Thanks for checking in with us to learn about Certificates of Insurance!
My name is Andrew Darlington and I am the founder of Veritas Risk Management & Insurance Services. I have been a licensed insurance agent for over 26 years. Our firm is licensed in over 35 states and we have sold thousands of business policies since I started Veritas in 2009. In addition, we have sent out tens of thousands of certificates of insurance over the years, so, as you can tell, we do have some experience in this arena.
What am I going to find here?
We will start with the basics and go all the way to the nitty gritty about Certificates of Insurance. On the left or above, depending on your device, you will see our Table of Contents so feel free to click on a section to skip there instantly.
Whether you are new to using certificates or already an expert, there can be more to learn! Certificates of Insurance are complicated, so we broke it down into some clear explanations so that you can understand how to handle every aspect of COIs
CERTIFICATES OF INSURANCE 101
If you are experienced with Certificates of Insurance click here to skip down to our Advanced section if you are already familiar with the basics of Certificates of Insurance.
What is a Certificate of Insurance?
A Certificate of Insurance (COI) is a document that summarizes the General Liability, Auto Liability, Umbrella Liability, and Workers' Compensation insurance limits for a company. It must include the name of the insurance company, the name of the insured (the client that bought the insurance), the policy number, and the policy period. The certificate will also list the types of coverage and the limits of liability.
A Certificate of Insurance is typically given to a third party to verify that the individual in question has the insurance needed for them to provide a service. An example of this would be a subcontractor, such as a roofer in Johnson City, providing a General Contractor (GC) with a Certificate of Insurance before starting the roofing work.
What are the steps to get a Certificate of Insurance?
Step 1
You must have either General Liability, Auto Liability, Umbrella Liability, or Workers' Compensation Insurance Coverage. You may also have some other sort of liability insurance coverage such as Cyber Liability or Professional Liability coverage. If you don't, call us! We can help!
Step 2
Contact your Insurance Agent
- Let them know them know what coverages you need to show to the person requesting the certificate.
- Give your insurance agent the name, address, and email or fax (if you don't live in this century) and they will send the COI to the requestor.
How much is a Certificate of Insurance Insurance?
Free!
Generally, a certificate of insurance is free. Because you pay a premium for your insurance policy and the insurance company and the agent both make money from the policy, you do not have to pay for the certificate. If you are getting charged for a certificate, you may need to find a new agent and/or company.
What Is Included On a Certificate of Insurance?
A COI includes the names of the insured, the insurance agent, and the insurance carriers. The middle of the form lists and describes several types of coverage: Commercial General Liability, Automobile Liability, Umbrella/Excess Liability, Workers Compensation and Employer's Liability, and any special coverages such as Cyber Insurance. This section will also say whether there is an additional insured endorsement or waiver of subrogation for each policy, the policy number, the effective and expiration dates, and the limits of each policy.
While the form is just one page long, it contains many important pieces of information.
For a deeper dive into this topic, click here to read our full article "What Does a Certificate of Insurance Include?"
The Limits of Certificates of Insurance
Businesses often assume that Certificates of Insurance are entirely reliable. They assume that if a subcontractor provides a COI to them, then they can trust that the subcontractor has the needed insurance coverage. Unfortunately, it is not that simple. If you rely on certificates of insurance alone, you might not have the protection you need.
If you take a closer look at your COI, you will see that it says that it is for informational purposes only and does not confer any rights. A COI does not change coverage and is not necessarily a guarantee of insurance. It is just a piece of paper describing the insurance policy.
Look at our YouTube channel to learn more about how COIs cannot change your coverage and about the legal reasons why a COI still offers some protection.
It can also be important to check the exclusions on the insurance policy to ensure that the policy covers what it needs to despite the exclusions.
Can a Certificate of Insurance Change Coverage?
A COI is simply a description of what the insurance policy says, it does not change the policy. However, even an inaccurate Certificate of Insurance can sometimes create an obligation for the insurance company to provide the coverage it describes.
Almost all insurance certificates have a disclaimer at the top stating that it does not grant any rights and does not amend the insurance policy. It also says that it does not constitute a contract. Further, it specifies that additional insured or subrogation waived status requires an endorsement on the insurance policy, not just a mark on the certificate.
Thus, you cannot request that the agent add specific language to the Certificate of Insurance unless that language is in the policy already, or you ask the person whose insurance it is to add it to the policy.
If a Certificate of Insurance grants no rights, how can you be sure it is correct?
While it is best to check the insurance policy and not just the Insurance Certificate, there are some safeguards in place to make the Certificate of Insurance reliable.
- First, it is illegal to write a false certificate.
- Second, some agents and carriers have been held financially and legally responsible to provide coverage described on a COI. Since they inaccurately described it and misrepresented the policy to the consumer, they sometimes have to pay.
There are certainly risks to simply accepting a COI and no other collaborating documents. Do keep in mind, there are some legal protections against false COIs.
For more information on this topic, click here to read our blog post "Certificates of Insurance are Worthless".
How Long Is a Certificate of Insurance Good For?
A Certificate of Insurance is theoretically good until the expiration date of the policy. At that time, usually a year from the effective date, the insurance policy will either expire or be renewed. However, there is also a risk that your subcontractor might cancel their policy–and you would never know.
All a COI says is that the contractor had insurance at the moment the agent sent it. Just because you have a Certificate of Insurance does not mean that you will be notified if the policy is canceled.
For example, let’s say you hire an electrician to do the wiring on a house. You request a Certificate of Insurance from his insurance agent, and you receive it in the mail. While you might think you are all good to go, it turns out that right after the agent sent you the Certificate, the electrician called in to cancel his insurance.
Later, the electrician starts a fire and damages the house you are building. You expect to be able to bill his insurance, but he doesn’t have any because he canceled it.
Because of this, even if you have a Certificate of Insurance from your subcontractor you still might not have the protection you need.
There is a more complicated process you can go through to find out when a policy is canceled.
Where Do I Get a Certificate of Insurance?
Especially with recent advances in technology, Certificates of Insurance can be faked. For example, your subcontractor could have gotten a Certificate of Insurance years ago and later on canceled their insurance. Now they just write over the date so that it looks like the certificate is recent.
Some subcontractors have been doing this for decades. Now that computers can mimic the font on certificates much better than typewriters could, these fake certificates look all the more believable. This means that if you take a certificate directly from the subcontractor, you have a greater risk of accepting a fake certificate.
The correct process to follow is to ask the subcontractor to tell their insurance agent to send you the Certificate of Insurance directly. To avoid fake certificates, you should never accept one from the subcontractor. Always require them to have their agent send it to you.
CERTIFICATES FOR PROS
How to Spot a Fake Certificate of Insurance
Fake Certificates of Insurance (COIs) have caused problems for decades, and modern technology has only made the problems worse. It's now easier than ever to create a fake COI.
For example, let’s say that you as the General Contractor hire a roofing subcontractor to install the roof on the home you are building. As the GC, you want all of your subcontractors to have insurance. Your roofer had insurance years ago, and he has had a COI since then. But a while back he dropped his insurance to cut costs.
The problem is that this particular roofer doesn’t want you to know that. He takes an old Certificate of Insurance and writes in a new date. He has no insurance, but how will you know that?
One important step is to make sure that the form you received is the 2016 version of the ACORD 25 form. Also, check if the form has handwriting or has any fonts that don’t match. If so, it is probably fake.
What Is a Waiver of Subrogation?
One box on a COI is for “SBR WVD” which is short for “subrogation waived.” What is that? A waiver of subrogation waives the right of an insurance carrier to sue the third party.
Typically, if you make an insurance claim and your insurance company pays you, they will attempt to recover their losses. They can do this through subrogation–essentially, on your behalf they sue the person who caused the damages.
A waiver of subrogation is an agreement that the insurance company will not subrogate against someone. There can either be a specific endorsement on the policy waiving subrogation against a specific person, or a blanket waiver saying that anyone who the insured has a contract with waiving subrogation has that waiver.
For example, a GC hires a subcontractor and requires the subcontractor to waive subrogation. The GC accidentally starts a fire at the construction project, damaging the subcontractor’s tools. The subcontractor files a claim with his insurance carrier, and they cover it. Normally, they would sue the GC to recover the lost money. However, since there was a waiver they cannot do this.
It is important to note that some insurance companies will deny your claims if you waive subrogation, so be sure to check what your policy says before offering such a waiver.
What Is Additional Insured?
Another important box on a Certificate of Insurance is the “additional insured” box.
An additional insured endorsement means that the insurance policy will protect the additional insured person if someone sues them because of a mistake made by the named insured. The named insured is the primary person the policy protects, in other words, the policy holder.
Thus, the named insured and their insurance company will be contractually obligated to defend the additional insured and pay damages against the additional insured if they make a mistake that leads to the additional insured being sued.
Additional insured status can be a very important part of your protection. Imagine that your excavation subcontractor hits a gas line. The leak causes an explosion, severely damaging the house next door. The neighbor will sue the subcontractor, but they will also sue you as the General Contractor. Additional insured status would protect you in this situation if you had it. Read more about why being additional insured is critically important here.It is important to note that just because an additional insured box is not checked does not necessarily mean that you are not protected under additional insured status. (Read more about that here). This is because of what is called “blanket additional insured.”
Blanket Additional Insured
Blanket additional insured is when an insurance policy covers as additional insured a whole group of people who interact with the subcontractor rather than naming each one of them individually. Blanket additional insured endorsements can be used to give additional insured status to GCs and others without needing to change the policy by adding an endorsement that lists a specific person as additional insured.
A Few Important Technicalities About Additional Insured.
Additional insured status is necessary to protect you from harm, but there are a few complexities you need to be sure to know about. You want to be sure you are both additional insured for “Products and Completed Operations” and for “Ongoing Operations” on your subcontractor’s insurance. Ongoing Operations protects you while the project is happening. Products and Completed Operations protects you if you are sued because of a problem with the finished product caused by the subcontractor.
There are also several cases in which additional insured status will not protect you that you should be aware of. Additional insured status does not protect you when you are the reason that the damage happened. It does not protect you when the subcontractor was not involved in the incident at all. Lastly, it does not protect you when the subcontractor was not named in the lawsuit.
To give you a little more context, we have also created a blog to explain the times that Additional Insured status DOES NOT help. You can read it by clicking here.
What is the difference between a Certificate of Insurance and a policy, binder, or dec page?
An insurance agent gives a COI to a third party to verify that the insured has insurance, while the insurance carrier gives these other documents to the insured himself to show him what his coverage consists of.
COI v. Policy
An insurance policy is essentially a detailed contract between the insured and the insurance carrier. It specifies all of the details of the insurance policy. Because this contract states your insurance coverage, you and the insurance company can make changes to it and those changes will actually change your coverage.
The insurance policy contains pages of detailed information. It contains the entire agreement between you and the insurance company as to what your insurance consists of.
A Certificate of Insurance doesn’t just describe one insurance policy, it describes several of them–but only liability policies. It is also important to note that a Certificate of Insurance cannot change a policy, it can only describe what already exists in a policy.
COI v. Binder
A Certificate of Insurance and a Binder both serve as proof of insurance, but to different people. A Certificate of Insurance is proof of insurance to a third party, while a binder is proof of insurance given to the insured before the policy itself has arrived.
An insurance binder describes an insurance policy that has not yet been issued and verifies that it will go into effect in the future. Normally a binder will last for a set period of time, and after that, the policy itself will go into effect. At that point, you should be sent the policy itself.
For example, let’s say that you are buying a house, and the mortgage company needs to see that you have insurance. You can’t put insurance into effect on the house yet because you don’t own it. However, you can get an insurance binder which says that on a particular effective date (i.e. the date that you close on the house) your insurance will start protecting the house. You could give the binder to the mortgage company so that you can get your loan.
COI v. Dec Page
An insurance declaration page (or “dec page”) is the first page of an insurance policy given to the named insured, while a Certificate of Insurance (COI) verifies to third parties that an insurance policy is already in effect. The named insured is the primary person the policy protects, in other words, the policy holder.
A customer should receive a declaration page when the policy is first created and with every renewal. It contains important information about the insurance policy such as the name of the named insured, endorsements added to the policy, the premium, the effective and expiration dates, the name of the carrier, and the name of the agent.
One major difference between these two is that the dec page is primarily a summary for the named insured, while a COI is primarily a summary for a third party. Another major difference is that a COI will typically list all liability insurance coverage the named insured has, while a declarations page just summarizes the insurance for a specific policy.
What is the difference between a Certificate of Insurance and an Auto ID Card or Evidence of Property Insurance?
A Certificate of Insurance pertains to liability insurance, while Auto ID cards and Evidence of Property Insurance forms pertain to other kinds of insurance.
COI v. Auto ID Card
An Auto ID card is a small card that verifies that you have auto insurance. Typically, the person whose insurance it is will hold on to it, especially while driving. They can verify their insurance to law enforcement during a traffic stop. They can also show it to someone they are in an accident with. It usually lists just a few things, such as the policy number, effective date, expiration date, insurance carrier name, and details about the car.
Auto ID cards and Certificates of Insurance are both forms of proof of insurance. However, there are some major differences. Insurance carriers give an Auto ID card to the driver to give to others. In contrast, an insurance agent should give the Certificates of Insurance directly to the person requesting proof of insurance. Further, Certificates of Insurance describe multiple kinds of insurance, while an Auto ID card just describes one. Lastly, COIs have much more detail about each kind of insurance than Auto ID cards, but both are just summaries of insurance coverage.
COI v. Evidence of Property Insurance
Both a COI and an Evidence of Property Insurance (EPI) describe insurance coverage, but a Certificate of Insurance describes liability coverage while an Evidence of Property Insurance describes property coverage.
An Evidence of Property Insurance form describes property coverage using the ACORD 27 & 28 forms. It describes both the property itself and the insurance coverage of that property. This is the form you want to see if you need to verify whether someone has adequate property insurance. Perhaps you rent a building from a landlord and want to be sure that they have insurance. Or perhaps you have a mortgage and your bank might want to see your Evidence of Property Insurance.
Perhaps even more important than the ACORD 27 & 28 forms are the forms that describe what kind of property damages are covered. The CP 10 10 form, or the “Basic Causes” form, protects from basic causes of property damage. This typically includes fire, lightning, vandalism, vehicle crashes, windstorms, riots, and hail, among other things. The Broad Causes form, CP 10 20, covers all of these things plus water damage, ice or sleet, weight of snow, and falling objects. If you need even more protection, the Special Causes form, CP 10 30, can help. This form protects you from nearly every incident, sometimes with exceptions for floods, harm caused by laws, and earthquakes.
Congratulations!
You now know more about Certificates of Insurance than 98% of the insurance agents out there, and if you are an insurance agent, you are welcome 😉
If you have any questions, please do reach out to us! We are always happy to help!
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Veritas Risk Management, Inc. offers proactive risk management services covering a wide variety of topics. Veritas Risk Management, Inc. does not engage in the practice of law, accounting, or tax consulting. We encourage everyone to consult with his or her own professional advisor for details concerning his or her specific facts, situations, and circumstances.
Andrew Darlington CIC, CRM, CBIA, AAI
Andrew, the agency owner, has been in the insurance and risk management industry since 1997 and started Veritas Risk Management in 2009.
