What is a Certificate of Insurance?

Written by April Weismann on 02/12/2020 11:47 AM in Commercial Insurance,. Small Business Insurance.

certificate of insurance

If you own a business, your customers are likely to ask for a certificate of insurance.  You may also be asked for a certificate if you are working as a subcontractor for another business, but what exactly is it, how do you get one, and how much does it cost?  HPM Insurance has the answers.

Certificate of Insurance Overview

Certificates of Insurance Provides Proof of Insurance

Simply put, a certificate of insurance is a document that serves as proof that a business has insurance. The document doesn’t reference property coverages since whether a business’s assets are insured is usually irrelevant to the client or company.  What they want to know is that the hired business has liability insurance in place should a claim occur.

The certificate itself is typically a one-page document and lists only the essential information about a policy or policies. For example, most certificates will note the:

  • Name of the insurance company

  • Name of the insured business

  • Limits of coverage 

  • Effective date and expiration date of the policy

  • Policy number

There will also be a “certificate holder” listed on the document. The certificate holder is the business requesting proof of coverage.

Why Do I Need a Certificate When I Could Show My Commercial Insurance Policy?

Though your commercial insurance includes the same information as the certificate, with even greater detail, a certificate is verifying coverage as of a specific day.  For example, say you obtain a commercial liability policy as of January 10th, but you forget to pay the premium, causing the policy to cancel on March 1st.  If you are asked to provide proof of insurance for a job on June 1st and you provide just a copy of your policy, the coverage is not worth the paper it was written on, given there is no coverage in place.

This is why most businesses require a certificate of insurance.  The certificate is dated, typically the day requested, and verifies coverage is in place (for at least that day.)  The document will also include the name of the business asking for it, further verifying coverage is in place. That said, insurance carriers can not cancel a policy immediately without proper notice to the insured. If the premium is not paid or perhaps the company has discovered an issue with the business operation, a notice of cancellation or non-renewal notice will go out indicating the cancellation date.  This notice does NOT typically go out to the certificate holder, just the insured.

Many New Hampshire Businesses Are Asked for a Certificate of Insurance

Many different businesses in New Hampshire are asked to furnish a certificate of insurance as a standard business practice. 

A business should not be offended when a potential customer or client requests to see a certificate of insurance. This shows that the potential customer is conducting their due diligence, and the request is a standard procedure in many settings. Moreover, it’s easy for businesses to obtain a certificate that they can show their customers.

Obtaining a Certificate of Insurance is Easy and Free

If your business has an insurance agent, obtaining a certificate of insurance usually is simple, fast, and free of charge. It can be as easy as calling the agent and requesting your certificate, but a little homework beforehand will help avoid potential hiccups.

First, ask any potential customer or client that requests a certificate of insurance what coverages they require your business to carry. Make sure you compare this to what you have, as you may need to increase your limits or add coverages. 

If you are a subcontractor with no employees, you may not have worker's compensation.  If this coverage is required for you to get the job, it may be worth purchasing, but it will take a little time.  It is essential to know this beforehand to avoid scrambling at the last minute.

While you’re talking with the customer, also ask for their legal business name, address, and where they want the certificate sent. This information is needed in the second step.

Second, contact your insurance agent. Let them know what coverages and limits your business needs in place, and they can check to see whether those protections are already included in your business’ policy. 

If your business already has all of the required coverages and limits, no changes need to be made to the policy, and a certificate can be turned around quickly. If your business needs to procure additional protections, your agent can help you make the necessary adjustments. 

Can I Request My Agent to Provide Me a Blank Certificate?

An insurance agent should never send a blank certificate as coverage needs to be verified on the date requested.  Unfortunately, over the years, we have seen less scrupulous business owners alter a certificate to provide to a client; however, this is not just dishonest; it is illegal.  If caught, the business owner will be subject to prosecution by the Department of Insurance and could face fines and/or jail time.   

Work with a Knowledgeable Insurance Agent

If your business needs to provide a certificate of insurance and you don’t have an insurance agent in New Hampshire, contact the team at HPM Insurance. One of our agents would be happy to help your business get the insurance coverages it needs and then provide a certificate so that you can land a new customer.

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