Understanding ACORD certificate of insurance isn't always straight forward. The COI is issued by a broker or insurance company to a third party who is seeking proof that you have certain commercial insurance policies in effect.
Understanding ACORD Certificate Of Insurance
You may have heard the term certificate of insurance (COI), and you might have even looked one over. However, understanding an ACORD certificate of insurance can be confusing if you are not regularly looking at them for a living.
ACORD publishes and maintains an extensive library of standardized forms - including the certificates of insurance - documents that is given to provide information about different insurance policies.
There are millions of them that are given out each year, and it is most often done when an insurance policy is renewed or opened. Understanding ACORD certificate of insurance - the most common type of certificate is the ACORD 25: Certificate of Liability Insurance - which is provided for informational purposes to let a third party know the type and amount of insurance issued to the business.
What are Certificates of Insurance?
Certificates of insurance are given to third parties that are known as certificate investors and holders. These certificates list what is included in the insurance policy, what is limited on the policy, and who is providing the coverage available.
Understanding ACORD certificate of insurance. There are a lot of different reasons as to why you might request or be given a certificate of insurance. Policyholders might request a certificate of insurance to show anyone who is asking about their insurance coverage. This can include when a subcontractor is getting a job with a general contractor, proving they have commercial general liability insurance, or showing property insurance for equipment they are holding, or when they need to provide evidence of their worker's compensation insurance for a contract. Showing a certificate of insurance can be evidence enough of the policy that you carry on hand.
However, a certificate of insurance is not an automatic insurance policy. Just because someone holds this does not mean that they have the insurance policy or that what is listed is actually covered. It can provide proof that insurance is held by you, the company that they are working with. This is especially important to have on hand because most people want to know that the company they are hiring has liability insurance. The client does not want to be responsible or held liable for any damages, injuries, or bad work. With the proof of insurance, the client can feel better about working with them. So in understanding ACORD certificate of insurance, sometime the party asking wants to be named as an 'Additional Insured'.
An ACORD certificate of insurance is usually requested directly from the broker or insurance company. This proves that the company truly does have the insurance that they claim to have. When validating these certificates, make sure that the company name exactly matches what is on the insurance policy. Even a small typo or difference could create a problem if a claim needs to be filed. Insurance companies and brokers hand out certificates of insurance quite often, so they should be familiar with the process of sending one to a client that needs to verify it.
Also, a client should always read through what is covered on the insurance policy. Not every company is going to have full coverage, and this might be something that is important to them. Different policies have different things covered, so reading through the benefits and limitations of the policy can better prepare them for if something were to go wrong.
As a business owner, a certificate of insurance should always be in your grasp. Providing proof of this should be second nature, whether or not your client asks to see it. Not only is having insurance a necessity, but having your proof of it right there is something that can help make a client feel more comfortable working with you. While they should always ask for another copy straight from the insurance company, showing them before they call can also ease their concerns.
The ACORD Certificates of Insurance
The following the ACORD Certificate of Insurance forms available to be issued as proof of insurance:
- ACORD 20: Certificate of Aviation Liability Insurance (20)
- ACORD 21: Certificate of Aircraft Insurance (21)
- ACORD 22: Intermodal Interchange Certificate of Insurance (22)
- ACORD 23: Vehicle or Equipment Certificate of Insurance (23)
- ACORD 24: Certificate of Property Insurance (24)
- ACORD 25: Certificate of Liability Insurance (25)
- ACORD 27: Evidence of Personal Property Insurance (27)
- ACORD 28: Evidence of Commercial Property Insurance (28)
For more information, see the full ACORD forms list.
Understanding ACORD Certificate Of Insurance - The Bottom Line
We hope this article on understanding ACORD certificate of insurance has been informative. If you haven't shown your certificate of insurance yet, don't worry. This is a really easy document to get, and it is fairly straightforward when you look at it. Before handing it out to clients, get a copy sent to yourself so that you can look over it. It's another great opportunity to view your coverage and see when your policy ends or changes.
The COI itself should list exactly who is covering you, the dollar amounts they are covering your business for and what your policy does and does not cover when it comes to filing a claim. Your small business insurance policy and certificate of insurance should work hand in hand to provide your clients with the knowledge that they are not going to be held liable if something goes wrong. Because it is so easy to request, you should ask for a copy from your insurance broker today.