What is 'Certificate Of Insurance '

A certificate of insurance (COI) is a non-negotiable document issued by an insurance company or broker verifying the existence of an insurance policy and summarizing key aspects and conditions of the policy. For example, a standard certificate of insurance lists the policyholder's name, policy effective date, the type of coverage, policy limits, as well as other important details of the policy. 

BREAKING DOWN 'Certificate Of Insurance '

Situations, where liability and significant losses are of concern, require a certificate of insurance.  Small-business owners and contractors often have a certificate of insurance granting protection against liability for workplace accidents or injuries.  The purchase of liability insurance will usually trigger the issuance of a COI.

Importance of Certificate of Insurance

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

Validating a Certificate of Insurance

Typically, a client will request 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 they are considering. Also, the client should check the policy coverage dates to ensure the effective date of the policy is current. Secure a new certificate if the policy is set to expire before the contracted work is complete.

Details of a Certificate of Insurance

A certificate of insurance contains separate sections for different types of liability coverage listed as general, auto, umbrella, and workers' compensation. “Insured” refers to the policyholder, the person or company who appears on the certificate as being covered by the insurance.

In addition to coverage levels, the certificate includes the policyholder's name, mailing address, and describes the operations the insured performs. The address of the issuing insurance company is listed, along with contact information for the insurance agent or the insurance agency’s contact person. If several insurance companies are involved, all names and contact information are listed. 

When a client requests a COI, they become a certificate holder. Name and contact information appears in the bottom left-hand corner along with statements showing the insurer's obligation, if any, to notify of policy cancellations.

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 offers by category and indicates whether coverage applies on a per claim or per occurrence basis. Because state laws determine the benefits provided to injured workers, the worker’s compensation coverage will show no limit. However, employer’s liability coverage limits should be listed.

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