Just by the nature of being in business, you will come into contact with many other businesses and individuals, which means liability risks are always present. For example, a customer can slip and fall on a wet floor in your premises or a staff can accidentally knock over an expensive item at a customer’s home while on delivery. Risks are always there.
A certificate of insurance (COI) is a form provided by an insurance company that verifies there is an insurance policy in place. It is a document that makes it easy to share information about your policy, and provides proof you are protected against such risks that may occur in the course of running a business.
You can also ask other businesses you work with to provide their COI to prove that they are also protected against liability risks and exposure, like product liability, contractual liability, and general liability, so that you have greater peace of mind while working with them.
Without insurance, our businesses are at risk of being held liable for damages, mistakes, injuries, and more. When you do business with another party, you can take on their risk, too, so it is important to know if they are covered.
A COI is an easy and effective way to share this information. And you can actually get your certificate of insurance in minutes from a reputable insurance broker.
How a Certificate of Insurance Works
When you purchase auto insurance, you are provided with an insurance card that summarizes the details of your policy. That is exactly what a COI does for business insurance.
The COI is not the actual policy, though. Instead, it is just a form used to conveniently provide pertinent information so that you can easily see if a business is carrying the proper insurance or provide your policy details to another party.
COIs are also called ACORD certificates because they are often presented as an ACORD 25 form. The Association for Cooperative Operations Research and Development (ACORD) is the agency that provides these forms, and over 90% of insurance carriers use them. This makes them standardized and easy to understand.
Why You Should Have a Certificate of Insurance
Businesses you work with will want to know that you are financially stable and protected from risk, so they may ask you for a COI if you work with them.
Sometimes, having a COI on hand can make the difference of whether you are hired for a job or not. Providing a COI can even be a prerequisite to making a bid or continuing discussions about a business contract or tender.
Whether you are a vendor, a contractor, or a supplier, you could be asked by businesses or individuals about the details of your policy, and the COI is the easiest way to give it to them.
Some businesses have strict requirements about keeping COIs on file. They may require you to have a COI on file with them just to drive onto their parking lot.
Especially for large companies with a lot of vendors and suppliers and are therefore open to more risk, COIs are just one of the facts of doing business.
Projects for government work will often compare COIs from various bidders to see which ones meet the job requirements. Government contracts usually require that policies provide a certain amount of financial liability.
Showing your clients a COI, even when you aren’t asked for one, shows that you are proactive, too, and this could set you apart from other businesses.
Even if you aren’t bidding on projects, showing that you are a serious and responsible business owner is important to maintaining strong client relationships.
How to Validate a Certificate of Insurance
Sometimes, you will need to get a COI from another business you are working with. If you receive a COI from a vendor or subcontractor, how do you know if it is valid?
A COI would be hard to fake because its layout is rather complex, but you should still check it thoroughly. Checking to ensure that the COI you get from someone is not a fake certificate of insurance can be difficult, but there are some details to keep your eye out for.
Make sure that there are sections for worker’s compensation, general liability, and automobile coverage. And if you have any doubt, call the insurance company.
The most important things are to check the date to make sure it is current and also check that the name on the policy matches the name of the company that is working with you.
Often, a COI is requested directly from the insurance company. Make sure to check the limits of the policy to ensure that they meet your minimum requirements, too.
How You Can Get a Certificate of Insurance
Technology continues to make our lives easier in many ways, so with some insurance brokers, getting a COI is very easy to do. With some insurance companies, your COI is even available through an app on your phone, making it hassle-free to get an up-to-date certificate to a potential client.
But if you aren’t insured with a company that provides fast and free COIs, you could waste valuable time trying to get one. You might also have to pay for a COI.
Some insurance companies charge anywhere from $15 to $50 to provide a COI on your behalf. While that might work for large companies bidding on gigantic projects, it isn’t going to work for a typical business owner that needs a COI readily available.