It’s a good rule of thumb for every business to have some form of business insurance, no matter their industry or size. For some businesses though, especially those that work with other businesses or clients, they’ll need to provide proof of their coverage, known as a certificate of insurance (COI).
If you’re giving clients advice, working on their property, or even just providing them with a specific technology, they’ll want to know that you’re covered for any potential liabilities arising out of your operations. They’ll also want to see that your insurance covers them, too, which can be done by including them as an additional insured (which we’ll get to later). Certificates of insurance can help you snag top clients—and give those clients the peace of mind that comes with knowing you’re covered by all the right insurance.
It might seem like a formality, but providing a certificate of insurance is the best way to show others that you have all the coverage necessary for a given job. Additionally, clients who perform such due diligence are the ones you probably want to work with, after all.
Here’s your guide to the details on certificates of insurance, why they’re important, and the best way to access them:
What Is a Certificate of Insurance?
A certificate of insurance is simply a document that provides evidence that you and your business have a current liability insurance policy. Certificates of insurances usually detail the basic information regarding your current insurance coverage. If you need to verify your policy limits and the time period to which the policy applies, you simply need to review your certificate of insurance for this information.
Certificates of insurances typically list out the following information about your policy:
- Policyholder’s name
- Types of coverage
- Limits of coverage
- Policy deductibles
- Insurance provider
- Policy number
- The period of time during which the policy is effective
Because so many certificates of insurance are standardized in an accessible format, this information is easy for policyholders and potential stakeholders to verify without diving into the full insurance policy. That said, it is always wise that stakeholders consult the actual insurance policy to verify its details. A certificate of insurance is merely evidence that the policyholder has insurance—it does not provide the conditions, exclusions, limitations, or parameters of the actual policy.
You’ll find a few more insurance-specific terms on a certificate of insurance that you may be responsible for filling out. Here are three important details that you need to understand:
You might hear “ACORD 25” used synonymously with “certificate of insurance.” ACORD 25 is actually the form number of the standardized document that many insurance providers or brokers use to produce the required certificate of insurance. ACORD—an acronym that stands for Association for Cooperative Operations Research and Development—is a company that creates form templates that standardize and regulate documents across the insurance industry. The ACORD 25 is the template used to produce certificates of liability, specific certificates of insurance designed for liability insurance policies.
You’ll also likely hear the term “named insured” during conversations involving insurance policies and certificates of insurance. The named insured is simply the primary policyholder for the insurance policy for which the certificate of insurance has been issued. The named insured policyholder is the party who has rights and obligations under the insurance policy.
Another term with which you will need to be familiar while dealing with certificates of insurance is “additional insured.” This term refers to entities that have been added onto a policy such as potential partners, customers, or clients. They request your certificate of insurance to verify that you have added them as an additional insured on your policy.
An additional insured has limited coverage under a policy. They are insured only with respect to liability for injury or damage due to the named insured’s acts or omissions in the performance of their operations or in connection with owned or rented premises. Make sure your certificate of insurance indicates all of the necessary persons or entities on your list of additional insureds before handing it over to them.
Who Needs a Certificate of Insurance?
So, now that you’re familiar with the intricacies of the document itself, let’s begin to consider some questions about the practices and procedures surrounding certificates of insurance. For one, you’re probably curious whether or not you actually need a certificate of insurance for the work you do.
Whether you’re a photographer, construction contractor, business consultant, or personal trainer, you likely invest in a business insurance policy of some sort. Even if potential clients don’t request proof of insurance, having a certificate of insurance ready to offer them will show initiative and diligence. Put simply, if you have a business insurance policy, then securing a certificate of insurance is a low-effort, high-reward step in investing in your business.
Certificates of insurance are a built-in service related to your insurance policies, so you won’t have to go through much trouble or pay an additional fee to access yours. You may not need a certificate of insurance until a potential client asks for one or when you need to verify your own policy details. That said, because certificates of insurance are so easy to access, having yours at the ready can’t hurt.
How to Get a Certificate of Insurance
As a result of the built-in nature of certificates of insurance for policies, the steps to get one parallel the steps to purchase a commercial insurance policy. That said, there are a few details of the process you’ll need to know if you’re specifically focused on getting a certificate of insurance:
Find the Right Kind of Commercial Insurance
Before anything else, you need to make sure you find the right kind of insurance for your coverage needs. This is especially the case if you need to purchase a specific type of insurance to be able to work with a client. There are many types of small business insurance that address the typical risks that come with running your own business. To start off your search, consider these eight most common forms of business coverage:
- General liability insurance
- Professional liability insurance
- Commercial property insurance
- Business interruption insurance
- Product liability insurance
- Workers compensation insurance
- Commercial auto insurance
- Cyber liability insurance
Unless a potential client indicates a specific form of business coverage you need to have to be eligible to work with them, look through the details of all of your business insurance options to find the one that best fits your needs.
Get Quotes and Purchase the Best
Once you find the right kind of business insurance for your needs, you need to access and compare quotes for a policy. To do so, you need to provide some basic information like the number of team members, employees, or volunteers you need to have on your policy. You also need to decide your coverage limit and the timeframe during which you need coverage.
This step will also very likely require you to list out any additional insureds you need to add to your policy. If you’re purchasing a policy specifically to be eligible for a project opportunity, be sure to add the prospective client here. You can also often complete this step by altering your policy after you initially purchase it.
All of the information you provided here will be used to determine how much your premium will be. Things like the number of people on your policy, the policy limit, and the policy timeframe all affect your premium.
If the estimate isn’t within your budget, you’ll need to shop your options. If you’re not able to find a policy that fits your initial necessities and your budget, then you might need to reevaluate the policy timeframe or the number of insured team members you want covered. Once you find the best quote that fits your budget, you’ll then purchase the policy.
Access Your Certificate of Insurance
Now, the step of actually accessing your certificate of insurance will depend on which insurance provider you ultimately choose. Through insurance provider Thimble, for example, you’ll be able to access a digital version of your certificate of insurance immediately after you purchase your policy.
Meanwhile, other insurance providers might provide hard copies or require you to request a digital copy that they’ll send to you in a matter of days. If you have specific needs for how or when you receive your certificate of insurance, make sure you ask about this document during your research and quote-finding phase.
The Bottom Line
Now that we’ve dug into all of the details on certificates of insurance, it’s useful to step back and remember that they’re simple documents with a simple purpose: to provide evidence that you have the required insurance.
But, of course, wrapping your head around all of the jargon and paperwork that these simple documents entail is important, too. Getting a grasp of concepts like ACORD 25 and additional insureds is crucial to handling your insurance policy—and its corresponding certificate of insurance—correctly. This know-how, in turn, will help you land top clients and, eventually, vet contractors yourself.
Terri Hitchcock, JD
Terri is currently the Chief Insurance Executive at Thimble Insurance and was previously a Principal and Director of the product design practice area with Perr&Knight, a major insurance consulting services firm. Her areas of expertise are reinsurance and insurance operations, contracts, compliance, product development, and underwriting, having provided such services to clients in the industry over the past 30 years. Terri graduated with a B.A. in English and French from the College of the Holy Cross. She received her JD from the University of Maryland School of Law.