Does your business provide services where there’s a potential for liability or loss? Then you need a Certificate of Insurance.
This unassuming document is powerful in its simplicity. It’s usually just one page long, but it can mean the difference between winning or losing new client work. That’s the case for almost any kind of business, whether you manage an events company or you’re an enterprising freelancer.
If you’ve been in business for some time, you’ve likely shared this document with clients dozens of times before, but have you ever stopped to wonder what it actually says? You’re about to find out.
Below we explain what a Certificate of Insurance is, and why your clients expect you to have one. Then, we dig into each section of the COI and reveal what they represent.
What Is a Certificate of Insurance (COI)?
A Certificate of Insurance (COI) is a physical or electronic document that provides proof that you have a valid insurance policy in place. A COI is issued by your insurer, and is typically included in the package of documents you receive upon purchasing your policy. This one-page document summarizes the key details of your insurance policy, including:
- Your legal name and business information
- The insurer who issued your policy
- The policy number, effective date, and expiration date
- The type of coverage included (e.g. Professional or General Liability)
- Policy limits and deductibles in dollar amounts
- Additional Insured(s)
Most Certificates of Insurance use a template developed by the Association for Cooperative Operations Research and Development (ACORD). This non-profit research group has supported the insurance industry for over fifty years, and is responsible for providing the standardized templates used by insurers. At Thimble, we use the ACORD 25 certificate.
Why Do You Need a Certificate of Insurance?
Any business that needs protection against liability for business projects could benefit from having a Certificate of Insurance. COIs are expected in any business situation where’s there’s a potential for liability or loss.
For example, if you’re a handyman coming to work on a project at your client’s workplace, they’ll want to know they won’t be found at fault if someone is injured due to an accident that results from the work you are doing for them. Likewise, if some of your equipment crashes through a window and causes property damage, they’ll want to know that you have the coverage to pay for that.
COIs are expected in any business situation where there’s a potential for liability or loss.
The benefits of COIs extend to other types of businesses as well, including small business owners, freelancers, and solopreneurs. For example, if you’re an IT consultant who provides web development or monitoring services, your clients want to know that they’re protected from potential losses due to site downtime or a server crash. Your COI can put their minds at ease.
Basically, if there’s potential for something to go wrong during the course of your work with a client—whether that “something” is physical injury, property damage, or another type of loss—you’ll want to get an insurance policy (and the COI to prove it).
Almost all businesses hiring contractors will require that the contractor provide them with a COI. While less expected with other transactions, such as between service businesses, pre-empting the ask and providing your prospective client with a COI during the sales process can do much to net their trust and earn their business. It’s a clear indicator that you take your business seriously, and establishes your professionalism.
In fact, it’s a common practice for clients to ask to be added as an Additional Insured to your policy, to ensure they’re fully covered for any damage you may cause.
Your Certificate of Insurance, Explained
Your COI provides proof that you have current insurance coverage. It also distills the details of your insurance policy into one handy document you can share with clients, rather than forcing them to read your entire insurance policy. As you might imagine, that’s a lot of information to pack into a single page.
If you’ve ever wondered what information gets included, you’re in the right place. We’ll take a magnifying glass to the fine print and dissect each section of the COI.
Let’s start with the top and make our way down, shall we?
At the very top of the COI, you’ll see the ACORD logo and a message explaining that what you are looking at is a Certificate of Insurance. This will state something official, like “This certificate is issued as a matter of information only and confers no rights upon the certificate holder.” This statement will be in all capital letters to ensure there is no confusion that this is merely a COI showing proof of insurance, and not a document that amends or changes any terms of the referenced insurance policy.
Beneath that will be the date of the COI and the interested parties it involves:
1. Date: This refers simply to the date the certificate was issued. It is not the same as the Policy Effective Date; rather, this just refers to the date the certificate was issued.
2. Producer:This refers to the insurer of the policy. It will include the legal name of the insurance company or agent’s name, along with their business address. This information is generally only included for the agent’s (i.e. Thimble’s) information.
3. Insured:This refers to the policyholder (that’s you!). It will include the legal name of the policyholder, whether that’s your name or the name of your company. As with the Producer, this will include contact information associated with your policy, such as your business address and email or phone number.
4. Insurer(s) Affording Coverage:This section will name all the insurance companies providing coverage, along with their NAIC number. This number is assigned to each individual underwriting company registered with the National Association of Insurance Commissioners. If there is only one insurer, their name will appear in the first line, next to the words “Insurer A.” If there is a second insurer, their name and NAIC # will appear in the second line, next to the words “Insurer B.” If you guessed the third insurer is listed as “Insurer C,” you’ve got the hang of things.
Now, onto the Coverages section. This is the main event of the COI, the meat and potatoes, the section we all came here to see. This section is organized into different rows, with each row representing a different type of insurance coverage. These may include:
- Commercial General Liability
- Automobile Liability
- Umbrella and Excess Liability
- Workers Compensation and Employers’ Liability
For each type of insurance coverage, the following information will be listed in a column format, creating that tabular format you see on COIs:
5. Insr Ltr: This stands for “Insurers Letter” and refers to which insurance company is providing this specific coverage type. If you see an A in this column, it refers to the insurer identified as Insurer A in the Insurers Affording Coverage section.
6. Addl Insd: This stands for “Additional Insured.” This will indicate whether the Certificate Holder is listed as an Additional Insured on the referenced policy. In layman’s terms, this states whether or not your client, or whoever you are sharing the COI with, is named as an Additional Insured. If so, this column will be marked with a Y or X to represent “yes.” If not, the column will remain blank or be marked with a N or N/A to indicate “no.”
7. Subr Wvd: This indicates whether or not the right of subrogation (SUBR) has been waived (WVD) for Additional Insureds. If so, there will be a Y or X in this column to indicate “yes.”
8. Policy Number: This one’s easy: it’s the policy number.
9. Policy Effective Date: This is the date the insurance policy becomes effective. It needs to be before, or coincide with, the effective date of your business contract.
10. Policy Expiration Date: This is the date the insurance policy expires, which needs to be on or after the termination of the business contract.
11. Limits: This section describes the individual policy limits for each type of coverage listed. For example, the General Liability line will include the limit for each occurrence, damage to rented premises per occurrence, medical expenses per person, personal and advertising injury, general aggregate, and products and completed operations aggregate.
12. Description of Operations / Locations / Vehicles: This section will outline any specific operations, locations, or vehicles this COI refers to.
Finally, we reach the end of the document. This section reveals who the Certificate Holder is and seals the COI with a signature from your insurer.
13. Certificate Holder: The COI acts as proof that the insured has insurance, so they will be listed as the Certificate Holder. If a client is named as an Additional Insured, then they can also be considered a Certificate Holder. The legal name of your client’s company and their contact information should be listed here.
14. Cancellation: Bookending the COI is an additional statement of official text, which essentially states that the insurer will notify the Certificate Holder if your policy is canceled for any reason before the Policy Expiration Date listed. This only applies if the client is listed as an Additional Insured.
15. Authorized Representative: This will feature a signature from an authorized representative of the insurance company who issued the COI.
Whether your business services individuals or other businesses, a Certificate of Insurance can help you earn your clients’ trust, and secure more projects for your business.
When you purchase insurance with Thimble, we issue a COI to all policyholders and Additional Insureds for free as part of your policy. Your COI can be accessed anytime online or through the mobile app (where you can email it to clients in a matter of taps). Get a quote for your business now.
Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.