Understanding certificates of insurance

​When stores lease real estate spaces or construction firms win jobs, the party on the other end usually has a particular set of requirements.
 
One of the requirements is that the tenant, contractor, or borrower show proof that he or she has adequate insurance.
 
Copies of insurance documents may be sufficient. But, not all companies want copies sitting around. A suitable substitute for document copies is a certificate of insurance. 
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How a certificate of insurance works

A certificate of insurance is a standardized document that will show:

• The types of coverage the policyholder has purchased
• The effective and expiration dates of the policy, and
• The limits of liability coverage.

 
In short, it provides evidence that a company is insured. This item is simple to create and store. Unfortunately, not all firms and insurance buyers fully understand them.
 
When some businesses receive these certificates, they think the items are contracts. But, the certificate is simply a snapshot of insurance provisions. It indicates that a policy exists, but it is not the document that provides coverage. The only document that provides coverage is the policy itself.
 
Requests for a certificate of insurance

Companies and individuals that hire contractors want to be sure they will not be held liable for injuries, damages, or substandard work. For this reason, they will frequently request to see a certificate of insurance.
 
Many businesses want these certificates to have specific terms, phrases, or words. But agents have legal boundaries for such requests. The only way agents can add wording to a certificate is if the listed policies contain that wording. Changes are not always allowed.
 
Many states prohibit agents from handing out certificates implying provisions that are not included in the policies.
 
For example, a certificate holder may want the item to state that coverage is primary and noncontributory. However, policies that do not reflect such information cannot have certificates that indicate otherwise.
 
Before you sign papers for leases or construction jobs, you should verify coverage requirements with us.
Don't be alarmed or taken off guard if a client requests the addition of their name or business as a certificate holder on your certificate.
 
Often, this is easily accommodated, but you must submit a request to your insurance agent so that they can review and issue your certificate accordingly.
 
Don't wait until a client asks you to provide evidence of business insurance coverage. Be proactive and have your document ready.