What is a COI?

A day in the life of a contractor can hold many potential hazards. For example, there is the risk of injury in commuting to work and risks of injury to yourself and others while performing job duties. In addition, a spill of any hazardous materials could expose others to significant harm and leave you open to potential lawsuits. With so much at stake, You need to be properly insured against these types of risks.

A business certificate of insurance (COI) lets your clients know you are adequately insured, and they can trust doing business with you. A certificate of insurance summarizes key areas of coverage and terms and conditions of the policy.

A standard COI will list your business name, the policy effective dates, the types of insurance coverage provided by the policy as well as the policy limits. If you are a contractor, the certificate of insurance will show potential clients that you meet their insurance requirements to work on specific projects.

Certificate of Insurance Definition 

A certificate of insurance is a declaration of coverage issued by the insurance provider that insures your company. A COI is a breakdown of your business coverage that is usually no more than one page long. It serves as evidence that your company is adequately insured. In addition, certain occupations, such as contractors, may have potential clients that require the COI before you can begin a job for them.

Why is a Certificate of Insurance Important?

A company owner or contractor without a COI may have problems securing contracts. Your client will review your certificate of insurance to ensure you have the amount of liability coverage the project requires. The COI is important to project managers as they do not want to be held liable if you are responsible for any type of damage to property, injury to others or faulty workmanship while working on their job sites. 

Some of the reasons having a business COI is important include:

• It provides proof that you carry essential types of insurance coverage, including general liability and workers compensation.
• It is a quick snapshot of your insurance policy that you can conveniently show potential clients who need to see proof of coverage.
• By having a certificate of insurance, you reduce your liability risks for potential lawsuits.
• Certificates of insurance are essential for project managers who need to quickly document that all the contractors working on a project have the required insurance coverage types and limits. It saves time, as reviewing the complete policy would take too much time.

What Information is Included in a Certificate of Insurance for Business

Your business COI contains all the essential details clients will want to see before you begin work for them. It is an overview of your policy detailing the types of coverage you have on a single form. The information on a certificate of insurance includes:

• Policyholder’s name (your company name)
• The effective dates of the policy
• The types of coverage you have
• The limits of coverage

How Much Does it Cost to Get a COI?

Most insurance companies will not charge you to obtain a COI. As long as your policy payments are current and your policy is in force, you should have no difficulty obtaining a certificate of insurance. Your insurance agent may be able to provide you with a certificate of insurance for free or perhaps for a very nominal fee. Most insurers and agents provide COIs as a complimentary service to policyholders.

How to Get a Certificate of Insurance

Once you have your business insurance policy in place, you can obtain the certificate of insurance you need to provide to your clients. The way certificates of insurance are provided to policyholders varies by insurance providers.

To obtain a certificate of insurance, you simply have to make the request either by phone, fax or in writing and allow the insurance company to explain its procedure for providing the business COI. If you are in doubt about how to obtain a certificate of insurance, contact your insurance agent or insurance company representative.

Some insurance providers do not issue certificates of insurance but will have you contact your insurance agent for your COI. Other insurers will allow you to obtain a certificate of insurance yourself by printing it electronically. If the company does issue a certificate of insurance, they may mail it by the U.S. Postal Service, email it or allow you to download it from a website.

Types of COI Coverage Contractors May Need 

The type of coverage you will need to show proof of will depend on the kind of job you will be doing. If you doubt you have the suitable types of insurance or the proper coverage limits, schedule a consultation with your insurance agent for a coverage review.

Here are some essential types of business insurance for contractors for which project managers may want to see proof. 

General Liability

Every contractor has liability exposures performing daily job duties. Any day during day-to-day job site operations, contractors can potentially damage property or cause injury to themselves or others. General liability insurance protects self-employed contractors from these types of hazards. According to the Insurance Information Institute (III), a commercial general liability policy will usually cover your legal costs if you are found liable up to the limits of your policy.

Pollution Liability

Any contractor who works with hazardous materials or transports those materials may need pollution liability coverage. For example, if you are transporting hazardous materials and the truck overturns, the spill may leak into a stream causing environmental damage. Environmental damage lawsuit awards can go in the millions. Pollution liability insurance protects contractors from third-party lawsuits.

Commercial Auto Insurance

Commercial auto insurance is essential for contractors who use their vehicles getting to and from work, transporting other workers or hauling tools and equipment. A commercial auto insurance policy should cover any vehicle used for your contracting business.

Professional Liability Insurance

If a customer is dissatisfied with the type of work you perform as a contractor or finds fault with your finished product, the customer can sue you as the contractor for damages. Another type of risk contractors face is negligence. If you fail to perform due diligence to ensure a job is done professionally, the client may claim you cost them time and money. Professional liability insurance protects you from these types of negligence claims.

Umbrella Insurance

Umbrella insurance is a type of extra insurance protection you can purchase to add to the policy limits of your other types of coverage, such as general liability or commercial auto insurance. While it will likely not be a requirement for a contractor to perform work, it is extra protection so you can feel adequately protected while performing your job as a contractor. In most instances, you can purchase umbrella insurance in increments of $1 million.

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Essential Proof of Coverage

A certificate of insurance is an essential document for contractors to possess. Most project managers will not allow you to begin work until you show proof of insurance coverage with a business COI. Luckily, obtaining a certificate of insurance is not difficult as long as you pay your policy premiums on time and your coverage is in force.

Check back with Benzinga often for more important insurance tips for business owners and other money and investment advice.

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