One of the services usually provided by your insurance agent is the preparation and delivery of a certificate of insurance. Nevertheless, there is often considerable confusion about what a COI (certificate of insurance) is, when it is important, and its proper usage.
Your insurance agent normally prepares and furnishes a certificate of insurance to person or company who has requested a certificate of insurance (a certificate holder). Although this is normally the case, each insurance company may or may not authorize the insurance agent to issue a certificate of insurance. The insurance agent has a responsibility to be aware of any specific requirements of an insurance company. If the agent does not have the authority to issue a certificate of insurance in a specific case, then the insurance agent will request that the certificate be prepared by the insurance company.
A certificate of insurance provides verification of specific insurance coverage types and limits, the insurance company name, the policy number, the named insured, and the policy effective dates.
A certificate of insurance is usually requested from a contractor by the party who signs a contract and is requested that party wants to make certain the other party (the contractor) has relevant insurance coverage. The contractor then requests the certificate from his or her insurance agent, and provides the agent with the following information:
- The name, address, telephone number, and email address of the party who has requested the certificate (the certificate holder). The name and address of the certificate holder needs to be exact because that is the name and address that will appear on the certificate.
- Any special requests by the certificate holder such as being named as additional insured, a waiver of subrogation, or a specific amount of notification time required if the policy lapses or goes out of force within the policy period should be provided to the agent and listed on the certificate.
- Any other special requests. If a special request is outside of the agent’s authority, the agent will (or should) communicate that request to the insurance company and request permission to include any specific language requested before the certificate is prepared. The communication between the agent and the insurance company and the authorization to include specific language on a certificate of insurance should be documented and kept on file by the insurance agent.
The party listed as the certificate holder on a certificate of insurance is only assured that a contractor’s policy is valid and in force. The certificate holder’s only right is to receive notification if the policy holder changes or cancels the policy, usually within 10 days. The normal understanding of a certificate of insurance is that it is issued for information only because it does not confer any rights to the certificate holder.
If certificate holder requests to be named as an additional insured and that request is approved, documented, and included on the certificate of insurance, the additional insured status normally gives the main contractor (the certificate holder) the same coverage and rights as the sub-contractor who is the “named insured” on the subcontractor’s insurance policy.
It is the best practice for anyone who hires a subcontractor to obtain a certificate of insurance from that contractor.