Home Finance Why Do I Need a Certificate of Insurance ?

Why Do I Need a Certificate of Insurance ?

Online Learning Sites

Has a new client you recently contracted with asked you for a certificate of insurance (COI) for a particular type of coverage? A COI proves your company has the necessary insurance coverage required by the other party to do business with them. This is not an unusual request, especially if your company is in real estate, healthcare, construction, or self-employed since insurance standards are ever-changing.

If you are wondering why it’s necessary to invest in one and if it’s worth it, this article will provide insight into these questions, as well as an overview of what a certificate of insurance is.

What is a Certificate of Insurance?

If you currently don’t have a COI on file for your business, it’s never too late to request one from your insurer. On the proof of insurance you receive, there should be much of the following information:

  • Type of coverage
  • Date you bought the policy and when it expires
  • Coverage limits

The Role Your COI Plays in Customer Relations

For many businesses and individuals, working with a contractor that can’t prove they carry insurance is a non-starter. Imagine yourself trying to hire a tree trimming business for your yard, and while they claim to be insured, they have no evidence to prove it? You likely wouldn’t hire that company. A certificate of insurance avoids this issue entirely and also benefits your customer relations, including: 

Verifies Your Insurance

As mentioned before, a Certificate of Insurance serves as proof of your being insured. However, instead of giving them a 30-page copy of your policy to skim through for important details, a COI consolidates it into a compressed form that highlights the information needed to verify your compliance.

Reduces Liability for You and Your Client

While your COI helps protect your compliance with a customer’s insurance requirements, it also provides them protection should something go wrong during your business transaction. 

Highlights Your Professionalism

Companies that provide a certificate of insurance are creating an image of professionalism and responsibility to their clients. 

Certificates of Insurance: What Type Do I Need?

The process of having a COI issued is relatively straightforward and requires you to request it from your insurer if you didn’t get one when initially purchasing your coverage. Also, if you have multiple coverage types, you may need to request a certificate for each policy. 

Check out the following examples of COIs you might request for your business insurance coverage: 

General Liability Insurance Coverage

This COI commonly gets requested by parties involved in contracted work, such as constructing a home, for example. You may have to send it not only to the project management but possibly the lender, as well as the homeowner and other third parties involved. 

Commercial Auto Insurance

Another type of COI you may need from your insurer is your commercial auto coverage. If you run a delivery service, own a warehouse that has its own fleet for shipping, or run a daycare that provides transportation to and from your facility, customers probably will need to see proof of insurance.

Workers’ Compensation COI

Any business subject to workers’ compensation laws should have a COI proving their compliance. For example, sending a certificate before bidding on jobs may be a requirement if you are a contractor with employees.

What Industries Usually Require a COI?

Nearly every business worldwide should probably have a current certificate of insurance on hand to satisfy their customers’ needs for proof of coverage. But, some industries experience such requests as a normal part of their everyday business routine, including:

Service Providers

If you run a pest control company, your clients might want to see your certificate of insurance to protect them against any damages or accidents you might cause with your services. For example, someone on a commercial property you’re servicing trips over your equipment and sprains their ankle. 

Realty Services

Before a real estate developer hires a realtor to write up a sales contract for a new housing project, a COI might be requested showing proof of professional liability insurance. This will ensure they have protection from any contractual mistakes that lead to financial damages with a prospective buyer.

Construction and Trade Companies

Whether you build houses or handle plumbing, a contractor that hires you may need your COI before allowing you to start work on their project. Homeowners requesting a certificate have the same intent as a contractor: ensure they are protected from any damages you might cause when working on their projects. 

Industry Consultants

If you run a consulting business, don’t be surprised if a company that hires you wants to see a COI before signing any contracts. For example, suppose you provide marketing services. In that case, they want to ensure your professional liability coverage is up-to-date and adequately protects them should you not hold up your end of the service agreement. 

Final Note

If you don’t currently have a certificate of insurance, don’t worry! Getting one issued is simply a matter of requesting your current carrier. Depending on who provides your coverage, you may be able to do this online with just a few clicks of your mouse or have to call their customer service. Costs can vary, though many insurers provide these certificates free of charge unless you need one expedited.

So, don’t procrastinate and provide proof of your business coverage quickly and easily upon request by ordering your COI right away.

LEAVE A REPLY

Please enter your comment!
Please enter your name here