The world of insurance has a lot of jargon and fancy words. It can be hard to decipher “insurance-speak” sometimes. Let’s say you’re a contractor on the phone with a potential client. Everything’s great until they ask for proof of insurance. You’ve got lots of business insurance, so you don’t anticipate a problem. You politely ask what the client would like to see as “proof.” As it turns out, they want a certificate of liability insurance. But what exactly is a certificate of insurance? What does it do?
We’ll go over what a certificate of insurance is and how to get one.
What is a certificate of insurance?
A certificate of insurance is basically a form from your insurance company that verifies that you have the coverage you say you do. It’s not part of your policy and it doesn’t change your coverage. It just gives details about your insurance so that your client knows that you have the financial security to protect them from the fallout of any negligence or claims on your part. Most of the time the entity requesting the certificate wants to know about your liability insurance, but a lender, for example, might want to see proof of property insurance.
Oftentimes, a contract will require that the contractor hold certain levels of insurance. The certificate is the client’s way of checking that you have the necessary coverage for the job. They’ll want to see the certificate before any work is started.
Pro tip: Keep in mind that the “insured” referred to is you. The certificate holder is the entity that wanted to see proof of insurance.
How do I get a certificate of insurance?
The certificate will be issued by your business insurance agent or broker. To secure a copy, you’ll have to reach out to them and request it.
What is included in a certificate of liability insurance?
The certificate of insurance will probably be separated into different sections – one for general liability, one for commercial auto, and one for umbrella insurance (a.k.a. excess liability.) These sections give details such as whether your policy is claims-made or occurrence and what types of vehicles are insured.
The certificate should give the following details:
- Name of the insured
- Name and address of the insurer (and other details)
- Policy type and limits
- Type of work the insured does
- When the policy will expire
- Name and address of certificate holder
- The insurer’s obligation (or lack of obligation) to notify the certificate holder if the policy is canceled before its expiration
Certificate of insurance vs. additional insured
Some contracts will also ask that you make the client an “additional insured.” To give your client additional insured status, you would have to ask your agent to add an endorsement to your policy (an endorsement being an addition to your policy that adjusts coverage.) The endorsement has to be there for the client to be considered an additional insured.
Now. You’re probably wondering:
What does it mean for the client to be an additional insured?
It means that your insurance can also cover the client. So, if the client gets sued because of something your business did, they would be covered under your policy.
(If additional insured status for the client is a requirement of the contract, they may need to see a declaration on the certificate itself saying that they are indeed an additional insured.)
One last thought about additional insured:
Your policy may already include certain people as additional insured, meaning no endorsement would be needed. Some policies are written in such a way that any client for which the insured works (and has a contractual obligation to include as an additional insured) will be covered under the policy. So, be sure to talk over this carefully with your agent to make sure you’re clear on how your policy handles additional insureds.
So, that’s the deal with certificates of insurance. It’s pretty much a form from your insurer that proves that you have insurance. You can either request a certificate of insurance from your agent or the client can get one directly from your insurer. Checking your limits of coverage is just the client’s way of crossing the T’s and dotting the I’s.
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