Insurance Certificates - What they are and who requests them?

by: Darlene Diplock

During the course of your business, your clients may request certificates of Insurance. You may also need to request certificates of insurance from your suppliers.  Certificates are often a source of confusion. In an effort to shed some light on this illusive document, I have outlined a few keys points pertaining to certificates of insurance.

What are they?

Certificates of Insurance are documents that verify you are carrying current insurance for specific coverage’s [for example Property, General Liability, Umbrella or Excess Liability, and Auto Liability] and coverage limits with your insurance company’s name for a stated period of time [the policy period]

Who requests them?

§               Landlords

§               Clients/Customers - companies, people or organizations you agree to perform a service for   or provide a product to that would have a financial interest should something go wrong.

§               Owners of leased equipment

§               Banks/Financial Lenders

Cancellation Notice:

The Insurer will try, but is not legally obligated, to notify the certificate holder in the event of cancellation of coverage within the stated amount of time [normally 30-60 days].

Certificate Holder vs. Additional Insured:

Certificate Holder:

The Certificate states to the Certificate Holder that the Named Insured (you) has the specific coverage and limits listed on the certificate. It does not grant insurance coverage to the certificate holder. It only states that you have the specified coverage.

Additional Insured:

An Additional Insured is an entity that is not automatically included as an insured on the policy. Therefore, the Certificate extends a certain degree of insurance coverage to the Additional Insured on your insurance policy. A contract or lease number is generally referred to on a certificate to specify the reason the Certificate Holder is named as an Additional Insured (i.e. “Certificate Holder is named as an Additional Insured with respect to the leased premises at location address or contract number).

It is important to have your Insurance Broker review the insurance sections of your contracts or lease agreements prior to signing the agreement to be sure that the insurance requirements in the document coincide with your company's insurance policy coverage. The Certificate of Insurance clearly states that the "certificate does not amend, extend or alter the coverage afforded by the policies."

Posted in: Financial