Certificate of Liability Insurance: Everything You Need To Know
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A certificate of liability insurance (COI) is a document that proves your business carries liability insurance. It is not the same thing as your policy. Issued to the policyholder by the insurance company or broker, a COI summarizes your policy details, including the insured's name, type of liability coverage, policy effective date and coverage limits. A COI is often required when a client or customer is requesting proof of liability insurance before hiring you for contract work.
Keep reading to learn how a COI works, when you need it and how you can get one for your business.
What Is a Certificate of Insurance?
A COI is typically a one-page document issued by your insurance company or broker that summarizes your business insurance coverage. Without a COI, a company or contractor may struggle with securing work. Accidents happen and clients will almost certainly want to work with a company that has liability insurance coverage and can prove it.
For example, if a contractor caused over $100,000 in liability damages, the client knows they can recoup their losses because the contractor is insured.
COIs may be issued on a per-project basis, and many COIs have a section for the certificate holder. The certificate holder is the customer or client who retains your service, and this section should include their name or company name and contact information. You should always complete this section before performing contract work.
However, there are some cases where the certificate holder section is left blank. For example, a homeowner may request a COI from their HOA’s insurance carrier just to keep for their personal records.
Here is an example of what a COI looks like. On your COI, you will find a summary of your insurance policy details:
- Insured individual(s) or company
- Mailing address
- Insurance company contact information
- Type of liability coverage (e.g., general liability, commercial auto liability, umbrella, workers’ compensation)
- Insurance policy effective date
- Insurance coverage limits
Why Do You Need a COI?
You typically need a COI because clients or customers will request it before they work with you. Quite common in the construction and general contracting industry, a COI tells potential clients that you have financial backing when accidents happen. Attempting to secure business without a COI signals to customers that if they file a liability claim against your business, they may not be reimbursed for their losses.
What Types of Businesses Need a COI?
Nearly all types of businesses should carry liability insurance and have a COI proving so. Below are examples of businesses that should have a COI ready:
- Catering services
- Retail stores
- Accounting firms
- Law offices
- Construction businesses
- General contractors
- Medical facilities
If your business serves customers or clients and your industry has a relatively high liability risk, you will need liability coverage. Having proof of liability insurance coverage ready can help you secure future work when clients and customers request it.
Businesses that bid for government contracts may be required to include their COI with their proposal. Your COI, along with other required documents, like construction bonds, prove that you are a reputable contractor that will get the job done and can respond to accidents.
Even small business owners, such as those that offer drywall installation or roof repair services, should have a COI ready. The client is more likely to work with a business that has a COI than another business without one.
What Does a Certificate of Liability Insurance Cover?
Your COI summarizes the limits of each type of coverage you have. If you have general liability, professional liability, automobile liability, umbrella insurance and workers’ compensation, you will find separate sections for each of those coverages.
Some coverages may have subsections, as well. For example, general liability insurance will have a section for medical expenses, personal and advertising injury and product liability.
Just like a personal insurance policy, your COI will show a maximum limit per occurrence and a maximum limit over the policy term (also called general aggregate) for each type of coverage. For example, a general liability insurance policy may have a $500,000 limit for each occurrence and a $1,000,000 general aggregate limit.
When Should You Get a COI?
As a business owner, you should get your COI as soon as possible. Your COI can be critical in securing new work, especially if you are an independent contractor.
If you hire subcontractors, you should ask for their COI. Large projects often require subcontractors that specialize in different areas of the project. For example, managing the construction of a new office may require you to hire separate subcontractors for HVAC, electrical and floor work. You should always verify that each subcontractor is properly insured, even if you’ve worked with them before. Otherwise, you could be financially on the hook if a subcontractor without liability insurance causes $100,000 of property damages on a project you’re managing.
Similarly, you should always receive a COI before a business does any work on your home or property.
When validating a COI, be sure to check against the following:
- Confirm the name of the insured on the COI matches the company or contractor.
- Verify whether the coverage effective date is active or expired.
- Contact the insurance carrier listed and verify that the company’s policy is legitimate.
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How Do You Get a Certificate of Liability?
You can request your COI from your insurance carrier. The insurance provider may send your COI in the mail or provide an electronic version you can download and print. You can then provide this COI to any customers or clients who request it.
If you are requesting a COI from another party — a subcontractor you’re hiring, for instance — you can ask them to directly provide you with the document. Alternatively, you can request that their insurance company send the COI directly to you.
How Much Does a Certificate of Liability Insurance Cost?
After purchasing your business insurance policy, you can request a COI from your insurance carrier without a fee.
The cost of commercial liability insurance itself varies greatly, but typically ranges between $40 and $150. Actual costs can change significantly based on the company size, industry, coverage limits and more.
How Long Are Certificates of Liability Insurance Valid?
Certificates of liability insurance last as long as your coverage period. If your liability policy lasts one year, your COI will reflect the policy’s effective start and end date.
You should retain copies of older certificates, even if you switch insurance companies. A customer, client or worker may file a claim for an incident that occurred in a previous coverage period, and copies of your COI can make it easy to spot which insurance carrier would handle the insurance claim.
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In business, a COI is required by potential customers or clients before they hire you to do work. Your COI proves that you have financial protection in case you’re held liable for an accident or losses.
Small business owners need commercial coverage they can afford. SmartFinancial can help you find the best business insurance coverage you need and at a low price. Just enter your zip code below or call 855.214.2291 to receive your free car insurance quotes.