What Is a Certificate of Insurance?
A certificate of insurance (COI)—sometimes referred to as a certificate of liability—is an official document provided by an insurance company that verifies a business or individual has active insurance coverage. It outlines key policy details, including coverage types, limits, and the policy period, offering proof of financial protection against claims for bodily injury, property damage, or other liabilities.
Contractors’ insurance certificates offer proof that unforeseen accidents, damages, and other risks can be covered. Below we have provided a list of common instances where a COI should be readily available.
When Proof of Liability Insurance Is Necessary
Hiring
If you hire subcontractors, they must provide a certificate of liability insurance before starting work. This ensures they have coverage in case of injuries or property damage. To confirm the policy is active and accurate, you may prefer having their insurance agent send you a copy directly. Similarly, if you work as a subcontractor or contractor, you’ll need to present your own proof of liability insurance to your employer, who may also verify it with your insurer.
Vehicle Accidents
If you own a work vehicle and it gets damaged while parked at your home, business, or a client’s location, it’s typically covered under a general liability policy. A contractors’ insurance certificate gives peace of mind to you and the owner of the location, and it will be necessary when reporting an incident. However, if a worker has an accident while driving your vehicle, it wouldn’t be covered. In that case, having auto liability insurance is important. Auto liability can cover both vehicles you own and those you don’t, such as an employer’s vehicle. Your certificate of liability insurance will specify the type of auto liability coverage included in your policy.
Submitting Bids
You will not be considered for a government contract unless you have general liability insurance for contractors. Homeowners are also increasingly requiring a certificate of liability insurance before hiring you for a job. This document outlines your coverage, with most clients focusing on whether you have workers’ compensation and general liability insurance. These policies protect clients by covering worker injuries and providing compensation for any property damage or personal harm caused during the project.
State Law Compliance
Some states have enacted laws to regulate certificates of liability insurance due to instances where these documents contained false information from insurance agents or their clients. While specific regulations vary by state, they generally address the following areas:
Standardization of Forms: Mandating the use of standardized certificate forms to ensure consistency and prevent unauthorized alterations.
Accuracy of Information: Requiring that all details on the certificate accurately reflect the actual terms and conditions of the insurance policy.
Prohibition of Misrepresentation: Making it illegal to include false or misleading information on certificates, with penalties for violations.
Restrictions on Additional Wording: Limiting or prohibiting the addition of terms or clauses not present in the underlying policy to prevent misrepresentation of coverage.
These measures aim to enhance transparency and trust in the use of certificates of insurance.
Summary
A certificate of insurance is an invaluable document for contractors as it provides proof of coverage, ensuring protection for both the contractor and their clients. It demonstrates compliance with insurance requirements, such as workers’ compensation and general liability, safeguarding clients against liability for worker injuries and property damage. Regulated to prevent fraud, certificates of liability promote trust and transparency, making them indispensable for professional operations.
Need to request yours? Visit our Contractors’ Insurance Certificate Center.
