A certificate of insurance is a short document that outlines the terms of your active insurance policies. It’s often necessary to provide this proof of insurance when you work with clients, landlords, and other third parties. You may also need to request certificates of insurance from other companies, such as vendors or contractors, to ensure that they have adequate insurance coverage and will not expose you to additional risks.

What is a certificate of insurance?

A certificate of insurance (COI) summarizes your current insurance policies and verifies that your business is properly insured. Usually only a few pages long, a COI explains what type of insurance coverage you have in effect, the limits of your policy, the dates of coverage, and other relevant information. Insurance companies provide COIs to their clients, and many insurers use a standard form provided by a nonprofit insurance organization, the Association for Cooperative Operations Research and Development (ACORD).

A certificate of insurance is purely informational and does not alter or amend any insurance policy. A COI does not serve as an insurance contract, policy, or coverage. Every COI should have qualifying language that states the document is a matter of information only and confers no rights to the certificate holder.

What is the difference between an insurance policy and an insurance certificate?

An insurance policy is a legal contract between you and your insurer that defines your coverage for a particular type of risk. Your insurance policy details who is covered, what types of perils and losses your insurer will pay for, and what situations are not covered. In contrast, a certificate of insurance is not a legal contract and exists purely to provide proof of insurance and basic information about the insurance coverage you have purchased. It summarizes the main details of insurance policies, allowing others to quickly and easily understand what insurance a company has and verify that policies are active. You cannot have a certificate of insurance without first purchasing one or more insurance policies, and a COI is not a substitute for your insurance policy documents.

It’s important to note that a certificate of insurance does not provide any coverage to your client; it only confirms what insurance coverage your company has. If you want to add a client as an additional insured party on your policy, you will have to work with your insurer to add them. 

Why do you need a certificate of insurance?

Certificates of insurance are important in two main situations: When you need to provide proof of insurance to someone you plan to work with, and when you need to verify that another company has insurance.

Proof of insurance is often required by clients, business partners, and landlords. Before signing a contract, the other party will likely want to see a COI, which will verify that you have liability policies in effect and that your insurance provides sufficient coverage. Even if they don’t require a COI, clients will often feel more comfortable if they know that you have a comprehensive range of insurance coverage.

Examples:

• You own a janitorial services company. Before signing a contract to provide regular cleaning services at an office building, your client wants to see your COI to ensure that you have general liability insurance, which would provide coverage if your service damages valuable property or causes someone to be injured. 
• You are signing a lease for your shoe store’s new location. Your landlord needs to make sure that you have general liability insurance. Otherwise, they could be held liable if someone is injured on the premises. 
• A company hires your IT consulting firm to provide IT services. They verify that you have professional liability insurance in case a mistake in your professional work causes them financial losses. 

If your company hires or partners with vendors, contractors, or other third parties, it’s a good idea to ensure that they have adequate liability insurance coverage. If your contractor or vendor is not properly insured, you could take on some of their financial risks in the event that an accident or loss occurs. 

Example:

• You hire a construction contractor to add an addition to your business’s location. You must check the company’s COI to make sure that they have insurance in case of an accident that causes property damage or bodily injury.

What information does a certificate of insurance include?

Information provided by a COI includes:

• The date the certificate was issued
• The name of the insurer
• Who is covered by the policy
• What type of insurance is provided
• Policy limits

When you evaluate a COI, it’s important to ask:

• Is the business name listed on the form the same as the company you expect to work with?
• Will the policy be active during the entire time you will be working with the contractor or vendor?
• What type of insurance policies are active?
• Are the limits of the policy sufficient?

Typically, anyone who receives your COI will become a certificate holder. Certificate holders may be notified if the insurance policy is canceled. While notification is not required, many insurance companies will notify certificate holders as a courtesy. 

Does a COI cost money?

No. If you have an active insurance policy, your insurer or agent/broker should provide you with a COI free of charge.

Is a policy schedule the same as a certificate of insurance?

No. A policy schedule or schedule of insurance is a part of your insurance contract that defines who is covered, what property is covered, deductibles, exclusions, limits, payment details, and other key information. It’s for the policyholder’s own information. A certificate of insurance is a separate document that provides proof of insurance for all your active insurance policies. COIs are intended to be provided to your clients or business partners who may wish to verify your insurance status. 

How do you verify a certificate of insurance?

To verify that a COI, contact the insurance company or agent listed on the form. The insurer should be able to confirm that the policy is valid. When you receive a COI, it’s a good idea to make sure that the insurance company is legitimate, the dates listed are valid for the period during which work will be done, and the coverage is valid in the correct state.

Final Word

A certificate of insurance provides a condensed summary of active insurance policies and their terms. Many clients and landlords will require you to provide this document as proof of insurance before they will sign a contract with you. If you hire contractors, vendors, or other third-party companies, it is wise to analyze their certificate of insurance to ensure that they have enough coverage. This will prevent your company from being held liable for any mistakes made by your contractors or vendors.