Insurance Certificate – Everything you should know

On purchase of insurance, they issue us a contract signed by the two parties – you and your insurer. We should keep this contract in uttermost confidence, as it is our legal ground for claims and bridge of contract. However, when required to show proof of insurance to third parties, brandishing your contract might not be the wisest idea. This is why an insurance certificate is also issued, as it serves as evidence of proof.

What is an insurance certificate?

An insurance certificate is a document that provides the specifications of insurance coverage. It serves as proof that the insurance is legit, and also includes extra information like:

1. Policy number
2. Name of insured
3. Types and limits of the coverage
4. Name of the insurance company
5. The effective duration of the policy

The insurance company issues an insurance certificate to the insured by the insurer and is a reliable means of highlighting the information in the actual contract. They usually require one party in a contract, to ensure that the other party has the right coverage. A good example of this is for contractors before the insurer awards a contract.

What are the Main Elements of a COI

The main elements of a certificate of insurance which serves as proof of insurance coverage include:

• The name of the policyholder
• The types of coverage the policyholder has
• The policy’s effective dates
• Policy expiration date
• Policy limitations 
• Insurers signature 
• The insurer’s name and address
• The policy limits, and 
• Other additional insured persons or beneficiaries. 

How to read a Certificate of Insurance

To read a certificate of insurance, start by checking whether it contains all the elements like:

• Policyholder’s name and the policy period to ensure it is recent and correct
• Review the types of coverage you purchased to avoid issues of claims in the long run
• Note down the policy limits and other exclusions. 
• Pay attention to other subsidiaries or additional insureds to understand who else might be covered under your policy.

When is COI Required?

Certificates of insurance (COI) are required in business transactions to verify that the parties involved have adequate insurance coverage. It is common in:

• Contracting
• Leasing commercial or new spaces
• Engaging in business or services that pose liability risks. 
• Renting equipment 
• Show investors when raising funds
• Can be required internally in the insured business firm
• It assures parties are protected against potential losses or lawsuits.

How to Obtain the Certificate of Insurance

To obtain the certificate of insurance, contact your insurance provider or agent, or broker. While writing to them, first, provide details about your coverage needs, and any specific requirements or additional insureds. Insurers issue COIs promptly, often electronically, to meet business needs or legal requirements.

Why certificates of insurance are important

Certificates of insurance are important for the following reasons:

• It’s used for mitigating risks in business dealings
• They provide an overview of the insurance coverage
• It spells out everything the two parties need to ensure that all parties meet contractual insurance requirements
• The certificate is important because it contains basic insurance details which helps in preventing financial losses from uncovered claims and fostering trust among business partners.

Validating an insurance certificate

As the insured, you should ensure that the insurance certificate issued by your insurance company has the right information. This is important because companies request an insurance certificate from the insurance company directly, rather than the contractor (insured). Information like the policy coverage dates and client name should be an exact match of the company’s expectations.

Conclusion

On purchase of insurance, we should request an insurance certificate as it is very useful and a valid form of proof of your coverage. It is very important, especially for contractors in their relationship with third-party clients. Although valid and carrying legal indications, an insurance certificate is not a contract and is totally different from an insurance contract.

Frequently Asked Questions

Is an insurance certificate a contract?

An insurance certificate is like a summary of what it contains in the actual contract. It is reliable and trusted to be accurate because the insurer issues it through an agent. However, it only remains a certificate, and it is not an insurance contract. They always state the facts plainly in the certificate.

Is an insurance certificate the same as evidence of insurance?

An insurance certificate is exact evidence of insurance. This is the primary purpose why it exists. It is taken and considered as highly as your insurance contract itself. Instead of showing your insurance contract as a form of evidence, you can put forth your insurance certificate.