing protection against liability for workplace accidents or injuries. The certificate is issued when purchasing liability insurance and details the types and limits of coverage, the issuing insurance company, the policy number, the named insured and the policy’s effective dates.

Importance of Certificate of Insurance

A certificate of insurance is often required for business owners or contractors to win contracts. Because many companies and individuals hire contractors, the potential client needs to know a business owner or contractor has liability insurance and that the client may not be held liable for damages, injuries or substandard work.

Validating a Certificate of Insurance

Typically, the client requests a certificate directly from the insurance company rather than through the business owner or contractor. The client should confirm the name of the insured on the certificate is an exact match for the company or contractor being hired. In addition, the client should check the policy coverage dates and ensure they are current. If the policy is set to expire before the job is completed, another certificate should be obtained at that time.

Example of Certificate of Insurance

A certificate of insurance contains separate sections for different types of liability: general, auto, umbrella and worker’s compensation. “Insured” refers to the person or company who is named on the certificate as having insurance.

The certificate includes the insured’s name and mailing address; the insured’s insurance agent’s name and mailing address; the name of the insurance agency’s contact person; and the names of the insured’s insurers. The certificate also describes the operations the insured performs; the name and address of the certificate holder; and a statement outlining the insurer’s obligation, if any, for notifying the certificate holder if the insured’s insurance is canceled.

The certificate briefly describes the insured’s policies and limits provided for each type of coverage. For example, the general liability section summarizes the six limits the policy provides and indicates whether coverage applies on a claims-made or occurrence basis. Because state laws determine the benefits provided to injured workers, no limit is listed for worker’s compensation coverage. However, limits should be listed for employer’s liability coverage.

RELATED TERMS
  1. Cover Note

    A temporary document issued by an insurance company that provides ...
  2. Liability Insurance

    Any type of insurance policy that protects an individual or business ...
  3. Personal Lines Insurance

    Property and casualty insurance products for individuals that ...
  4. Classified Insurance

    Insurance coverage provided to a policyholder that is considered ...
  5. Business Liability Insurance

    Insurance that protects a company and/or business owner in the ...
  6. Assigned Risk

    A risk that an insurance company is required to provide coverage ...
Related Articles
  1. Insurance

    Do You Need Casualty Insurance?

    Find out how different types of coverages can protect you and which policy is right for you.
  2. Insurance

    12 Insurance Questions for High Net Worth Families

    High net worth families should ask themselves these 12 questions regarding comprehensive insurance.
  3. Insurance

    Insurance Coverage: A Business Necessity

    Don't go to work without this policy in place - especially if your work is in your home.
  4. Managing Wealth

    6 Insurance Policies That Protect the Wealthy

    Here are six types of insurance that the wealthy use to protect their assets.
  5. Insurance

    For Top-Notch Insurance Coverage, Compare Quotes

    Find out how to use and compare policy options to get the best coverage at the best price.
  6. Insurance

    Understanding Your Insurance Contract

    Learn how to read one of the most important documents you own.
  7. Insurance

    Insurance, Excess Insurance and Reinsurance: What's the Difference? (ALL)

    Understanding the differences might help you avoid being overinsured or underinsured.
  8. Insurance

    Bundle Your Insurance For Big Savings

    Bundling your insurance can save you money and time. Read on to see how get the most out of multiline insurance discounts.
  9. Insurance

    What Happens If Your Insurance Company Goes Bankrupt?

    When insurance companies go bankrupt or face financial difficulty, it's bad news for policy holders.
  10. Insurance

    Exploring Advanced Insurance Contract Fundamentals

    Understanding your contract can help you protect our family's financial security.
RELATED FAQS
  1. What is the average return on total revenue for the insurance sector?

    Learn about the three main segments of the insurance industry, and find out what the average return on revenues is for the ... Read Answer >>
  2. What are some examples of when insurance bundling is a bad idea?

    Learn about situations where insurance bundling may not be a favorable option. Bundling insurance is often a good idea, but ... Read Answer >>
  3. Which insurance policies do I really need?

    Your needs for insurance depend on your situation and can't be generalized for everyone, but there are a lot of options available. ... Read Answer >>
  4. What caused the European / Eurozone debt crisis?

    Understand how insurance companies price insurance premiums, and learn the importance of data and statistics in the insurance ... Read Answer >>
  5. How much do changes in interest rates affect the profitability of the insurance sector?

    Learn about the relationship between interest rates and insurance company profitability, and how interest rates can affect ... Read Answer >>
  6. What are examples of the largest companies in the insurance sector?

    Read about some of the largest and most influential companies in the insurance sector, a list that includes Berkshire Hathaway ... Read Answer >>
Hot Definitions
  1. Fixed-Income Security

    An investment that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity. ...
  2. Free Cash Flow - FCF

    A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents ...
  3. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to ...
  4. Two And Twenty

    A type of compensation structure that hedge fund managers typically employ in which part of compensation is performance based. ...
  5. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  6. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
Trading Center