Each company needs proper business insurance. It protects companies from losses that may occur during the normal course of business. Companies assess their insurance requirements based on potential risks, which can vary depending on the type of environment in which they operate. You can choose between various types of business insurance, such as property damage, legal liability, and employee-related risk insurance.
Regardless of the business industry you are in, each company is vulnerable to risks. These occurrences could result in significant financial hardship or even bankruptcy for your company. With appropriate insurance coverage, you protect your company from everyday risks that could cause significant financial harm. When things go wrong, having the right business insurance plan and certificate of insurance gives you peace of mind that you won’t have to pay out-of-pocket expenses.
But when it comes to certificate insurance, many business owners often wonder what exactly it is. Basically, certificates of insurance (COIs) are documents that an insurance provider or broker issues to confirm the existence of insurance coverage granted to specified individuals or businesses under specific conditions. In this article, we’ll explore COIs and what makes them important.
What Are COIs?
When you have business arrangements with another company, it is critical to define whose insurance will apply in the case of an incident. Or, in other words, you should sign a contract with your partners specifying insurance obligations. And if you don’t have a written contract, you should obtain a certificate of insurance listing your business as an additional insured.
Keep in mind, however, that COIs are not formal contracts between you and your partners, but rather proof of insurance.
Understanding the importance of COI
COI is essential for each business that often deals with on-site contractors or suppliers. Because liability and loss are of great concern for each business, the certificate proves that you are properly covered regardless of the situation you are in. Each business owner and contractor is obliged to obtain a COI that keeps them well-covered in a situation of liability when it comes to workplace accidents or injuries. When liability insurance is purchased, a COI is usually issued.
The certificate of liability insurance must include the names and descriptions of all people who are insured. Without it, entrepreneurs and contractors can encounter difficulties closing significant business deals. The reason is that a lot of individuals and companies hire contractors, so all clients need to know if the contractor and entrepreneur have obtained liability insurance.
This way, they will be certain that if someone is injured or there is an accident of any kind, they will not take any responsibility. The laws for issuing liability insurance vary by region. Therefore, the COI should be written in accordance with local regulations in mind.
When is it needed?
Whenever third parties enter your property to carry out a task that is not under your direct control, you should ask them to add your business as an additional insured on their coverage for the duration of the task. The COI would detail the coverage offered to your organization under particular conditions.
Similarly, if you are a contractor performing tasks on another business’s premises, you should ask your insurance provider or broker to extend your liability to account for the increased risks posed by that task.
What should I do if I am asked to show the COI?
Typically, your business associates will ask you for your COI before the beginning of a project to ensure you are properly covered. In that case, first, you need to contact your insurance provider or broker and submit a request to increase your liability to cover any risks brought on by the project. Once you receive the COI, make sure to save one copy for yourself and give the other to the business associate.
To stay on the safe side when contractors are working on your premises, you should also ask them to provide you with a copy of their certificate of insurance. Once you have it, make sure to verify all details, such as insurer and insured details, policy number, the limit of liability, and expiration dates among other things.
Final thoughts
Nothing should stand in your way of building business partnerships if you know how to leverage your certificate of insurance. Keep in mind, however, that COIs are not a substitute for an actual insurance policy, which you will also need to have. To make sure your business is always properly covered, contact an insurance broker sooner rather than later.