If your business relies on contractors, vendors, or outside service providers, you’re opening your company up to new layers of liability. And while your own insurance might be in great shape, it’s critical to make sure your partners are covered too. That’s where certificates of insurance (COIs) come in.
What Is a Certificate of Insurance?
A COI is a document that proves a third party has active insurance coverage. It typically includes key information such as:
- Policyholder name
- Insurer and coverage limits
- Policy effective dates
- Type of coverage (e.g., general liability, workers’ comp, auto)
COIs aren’t contracts, but they provide peace of mind that your contractors carry the coverage they’re supposed to, and that you’re not unknowingly absorbing their risk.
Why It’s Essential
Even if you’ve worked with a contractor for years, failing to request a COI puts your business at risk. If they cause damage or injury and lack proper coverage, your business could be held liable.
A COI can:
- Prove the contractor has valid coverage
- Protect you in case of injuries on your property
- Help you recover losses from incomplete or negligent work
How to Manage COIs Effectively
Collecting COIs is only the first step. You also need a system to track them, ensure they’re up to date, and confirm that coverage matches contract requirements.
Ask:
- Are the limits and coverage types what we agreed to?
- Is the policy still active?
- Was it issued by a reputable insurer?
Simplify the Process
Consider using a certificate managementsystem to track renewals and automate reminders. It’s also important to document requirements clearly in all contracts.
Don’t wait until there’s a claim to realize a third party wasn’t properly insured. Make COIs a routine part of your vendor onboarding and project management process.
Need help reviewing your COI requirements? Contact McHugh Insurance Group for guidance.