Certificates of Insurance: A Practical Guide for Business Owners

A certificate of insurance (COI) is a one-page summary showing that a business had certain policies in force on the date it was issued: the insurers, policy numbers, effective dates and limits. For liability coverage, the most common form is the ACORD 25.

A certificate is evidence of insurance, not the insurance itself. The coverage comes from the policy and its endorsements (written changes to the policy). The certificate form says so directly: it is issued as a matter of information only, confers no rights on the certificate holder, and does not amend, extend or alter the policies it lists.

It is also a snapshot. A policy can change, non-renew or cancel after a certificate is issued, which is why many companies ask for an updated certificate at every renewal.

These two terms are often mixed up, and the difference matters.

• Certificate holder: the person or company the certificate is issued to. It gives them proof of your insurance and nothing more; it doesn't give them rights under your policy.
• Additional insured: a person or company added to your policy by endorsement, so they can have protection under your policy for claims arising out of your work, within the terms of that endorsement.

When a general contractor, landlord or client asks to be named as additional insured, they're asking for an endorsement on your policy, not just a certificate. The certificate then shows that the endorsement is in place.

Construction contracts, leases, vendor agreements, event and venue agreements, and trucking broker-carrier agreements usually include an insurance section or exhibit. Typical requests include:

• Additional insured, ongoing and completed operations. Ongoing operations applies while your work is in progress; completed operations extends it after the job is done. Contracts often cite forms such as CG 20 10 and CG 20 37, sometimes with specific edition dates.
• Primary and non-contributory. Your policy responds first, without seeking contribution from the holder's own insurance.
• Waiver of subrogation. Your insurer gives up its right to recover from the holder after paying a claim. It usually needs an endorsement on each policy where it's required, such as general liability, auto, workers' compensation and umbrella.
• Minimum limits and umbrella. Per-occurrence and aggregate limits, often with an umbrella that extends to the same additional insureds.
• Notice of cancellation. Many contracts ask for 30 days' notice to the holder. The ACORD 25 says notice will be delivered in accordance with the policy provisions, so advance notice to a third party generally requires an endorsement, and not every insurer offers one.

If a requirement isn't something your policy provides today, it's far easier to sort out before you sign than after the job starts.

A common request is to type extra language into the description box, such as "Certificate holder is additional insured on a primary and non-contributory basis with waiver of subrogation." If the policy doesn't include those endorsements, that sentence doesn't create them, and the certificate itself says it doesn't amend, extend or alter the policy.

The fix is to put the right endorsements on the policy first. That is often a blanket additional insured endorsement that applies when a written contract requires it, or a scheduled endorsement naming the holder. The certificate should then describe those endorsements accurately.

Agents also can't issue certificates that misrepresent the policy. Some states regulate what certificates may say, and requirements vary by state.

If ALP handles your policy, send certificate requests through our Certificate Center with the holder's details and the contract's insurance requirements. A licensed agent checks the requirements against your policies before a certificate is issued. If something needs an endorsement or a different limit, we'll tell you what has to change and ask the insurance company first.

If ALP doesn't handle your policy yet, the certificate itself has to come from the agent or insurance company that manages your current policy. You can still send us a contract's insurance requirements with a quote request or a coverage review. A licensed agent can compare them with your current policies, point out requirements they may not meet, and talk through insurance options. That review doesn't issue a certificate or change any policy.

Most delays come from missing information. Send everything in one request:

• The insurance requirements page of the contract, lease or vendor agreement, not just the holder's name. It tells us which endorsements and limits are needed.
• The certificate holder's exact legal name and mailing address.
• Project or job details: job name and address, contract or PO number, or the property address for a lease.
• Any other parties that must be listed as additional insureds, such as the owner, general contractor, property manager or lender.
• Delivery details: who should receive it and by when.

If the requirements call for an endorsement your policy doesn't already have, the insurer may need to approve it before the certificate can be issued. Asking before work starts keeps a missing certificate from holding up a job or a payment.

If you hire subcontractors or vendors, the certificates you collect are part of your own protection, and your insurance company's premium auditor will likely ask for them. Without them, the insurance company may charge premium for that work at audit, depending on the policy. When a certificate comes in, check that:

• The named insured matches the company you hired.
• Policy dates run through the dates of the work, and expired certificates are replaced at renewal.
• Limits meet what your contract requires, including the umbrella.
• Additional insured and waiver boxes are marked, and for important jobs, ask for copies of the endorsements themselves.
• Workers' compensation is shown, or you have documentation of why it isn't required.
• The description of operations fits the work they're doing for you.

A certificate that looks fine can still sit on top of a policy with exclusions for the sub's type of work, residential projects or work above a certain height. Keep certificates on file by project and track expiration dates so you aren't chasing them at audit time.