What Is a Certificate of Insurance?

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You've probably heard it's important to track certificates of insurance, but what exactly are certificates of insurance?

A certificate of insurance (COI) is how other businesses such as vendors, subcontractors or tenants show you that they have insurance.

Typically the way they do this is by providing you with an ACORD 25 form, as well as any endorsements that together describe their insurance provider, their business information and important details about their policies.

In the context of a certificate of insurance, the other business is called the "Insured", and the business receiving the certificate is called the "Certificate Holder".

A properly prepared certificate of insurance, shows that the other business or "Insured" is meeting the insurance requirements as they are described in your contract with them. This helps protect both parties in the event of a loss, and can prevent unexpected fees from your insurance company in the event of an audit.

The main reason you need to collect a COI from businesses you work with is to ensure that if a vendor or contractor causes an accident, they have sufficient insurance to cover the losses that arise from the accident.

Once you receive a COI, it's important to review it to ensure the most critical aspects of your insurance requirements are met.

Most businesses do not get their certificates right on the first try, and you will have to assess how risky the job is, how strictly you want to enforce your requirements, and whether to ask for a revision.

Most businesses do not get their certificates right on the first try, so you will likely have to request changes the first few times you receive a cert from a new business.

You may also elect not to request revisions if the certificate only deviates from your requirements slightly. You will have to assess how risky the insured's type of work or the particular job is in order to decide how strictly you want to enforce your requirements.

The most sophisticated risk managers establish tiered requirements based on job or contractor type and supply their team with a playbook or decision tree so that they can analyze whether a given certificate is acceptable for the situation.

Finally, it’s important you keep track of when your business partners' insurance policies are expiring so you can request updated certificates of insurance to verify your business is still protected.

There are many ways to track certificates. Microsoft Excel can work well for tracking a small volume of certificates if you have the discipline to update and review it consistently.

Many businesses also add reminders to their calendars so that they remember to request new COI when policies expire.

For tracking a large volume of certificates, it is a good idea to use purpose built certificate tracking software like Assured Certificates to automatically track compliance and expiration dates for you.