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6/18/2021 |
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What Is a Certificate of Insurance & Why Do I Need It? |
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What Is a Certificate of Insurance & Why Do I Need It?
A certificate of insurance (COI) is a document that serves as proof of general liability insurance. It is a snapshot of an insurance policy, containing all the most important details, and it helps protect against third-party risk.
Simply put, a certificate of insurance (COI) is to business insurance what an auto ID card is to auto insurance. It is proof of insurance for your business or organization.
When you purchase an auto insurance policy, you also receive a companion document—the insurance card. You keep this in your vehicle to produce as proof of insurance in the event of an accident or traffic stop. Likewise, when you purchase a general liability policy, you should also procure a certificate of insurance that you can use to prove the insured status of your business when entering into new contracts.
Just as an insurance card is a small, compact version of an otherwise lengthy contract, a certificate of insurance contains all of the most pertinent details of your general liability policy on a standardized, single-page form. The most commonly used type of COI is the ACORD 25 form.
It is important to note that the insurance card itself is not a policy; rather, the document’s sole purpose is convenience. The same holds true of a certificate of insurance for business. A COI is simply intended to streamline access to the most important information in your policy, including the type of coverage, the carrier, the effective and expiration dates of the policy, and the policy limits.
Who Needs a Certificate of Insurance?
If you are a business owner or you run a nonprofit, you should have a certificate of insurance. It really is that simple.
How do I get a Certificate of Insurance?
If you need a certificate of insurance to fulfill a contract requirement or would just like to have a copy on file, contact your insurer.
What Does “Additional Insured” Mean?
Most of the time when a third party requires you to provide a certificate of insurance they will ask to be named as an additional insured. This is not as ominous as it sounds—it just means that your insurance policy will provide coverage to the third party if they get sued for something that you do.
For example, say your nonprofit is having a fundraising event at the local Elks Club. The Elks Club will probably ask for a certificate of insurance, which names them as an additional insured. For your event you set up tables and displays for auction items. The evening of your event one of the displays falls on one of the attendees and severely injures them. That person will sue both your organization and the Elks Club. The Elks Club will then come to you and say that they want coverage for the lawsuit from your insurance policy because it was your actions and operations that caused the claim. If you have provided them a certificate of insurance naming them as an additional insured, then you will both be covered under your policy for the incident and resulting claim and lawsuit.
Note: To participate at the Fremont Festival of the Arts, we require you to have a COI that lists a $1,000,00 liability coverage AND the Fremont Chamber of Commerce listed as Additional Insured
GET INVOLVED in the Fremont Festival of the Arts by visiting this page:
https://www.fremontfestival.net/get-involved
Sources:
https://www.businesscredentialingservices.com/blog/what-is-a-certificate-of-insurance-and-why-do-i-need-it
https://www.steelbridgeins.com/blog/what-your-nonprofit-needs-to-know-about-certificates-of-insurance
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