What Exactly is a Certificate of Insurance and Why Do I Need One

A certificate of insurance is documentary proof that there exists insurance coverage to and from any business. People or business entities supplying services or goods to customers make good use of certificates of insurance in assuring customers that the liability, worker's compensation, property as well as all other insurance coverage exists in order to enforce the numerous obligations as part of the obligations.

A certificate of insurance may be needed by an insurance company from those persons or business entities that provide services or goods to customers. By keeping a file of all insurance coverage, the insured can often receive a reduction in insurance premiums.

Having this document does not mean that it constitutes an insurance contract as it does not make changes to or modify the insurance coverage nor does it spell out exclusions. It only certifies that there existed insurance at the time of issuance. Certificate holders do not qualify to obtain information regarding policy changes during the validity of the insurance coverage. They may only be informed about any notice of termination.

A certificate of insurance should be made out in original and have original signatures as well as name the insured and certificate holder. It should also specify the minimum amount of insurance as well as state the required period of notice in case the coverage is to be canceled. In addition, the document may be accompanied by an endorsement page which shall make reference to the policy number which in turn should match the certificate. All insurance companies providing insurance shall legally exist in the state in which the policy holder takes out the insurance policy. The insurance companies should also be rated "A" or better by A.M. Best's Key Rating Guide or be listed in the Federal Register's "Companies Holding Authority as Acceptable Sureties on Federal Bonds."

In case an organization rents a building, land, or other related facility, the owner of the property may first ask that some proof that insurance exists. A form needs to be filled to request a certificate. There is also provision to name the property or business requiring the certificate as additional insured.

A typical form will have a date of issue, name of the producer as well as names of the companies affording coverage. It shall also have a code and sub-code as well as the name of the insured. In addition, the various types of coverage will be explicitly stated. These may include employer's liability limit, comprehensive general liability and comprehensive automobile liability. There will also be the policy number, policy effective date and expiration date of the policy. The cancellation of any of the policies mentioned in the certificate of insurance the issuing company will give a required number of days notice of termination.

While getting a certificate of insurance, it is prudent to first try out the pre-drafted documents that are available in the market. These documents are concise and meet the demands of most users. Using these documents instead of writing one from scratch is recommended.