What is the Certificate of Insurance (COI)?

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Types of Certificate of Insurance

#1 – Certificate of Liability Insurance

Typically, companies involved in a business transactionBusiness TransactionA business transaction is the exchange of goods or services for cash with third parties (such as customers, vendors, etc.). The goods involved have monetary and tangible economic value, which may be recorded and presented in the company’s financial statements.read more or relationship require liability insurance. For instance, the landlord of a leased commercial property can request the lessee to provide the certificate of liability insurance to absolve themselves from any liabilities arising from the lessee’s business operationsBusiness OperationsBusiness operations refer to all those activities that the employees undertake within an organizational setup daily to produce goods and services for accomplishing the company’s goals like profit generation.read more.

#2 – Certificate of Workers Compensation Insurance

In the case of construction jobs or other similar huge projects, the project management companies or general contractors must provide workers compensationWorkers CompensationWorkers compensation is the insurance against the workplace injury, and it covers the damage due to injury by providing monetary benefits to the employee for medical expenses, disability benefits. Thus, it saves the interest of both the parties, the employer and the employee.read more insurance certificates. It safeguards the contractors against potential work-related risks, a mandatory requirement in most states.

#3 – Certificate of Car Insurance

This type of certificate of insurance may be seen in the form of an insurance ID card or a full-sized form issued by the insurer at the policyholder’s request. Usually, banks or lenders can request a certificate if they suspect the car loan borrower does not have adequate insurance coverage.

Who Needs a Certificate of Insurance?

When a company hires a project management company or a general contractor, several risks are involved. For example, the contractor may cause some accidental damage to the property. In addition, some of the contractors may be injured during the project. Therefore, the hiring company wants to ensure that it is not held responsible for the contractor’s damages, injuries, or substandard work. For this reason, the hiring company can request the contractor to provide a certificate of insurance. However, the request for a certificate has nothing to do with trust. Rather, it is all about mitigating the risk that may arise from unexpected events.

Costs

It should not cost anything as the insurer offers a complimentary service. However, if the requested limit coverage necessitates the purchase of a rider for additional coverage, then the insurer might have to ask for payment of the additional premium. Other than that, the broker or the insurer should never charge any fee for providing a certificate of insurance.

Importance

  • Proof of Insurance Status: The insurance policy summary with an effective date and policy holder’s name. Hence, it serves as proof of whether or not insurance is the effect.Quick Access to Information: This is the abridged version of the entire insurance policy. Hence, it conveniently provides quick access to the required information.Transfer of Liability: The hiring company can comfortably reduce its risk liability by collecting the certificates from third-party contractors. In this way, the hiring company can transfer the loss to the third party’s insurer if something goes wrong.

This article has been a guide to What is Certificate of Insurance is and its definition. Here, we discuss the types of COI, costs, and who needs such a certificate. You can learn more about it from the following articles: –

  • Hazard InsuranceMalpractice InsuranceErrors and Omission InsuranceGroup Insurance