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Certificates Of Insurance: Understanding The Tricky Bits

  

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Nowadays, businesses are usually familiar with certificates of insurance, however it seems that a lot of confusion exists around what the certificate does and when it is really required.

At Gougeon Insurance Brokers, we like to explain the Certificate Of Insurance simply. If you have a business arrangement with another company - whether it be a concessionaire, a supplier who is often on site, or a sport organization that often hosts events at your property - you really need to have clarity as to whose insurance will be responding to an incident and in the event of a loss. Ideally, a contract between the two businesses can outline these insurance obligations clearly and effectively.

• In absence of a contract, you should at minimum obtain a Certificate of Insurance.

What Is A Certificate Of Insurance?

A certificate of insurance is a proof of insurance, which is provided by an insurance company regarding a business. It outlines the most important elements of that business contract on the certificate. It is an informational document only. It cannot take the place of the Insurance Policy nor can or should it contain anything that is not in the Insurance Policy. It is used to verify the existence of insurance coverage.  One party provides it to another to confirm certain types of insurance, the limits applicable, the timelines applicable (if any), and other policy details.

• The certificate of insurance helps both parties understand the insurance coverage available if a loss should occur.

Why do you need a Certificate of Insurance?

• A certificate will confirm that the third party has insurance coverage.
• As a certificate holder, you have requested “proof” of insurance from someone else.

It is important for you to realize that the certificate is not an insurance document and no contract of insurance exists between the holder and the insurance company listed on the document. Often, being a certificate holder is confused with being covered by the third party’s insurance.  Most certificates specifically state that they confer NO rights to the certificate holder.

How Do You Get Additional Insured Status?

To obtain protection under the third party’s policy, your business would need to be added as an additional insured and listed on the certificate.

The third party’s insurance contract should be altered to include your business as an entity who is entitled to receive some benefits in the event of a loss. Sometimes the additional insured status costs money because the insurance company has agreed to expand it’s scope of risk to include another party.

Interested in learning more about Certificates Of Insurance? Download our free certificate of insurance checklist to help manage this risk exposure.

Items in this checklist include:

• Confirming that the issuing brokerage name and address is on the certificate
• Confirming that the certificate shows the insurance company that provides coverage for the named insured and policy number
• Confirming additional insured status and any special provisions are in place.