Certificates of InsuranceWhether you are a small business owner, insurance company, or homeowner wanting to hire a business for work on your property, you most likely have discussed or requested a “certificate of insurance.”  While asking for or requesting a COI may sound like a simple task, there are some issues that surround certificates.  It’s not as easy as it may seem and here’s why.

What Is a Certificate of Insurance (COI)?

Simply put, a certificate of insurance can be provided by the insurance company, and it verifies an insurance policy with effective dates of coverage, policyholder’s name, and policy limits.  Business owners need to be prepared to provide this if they want to secure any bids on jobs and get clients.  Most people asking for a certificate do not want to assume any risk of expenses created by the contractor, such as substandard work, damages, or injury.

In most business circumstances, there is concern about liability situations that can arise and this is when certificates of insurance are typically used. Small business owners and contractors often have this document giving protection against liability for accidents and/or injuries happening at the workplace.

Issues that May Arise out of Certificate of Insurance Requests

Sending over confirmation of an insurance policy sounds easy thus far, but is it? Sometimes it’s not as easy as sending over basic coverage information, but rather the agent may have to endorse the existing insurance policy with specific verbiage relating to the business context.

The major problems that develop from certificate of insurance requests are often two-fold:

Description of Operations- Sometimes, there is a request for specific language/verbiage to be inserted into the “description of operations.”  The description of operations is designed to outline the specific job for which the certificate of insurance is issued, but sometimes wording can be inaccurate (pertaining to insurance protection) and even illegal. Agents and businesses need to ensure the wording is clearly expressed and accurate.

Additional Insured- If someone asks to be added as an “additional insured” on the certificate of liability insurance, that person is asking to be protected against covered losses that happen because of the policyholder’s (named insured) negligence. If someone asks to be an additional insured, that person has a vested interest and something to lose should something go awry.

What you need to know is that some business owner’s policies automatically cover additional insureds by having an endorsement, while others may need to have the additional insured added for an additional charge. Any entity asking to be named as an “additional insured” is requesting the business owner’s liability coverage be extended to protect them as well. 

Requesting and Providing Certificates of Insurance

Keep in mind that if you are hiring a contractor or any business to perform a job on your property, you should request a certificate of insurance.  If you are a business owner or contractor, you should provide a COI to your clients for proof of insurance.

As you can see there is a lot more to COI than meets the eye.  Now it may be easier for you to realize some typical issues that can create delays in getting the COI issued.  If you have any questions or concerns regarding certificates of insurance or how it impacts your business, call our offices today at Burkett & Associates and we will assist you in every possible way. We are here to assist you with all your Alabama insurance needs.  Call today at 256-704-7400.