These days, it would be irresponsible to run a business without insurance. In fact, in all but one state, having workers’ compensation (with a certain number of employees) and a commercial auto policy (with a work vehicle) are legally required. Basically, whether or not you think you need it, you need it.
But few businesses settle with just the federal insurance requirements. Rather, they will take out several policies in order to protect themselves from all possible liability suits.
Insurance is a complicated world, with jargon like “Additional Insured Endorsement” or “Certificate Holder”, but because there’s so much crossover from one policy to another, it’s easy for terms and ideas to get muddled or confused. Below, we’ll try to clearly explain what these important phrases mean and why they matter.
First, understanding general liability
Before we can dive into the nitty-gritty, it’s important to first take a step back to gain perspective. In order to do that, we must begin with general liability insurance.
General liability insurance is sometimes also called general liability business insurance. A liability policy is a must-have for both big and small businesses alike, since it safeguards them from claims of injury or damage done to third parties. Whether or not the business is at fault, a typical general liability policy can financially cover the following situations:
- Medical bills for a customer that gets hurt by your equipment or on your property
- Legal fees
- Bodily injury the business is responsible for
- Third-party property damage sustained by the client
But how would that play out?
You’re a contractor remodeling the second story of a home. This project involves multiple workers, tools, and equipment all hosted on the roof itself. Should this practice lead to a tool falling between a roofing joist and injuring someone or damaging the property (third-party property damage), you could be the one that’s held liable.
Certificate of Insurance
Now that we’ve reviewed the basics of general liability, we can start delving into the terminology. The ability to distinguish and explain these phrases will help you fully understand who and what your insurance policy covers. With that stated purpose in mind, we’ll start with an easy one: the Certificate of Insurance.
Sometimes called the Acord 25, the Certificate of Insurance (COI) is a document that is typically used in order to certify that you have liability insurance. It’s worth mentioning that this document doesn’t serve as any sort of amendment as to the details of the coverage and/or policy; instead, it acts as a physical verification of coverage. A COI will include all of the relevant details of the insurance policy, such as:
- Named Insured(s)
- Type of Coverage
- Coverage Limits
- Insurance Provider
- Policy Number
- Policy’s Effective Periods
Upon completion of the transaction, the Certificate of Insurance will be sent to the policyholder. This is the party—typically the primary Named Insured—that selected and then purchased the plan (hint: if it’s your name on the top of the COI, you’re the Named Insured).
But why would this matter?
Well, in some cases, a client requests that the vendor or subcontractor show them their COI. This acts as proof of insurance and assures them that you are, in fact, the policyholder. It tells them you have the necessary insurance to pay for any potential damages—whether bodily injury or third-party property damage—that might occur throughout the duration of the work you’re doing.
So, if requested, you would hand the client the COI, and they, in turn, would add their name to the document, indicating that they’ve seen and received it. As such, they then become known as the certificate holder.
There’s a great deal of speculation and confusion about adding other parties to an existing insurance policy under the title of Additional Insureds. Naturally, an insurer wishes to reduce the amount of coverage provided, whereas the policyholders want as much coverage as possible, especially to all of the parties that may be involved in a given project.
An Additional Insured Endorsement is a provision to your typical general liability insurance policy. It broadens the coverage to other relevant work parties or involved members, and it could be applied to individuals or a company. In such cases, they would be added to the policy and then be named on the Certificate of Insurance. Afterwards, a copy of the COI should be sent to them for record keeping purposes.
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If you don’t have a general liability or professional liability insurance policy for your business, you’re playing with fire. But until now, depending on how much you work, you’ve had to spend a lot of money paying for coverage when you’re not working. Bad for business, bad for you.
Say you’ve been hired for a gig that’s only going to last two days, but you still need insurance. With your average insurer, you’d be forced to purchase an annual policy. So, even if you don’t have other jobs, you’re still paying for days that you don’t use it. But, these days, there’s a better way to protect you and your business.
Thimble is a revolutionary on-demand insurance company that is turning the insurance market on its head. Instead of trapping you in an annual contract, Thimble lets you purchase a policy by the hour, day, or month. And, you can add as many Additional Insureds as you need, for free.
Getting a policy with Thimble is as affordable as it is easy. Simply visit our website or download the Thimble app and enter your ZIP code, desired coverage, and a few other details to purchase a policy. In under a minute, you’ll go from zero defense against liability to having a Certificate of Insurance on hand for whatever life throws your way.
Thimble exists to make insurance simple. We hope these definitions were informative, and if you’re looking for coverage that works when you do, go with Thimble.
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.