Who needs them, when, and why?
What Is a Certificate of Insurance?
A certificate of insurance (COI) form is a standardized document that provides evidence of insurance coverage. It will include the contractor’s coverage types and liability limits. This certificate also lists the effective date of the policy.
Why Is a Certificate of Insurance Important?
If a contractor hires a subcontractor, and the sub causes property damage, the original contractor can be held liable for these damages. Even if the terms of the contract clearly state that the subcontractor must be insured, if the sub’s coverage is non-existent or inadequate, the contractor can still be sued.
When do you need a certificate of insurance?
Contractor hiring subcontractor
If your company hires subcontractors, it is extremely important that you get a certificate of insurance from each one you work with. Even if you trust your subcontractors – for example, if you have worked with these contractors in the past and knew them to have insurance at the time – you should submit a certificate of insurance request each time you hire them onto a new job. Doing so can prevent a scenario where you inadvertently take on the risks associated with the work your subcontractors perform.
The following are some things to pay close attention to when you receive a certificate of insurance:
- Confirm that the name of the insured on the form is an exact match for the name of the person or company you are hiring.
- Check the policy coverage dates to ensure that they are valid. If the policy is due to expire before the job will be completed, you will need to be sure to get another certificate of insurance at that time.
- Ensure that the certificate holder has, at a minimum, both general liability insurance, to protect against damages, and workers compensation insurance, to protect you in the event that the worker is badly injured on the job.
- Make sure that the liability limits held by the contractor meet the liability limits you require of your workers. If they are not high enough, you can request that the contractor purchase additional coverage and present you with a new certificate.
- Ask to be named as an additional insured party for the duration of the project or contract for which you are hiring the worker.
Subcontractor performing work for contractor
If you are a subcontractor, expect to provide a certificate of insurance each time you begin a job. Your insurance advisor can assist you with this. General Southwest clients can use this link to receive a COI, generally within 2 business days. Make sure your policy is adequate for the state you are working in. In addition to general liability insurance, you will also need to provide proof of workers’ compensation coverage.
Property owner hiring contractor
If you own a home or business property, you should ask for a certificate of insurance before having work done on the interior or exterior of your building, or anywhere on your premises—including landscaping and pool maintenance. Taking this important measure can cover your risks in several ways:
- It can prevent you from taking on risk if an improperly insured company is responsible for property damage. For example, if a contractor is working on your property and inadvertently damages your neighbor’s yard or home, you will not be held responsible.
- It will ensure that you are not held responsible for a contractor’s medical bills if that contractor is injured while performing work on your property.
- It will also ensure that you can receive compensation if the work is poorly done or not completed. In this case, you would be able to go to the contractor’s insurance company to file a claim.
Need more information?
A certificate of insurance is an important document for those who wish to protect themselves from possible lawsuits and financial losses. Whether you are a contractor who needs to present a certificate of insurance or are working with a company who is requesting to see one, your General Southwest advisor can answer your questions. Contact us at 480-990-1900 or 1-800-890-1115.
