Does My Small Business Need a Certificate of Liability Insurance?
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What happens when you have to prove to a potential client, a government body, or an industry association that you do, in fact, have Professional Liability Insurance coverage for your small business? The standard proof of insurance in those instances is called a Certificate of Liability Insurance. It's an important document that can make your life easier and help you expand your company's horizons.

The Perks of Professional Liability Insurance

Professional Liability Insurance (sometimes called Errors & Omissions Insurance or Malpractice Insurance) protects your business from alleged mistakes you or your employees make when delivering services or products. If a situation leads to a claim by a client or business partner that your work was deficient and thus caused them financial losses, Professional Liability Insurance covers your legal expenses. This includes…

  • Lawyer fees.
  • Court costs.
  • Administrative expenses.
  • Expert witness costs.
  • Settlements.
  • Court-ordered judgments.

Often, small errors lead to large liabilities. Even if you're not at fault, you might need to spend tens of thousands of dollars to defend yourself against a claim. For examples of these situations, check out "Professional Liability Lawsuit Examples: Lessons for Small-Business Owners."

Professional Liability Insurance is so important that many of your potential clients might require you to carry it before signing a contract. That's where Certificates of Liability Insurance come in. (For more information on why you might need Professional Liability coverage, read "Is Your Small Business Required to Carry Professional Liability Insurance?")

An Overview of Certificates of Liability Insurance

A Certificate of Liability Insurance is exactly what it sounds like — a certification that proves your business is covered for professional errors. You can offer it to clients or others requesting proof of your insurance coverage.

Unlike your actual Professional Liability policy, the Certificate of Liability Insurance is not a legal contract — it doesn't create obligations for you or your insurer. It is, however, still quite a useful and important document. For instance, it can act as the best reference of your insurance coverage, listing the following information all on one page:

  • General info about you and your insurers. This includes contact information, business names, and each of your insurance providers. (It's important to verify this information is correct.)
  • Coverage details. Your certificate lists the types of coverage your business carries, limits for each policy, deductibles, policy numbers, and the effective dates your insurance.
  • A "Description of Operations." This specifies the work your business does (and thus the scope of your Professional Liability coverage — e.g., carpenters are covered for carpentry work, not for business consulting).

While not all certificates are exactly the same, this sample certificate of liability insurance illustrates how yours might look.

What Else Can a Certificate of Liability Insurance Do?

Beyond summarizing your coverage details, a Certificate of Liability Insurance is a tool for attracting more business. Your certificate works for you in two important ways:

  • It expands your client base and possible contracts. More sophisticated clients and some more lucrative contracts will require you to carry Professional Liability Insurance. By providing those clients or business partners with your proof of coverage, you're demonstrating your company's professionalism.
  • It maintains client relationships. Though not legal documents, certificates are more than just sheets of paper. If you designate your client a "Certificate Holder" (you can see this in a box at the bottom of the sample certificate), they will automatically get updates from the insurer if your insurance status changes. That way your clients know everything is up-to-date and sound.

How Do I Get a Certificate of Liability Insurance?

Because certificates are only issued to those with active policies, the first step toward getting one is to purchase a Professional Liability Insurance policy. The application is straightforward and easy to navigate, but you will need certain information on hand to complete the process. For more details, read "How to Apply for Professional Liability Insurance."

Apply for Professional Liability Insurance and Get Your Certificate

Fill out an online insurance application to receive insurance quotes tailored to your needs, and get the proof of liability coverage you need to grow your business.

Professional Liability Insurance: Further Reading

Professional Liability Insurance on the Insureon Blog