Certificates of Insurance (COIs): What You Need to Know

In any project, it’s important to make sure you have the proper insurance to protect yourself and all parties involved.

Let’s say you’ve just hired a plumber. Before he gets to work, you want to make sure the plumber’s insurance coverage will cover any potential damage to your house. If you are listed as an additional insured, their insurance will pay for any damages that occur.

But how do you find out what coverage the plumber has in the first place? Contracts need to be reviewed so that insurance brokers can know the terms and scope of their requirements. This is where certificates of insurance (COIs) come into play.

Every contract with a vendor or a customer will have an indemnity or insurance section of what they want to see from you as far as insurance is concerned. This includes documents that extend your policy to cover them. Those requirements are contractually driven, which means a certificate is necessary.

Let’s have a professional detail of the complexities. 

In this video, Brenda Jo Robyn, founder of Competitive Edge Insurance, will answer everything you need to know about COIs.

What is a Certificate of Insurance?

A Certificate of Insurance (COI) is a snapshot in time of insurance coverages for an insured.

According to Investopedia, a certificate of insurance is a document “issued by an insurance company or broker [that] verifies the existence of an insurance policy.”

“Small-business owners and contractors typically require a COI that grants protection against liability for workplace accidents or injuries to conduct business.”

A COI gives a summary of what coverages someone has, whether it be general liability, workers’ compensation, or property. A COI can also include a description of coverages that might be there or attached; such as additional insured status or waivers of subrogation.

How Often Do You Need to Update a COI?

Any time there is a change in the policy in terms of limits of insurance and/or coverage dates.

Another time you might need an updated certificate of insurance is if there’s a new project or project location for a particular client.

Why Do We Need a Copy of Your Contract to Issue a Certificate?

In terms of contractors, projects, or building owners, you spend a lot of time and effort trying to win work. The last thing you’re looking at is insurance conditions. Insurance conditions are most often reviewed last—if at all. 

When this is the case, conditions that are additional in cost can pop up. These conditions are often impossible to obtain and can impede your ability to sign contracts and get work at all.

A Real-Life Example

Here’s a real-life example of why COIs are so important from Brenda Jo Robyn, founder of Competitive Edge Insurance.

“One of my contractors sent me a certificate that they needed for a new job.” It was a huge job: an HOA, residential complex of 70 buildings with 40 units in each building. 

“So they sent the request over,” says Brenda Jo. “We completed it, sent it back, and all of a sudden there’s an email back saying, ‘Hey, can you comply with these? The certificate doesn’t share that the insurance covers that we require.’”

“The party then sent us a sample certificate that they wanted to be done. This sample required two million more in limits than my client had, [and] they weren’t going to be let on the project as a result.” This was an $18,000 mistake.

Brenda Jo continues. “They signed the contract [and] the requirements were in the contract, [but] they only sent me the request for a certificate of insurance.”

In this example, if Brenda Jo would have been able to see this requirement beforehand, the terms could have been either negotiated or the necessary coverage could have been obtained.

Brenda Jo reminds us, “you know, every contract is negotiable.”

On the topic of contracts, are you interested in learning about contract bonds? If the answer is yes, read on here.