How to read a certificate of insurance form

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By Harry J. Lew
June 25, 2019
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A certificate of insurance form establishes proof of insurance and summarizes your coverage on one page. Here's how to use and read certificates of insurance.
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When people hire your company, they want to know working with you won’t increase their legal liability. Similarly, when you hire vendors or subcontractors for your firm, you want assurance that hiring them won’t harm you financially. How do both parties put these concerns to rest? By requesting a certificate of liability insurance form.

A certificate of insurance (COI) form, also known as an ACORD certificate of liability insurance, is a document that establishes proof of insurance. It lists on one page your liability insurance policies, your coverage limits, and your policy effective dates. This shows everyone involved that you are adequately insured. By reviewing a COI, your customers can close deals knowing there’s an insurance safety net in place. (See a certificate of insurance example [PDF]).

Why is a certificate of insurance form important?

Most business owners strive to be competent, honest, and truthful. Sadly, reality may fall short of expectations. Vendors and business partnerships might:

  • Not be as skilled as promised 
  • Fail to mention prior legal disputes 
  • Claim to have insurance when, in fact, it expired many years ago

Asking for a current COI helps verify a potential vendor or subcontractor’s financial-responsibility claims. When lining up work with a new client or vendor, never hesitate to provide or ask for a certificate of insurance form. It’s simply a good business practice.

In what cases are certificates of insurance necessary?

Certificates of insurance have a wide application in the business world. Any time parties to a transaction are concerned about losses and legal liability – something most small businesses worry a lot about – certificates of insurance play an important role. Here are some cases in which COIs are essential:

  • A commercial property owner wants to confirm insurance in case tenants cause a fire or injure a visitor. Without a COI, the property owner might have to pay for repairs himself.
  • A manufacturer requests a COI from a contractor prior to beginning a facility renovation. Now the owner knows she won’t have to pay for any structural damage the remodeler causes.
  • A building design firm wants to insulate itself against the risks of bringing subcontractors onto its construction sites. Getting proof of insurance eliminates its risk of having to pay for the medical bills of injured workers employed by the subcontractor.
  • A commercial bank needs a COI before accepting the collateral pledged against a construction loan. This assures them that the loan will still be collateralized even if the pledged property burns down.
  • A municipal government asks an engineering firm to provide a COI before starting a road construction project. This creates a liability barrier for the municipality should the engineering firm draw up faulty plans.

As you can see, whenever businesses engage in projects that can trigger losses for multiple parties, certificates of insurance are the go-to document.

What are the main sections of an ACORD certificate of insurance form?

There is no standard format for a certificate of insurance form. However, ACORD (Association for Cooperative Operations Research and Development), a nonprofit property and casualty insurance organization, provides a form used by most insurers, agents, and brokers. The ACORD COI packs a large amount of information on one page, including:

  • Date: When the form was issued
  • Disclaimer: Summarizing the nature of the COI 
  • Producer: The insurance agent or broker who issued the certificate
  • Insured: The name and address of the person(s) or business covered by the policy
  • Insurance coverages: The insured’s liability insurance coverages – typically general liabilitycommercial autoumbrella liability, and workers’ compensation. This section also shows policy numbers and their effective and expiration dates.
  • Insurers: All companies providing the coverage listed above
  • Limits of liability: How much coverage in dollars each policy provides with coverage subtype 
  • Description of operations, locations, vehicles: A catch-all space to respond to specific requests such as being listed as an additional insured
  • Certificate holder: The person / company to whom the COI was issued
  • Cancellation: Notice that the certificate holder will be notified if the insured cancels the policy before the expiration date
  • Signature: Signature of the agent, broker, or an authorized representative of the agent or broker

How to read a certificate of insurance

Once you receive the form, here’s what to look for:

  • Make sure the business name on the form matches the vendor you thought you were hiring.
  • Verify that the policy expiration date does not come before the completion date of your project. If it does, ask the vendor to submit another COI confirming the policy’s renewal.
  • Make sure the company has general liability insurance at the very least, as well as workers’ compensation insurance. These policies will cover you for any third-party losses (property damage, bodily injuries) the vendor causes, as well as any injuries to his or her employees during your project.
  • Determine that the vendor’s liability limits meet or exceed the limits on your own insurance. If they don’t, consider requiring the person to purchase additional insurance.

In rare cases, business owners will present counterfeit COIs because they can’t afford to maintain genuine insurance. If you have any reason to doubt someone, request the COI directly from the person’s insurance agent or broker.

Is a certificate of insurance form the same as an insurance policy?

No, a certificate of insurance is only a summary of existing insurance coverage. But it isn’t an actual insurance policy. In other words, when you give a customer your COI, you’re not entering into a contract to cover that person’s losses. You’re just providing proof that you have insurance. However, you may wish to provide coverage to the certificate holder. In that case, you must make your customer an “additional insured” on your policy. This is easy to do. Just call or email your agent or broker and ask the person to amend your declarations page to include the name of your customer.

Access your certificate of insurance with Insureon

Insureon provides an easy online application to compare insurance quotes for top-rated carriers in the United States. Once you have purchased a policy, you can download your certificate of insurance or request one from your carrier online with Insureon’s Customer Portal. Start an application today to compare quotes to insure your business.

Save money by comparing insurance quotes from multiple carriers