Certificate of Liability Insurance: What It Is, Why It’s Needed and How To Get One

A certificate of liability insurance is a document that proves your business is covered by a certain type of commercial liability coverage, such as general liability insurance. You may need to show proof of liability insurance to secure work with a certain client or agency, rent commercial property, meet your state’s licensing requirements or attract angel investors to your startup.

A certificate of liability insurance is a free document from your insurer that you can use to show proof of coverage to secure a contract, get a business license or rent office space.

Keep reading to learn more about how to get a certificate of insurance, what information your COI should include and when it may be necessary.

On This Page

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  What Is a Certificate of Liability Insurance?

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  What Information Is Included in a Certificate of Liability Insurance?

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  Types of Certificates of Liability

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  Does a Certificate of Liability Insurance Provide Coverage?

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  Is a Certificate of Liability Insurance Required for Businesses?

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  Who Needs a Certificate of Liability Insurance?

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  How Much Does a Certificate of Liability Insurance Cost?

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  Certificate Holder vs. Additional Insured

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  Certificate of Liability Insurance Examples

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  When Does a Certificate of Liability Insurance Expire?

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  Certificate of Liability Insurance at a Glance

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  How To Get a Certificate of Liability Insurance for Your Business

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  FAQs

What Is a Certificate of Liability Insurance?

A certificate of insurance (COI) is a document that summarizes a company’s commercial insurance coverage — with a certificate of liability insurance specifically providing basic details about relevant liability insurance policies. It may be available physically and/or digitally. COIs tend to be only one page long, so they enable you to easily show proof of insurance to anyone who asks for it without presenting your entire insurance contract.^[1]

What Is an ACORD Certificate of Insurance?

An ACORD certificate of insurance simply refers to the COI form most commonly used by insurance companies and brokers.^[2] Also known as the ACORD 25 certificate of insurance, it was designed by the Association for Cooperative Operations Research and Development, a nonprofit that develops standardized insurance forms to normalize the way information is collected and presented throughout the insurance industry.^[3]

What Information Is Included in a Certificate of Liability Insurance?

COIs generally include the following information:^[1]

1. Names and mailing addresses of the entities covered by the policy
2. Insurance company’s contact information
3. Coverage types included in the policy
4. Policy number
5. Policy’s beginning and end dates
6. Policy’s coverage limits
7. Other certificate holders (e.g., a general contractor who requests your COI before hiring you for a project)

Types of Certificates of Liability

Various types of business liability insurance may be summarized in your certificate of liability coverage. See below for an overview of the most common types of liability coverage that may be discussed in your COI:^[2][4]

• General liability: The most fundamental type of commercial coverage is general liability insurance, which can cover medical treatments for a guest who is injured on your business premises, repair bills if your business is held liable for damage to another person or company’s property and legal expenses if you are sued over a bodily injury, property damage or personal and advertising injury claim.
• Professional liability: Professional liability insurance — also known as errors and omissions insurance — covers your company’s legal fees if you are sued for misrepresentation, negligence, inaccurate advice or another type of mistake or failure in the performance of your professional duties.
• Commercial auto: Commercial auto liability insurance can pay for someone else’s medical treatments or property repairs if you or one of your employees is responsible for a commercial vehicle accident. You may need hired and nonowned auto liability insurance to cover vehicles your business rents, leases or borrows for commercial purposes.
• Workers’ compensation: If an employee becomes sick or injured on the job, workers’ compensation insurance can cover expenses like medical and rehabilitation costs, lost wages and disability benefits for the employee. It may also cover your legal expenses if an employee sues you over a workers’ compensation claim — though, in some states, you may need separate employer’s liability insurance to secure this coverage.
• Directors and officers: Directors and officers liability insurance can cover legal defense costs if one of your executives is sued for mismanagement, noncompliance, human resources issues or a similar allegation of corporate misconduct.
• Commercial umbrella: You may be able to purchase policies that provide extra coverage in case a costly claim exhausts the coverage limits of your underlying liability insurance policies. Commercial umbrella insurance provides extra coverage for multiple liability policies at the same time, while excess liability insurance only extends your limits for one type of policy.

Keep in mind that you may also be able to obtain a certificate of commercial property insurance, which outlines the coverage you have purchased for your commercial building and any business personal property you keep inside that building. Property insurance certificates are most commonly requested by banks and other mortgage lenders that want to protect their investments in commercial property.^[4]

Does a Certificate of Liability Insurance Provide Coverage?

A certificate of liability insurance does not technically provide coverage itself — instead, it verifies that there is an insurance policy in place that does provide coverage. In fact, many COIs contain language clarifying that nothing in the document changes the coverage provided by the referenced policies.^[2] Since your COI is separate from your insurance policy, you may need to request a new certificate anytime you update your coverage.^[1]

Is a Certificate of Liability Insurance Required for Businesses?

Workers’ compensation and commercial auto insurance are often required by law, so you will likely need COIs that prove you are covered by these policies.^[5][6] Meanwhile, there are several other situations in which a business may need to produce a certificate of liability insurance, including the following:^[1][4][7]

• Contract bidding: A general contractor may be able to stand out from their competitors by sharing a COI when bidding for contract work. For example, an organization looking to hire someone to oversee the construction of a new building may perceive a contractor with general liability insurance as more reliable, and it may be more likely to hire that contractor as a result.
• Fundraising: When trying to get a new business off the ground, it may be helpful to present a certificate of liability insurance to prospective investors to prove that the investment they make into your company will be protected against lawsuits.
• Client requirements: Businesses that offer professional services may have a hard time attracting clients without COIs. For example, a potential client may not be willing to pay a consulting firm for their services unless they know the firm has professional liability insurance to cover financial losses stemming from bad advice their consultant gives them.
• Rental agreements: If you rent an office space or other commercial building, your landlord may want to see proof of insurance to make sure you can remain financially stable and continue making rent payments in the event of an unexpected liability claim.
• Professional licensing: You could have to show proof of commercial coverage to receive a license or certification to practice a certain profession in your state. For example, real estate agents are often required to carry business liability insurance by state licensing agencies.

Who Needs a Certificate of Liability Insurance?

Any business that could be asked to provide proof of commercial liability insurance coverage — that is, practically any business with a high liability exposure — needs to have a COI. Certificates of liability insurance are most commonly necessary for construction contractors and professional services companies that may need them to negotiate with clients, but COIs can also be useful for businesses in a wide array of other industries.

Maintaining liability insurance lends credibility to your business by showing your commitment to safety and financial security, so being able to prove you are covered is key.

How Much Does a Certificate of Liability Insurance Cost?

If you’re already insured, you should be able to request a COI for free.^[1] Of course, you will have to pay for the insurance policies themselves, with premiums depending on factors like your company’s industry, size, location and claims history. Take a look at the table below to see the average cost of various types of coverage that may be mentioned in your certificate of liability insurance:^[8]

Certificate Holder vs. Additional Insured

A certificate holder is any entity that requests a COI from your business, while an additional insured is a third party that is eligible for coverage under your insurance policy. For example, a subcontractor you extend your general liability coverage to would be an additional insured, while a company that hires you for a project and asks for proof of liability coverage would be a certificate holder. Both certificate holders and additional insureds are listed on your COI.^[9]

Certificate of Liability Insurance Examples

For an example of when a certificate of liability insurance may be necessary, consider an independent contractor bidding for work on a construction project. Since businesses are usually held liable for injuries their contractors experience on the job, they may only hire contractors who already have their own workers’ compensation insurance.^[10] As a result, you may need to submit a COI showing proof of workers’ comp coverage to get hired in this scenario.

In addition, any type of business could encounter a situation where a prospective customer wants to verify that it is insured up front. For example, someone who is interested in hosting a birthday party at your restaurant may want to make sure you have liability coverage in case their guests experience food poisoning or some other type of loss during the event.

When Does a Certificate of Liability Insurance Expire?

Your certificate of liability insurance will remain valid as long as the associated insurance policies are still active, meaning it will expire once your existing insurance coverage is canceled or otherwise ends.^[4] Even if you opt to renew your insurance policies at the end of the coverage period, your existing COI may be out of date and may need to be updated at the beginning of the next policy period.

Certificate of Liability Insurance at a Glance

• Definition: A certificate of liability insurance (COI) is a one-page document that summarizes the core details of a business owner’s commercial liability insurance policies.
• Purpose: COIs are an efficient way to show proof of insurance if you need to rent commercial property, raise funds for your startup or obtain a professional license.
• Coverage: Unlike an insurance policy, a COI does not provide coverage itself, but it may include information about various types of business liability coverage, such as general liability, professional liability and commercial auto liability insurance.
• Information: Your COI should include information about your business, your insurance company, the coverage provided by your insurance policy and other people or businesses who are covered by your policy or have requested a copy of the COI.
• Costs: It doesn’t cost anything to obtain a COI, but you will likely have to pay thousands of dollars per year for the associated insurance policies.
• Examples: Certificates of liability insurance are commonly used by construction workers trying to secure contract work and professional service firms aiming to meet the demands of prospective clients.

How To Get a Certificate of Liability Insurance for Your Business

You may receive a COI automatically when you buy a commercial liability insurance policy, and you should be able to request another through your insurance agent or an online portal if needed.^[7] Before settling on an insurance policy, it’s a good idea to compare quotes from three to five different insurance providers to ensure you’re getting the best possible deal on the right insurance coverage.

Fortunately, SmartFinancial makes comparison shopping easy. Simply tell us about the type of coverage your business needs, and you’ll be connected with an agent who can help you find the best policy available through our online marketplace platform. Click here to begin your questionnaire and compare commercial insurance quotes for free today!