Certificate of Insurance (COI): What Is It, and When Do You Need It?

Risk hedging is a primary goal for businesses seeking to safeguard their assets and liabilities. The surefire way to achieve this is to request a COI insurance certificate from contractors, clients, and service providers. This certificate serves as proof that the parties to the contract are financially protected in case of accidents, damages, or losses.

This article explains the COI insurance meaning, outlines its key details, and guides you through the process of obtaining, verifying, and retaining a COI insurance form.

What Does COI Mean in Insurance?

When you start cooperating with a new company, you want to ensure your business won't suffer any financial losses if something in the project goes wrong. This can happen only if your partner has a necessary insurance policy in place. And what is COI insurance for? It tells you that such a policy exists, so you have nothing to worry about.

COI stands for Certificate of Insurance. A COI is an official document issued by an insurance company or broker that confirms an insurance policy exists and is active. The COI outlines essential details, including coverage types and policy limits, to ensure you understand that you are financially secure after entering into a business partnership with the policyholder. And if you are the one being hired, presenting a COI of company means that you are a credible and reliable partner who is prepared to assume liability towards customers and pay for potential damages.

What is a COI in Insurance Used for?

COIs are commonly required when hiring vendors or contractors for projects that carry significant potential liabilities such as workplace accidents, property damage, or service deficiencies. In these cases, the COI confirms that the vendor’s insurance covers such risks. Should an incident occur, the client can file a claim against the contractor’s insurance policy. Without valid insurance, the client may face losses without compensation.

To avoid this risk, many clients typically require a prospective contractor to provide a COI before finalizing a contract, often during the bidding or application process. The policyholder contacts the insurance agency that generates the document on short notice. Especially important is the certificate of insurance for small businesses and startups whose future success and commercial prospects in the field are directly related to winning their partners’ trust.

Yet, you should remember that a COI isn’t an insurance guarantee. Its mission is simply to verify that the policy was issued on a certain date and will elapse on a later date, as well as summarize its key points. Because a COI is only a snapshot of the policy at issuance, it will not reflect later changes. For example, if the policy is canceled or lapses after the COI is issued (e.g., for nonpayment), the certificate will not indicate that cancellation.

Zooming in on the Details of a Certificate of Insurance

If you request a COI, you should know what information to expect from it. Typically, this document includes the policy number, effective and expiration dates, coverage limits, and the type of coverage provided. Information related to COI insurance coverage is divided into sections: general liability, umbrella/excess liability, auto liability, and workers’ compensation, each corresponding to a specific type of liability. Conventionally, the general liability section contains some universal operating principles, like the six limits within each category (except workers' compensation, which has no limits under existing laws), and specifies whether coverage applies per occurrence or per claim.

The COI also lists the policyholder’s (insured’s) name and contact information, as well as the insurer’s name and contact details. If multiple insurers or agents are involved, each one is listed with their respective contact information.

Two important terms that you need to understand are used on the certificate. “Insured” refers to the policyholder (a person or a company) whose name appears on the certificate. "A certificate holder" refers to the organization requesting the COI. The certificate holder’s name and contact details are located in the bottom left corner, along with a note stating that the insurer is obligated to inform the certificate holder in case the policy is canceled.

How Do I Get My Insurance Certificate?

The policyholder (insured) is responsible for obtaining the COI from the insurer and providing it to the requested party. Sometimes, the policyholder has a COI on their hands since they received it automatically when they purchased the insurance. More often, however, the insured company must specifically contact the carrier and ask for this document. This process is typically straightforward and can be completed in just a few days.

When you receive the certificate from your potential, it’s crucial to carefully review the document to avoid fraud or misinformation. This involves several key steps:

• Check whether the insurer is legitimate (by verifying its licensing and registration through official portals) and financially reliable (by inspecting its financial strength rating assigned by specialized agencies like Moody’s, Standard & Poor’s, or A.M. Best).
• Verify that the name of the insured shown on the COI exactly matches the name of the contractor or company you are hiring.
• Ensure the policy remains valid throughout the project's duration.
• Review all coverages to ensure they are listed and have sufficient amounts.

If you still have any doubts or concerns after reviewing the COI, it’s best to contact the issuer directly for clarification.

Who Needs a Certificate of Insurance?

The COI is an essential document for both parties in a business relationship, the hiring organization and the hired service provider.

As an employer, you need to ensure that you won’t incur any financial loss in the event of an accident. This certificate is the most reliable and efficient way to confirm this. You won’t have to sift through the full insurance policy with its complex legal language and endless clauses. The COI presents the essential information clearly and concisely, all laid out in black and white.

As a hired party, you can only secure the deal by providing your prospective partner with valid proof of insurance. Doing so alleviates their concerns about unexpected expenses and reassures them that their financial interests are fully protected.

How Long Should I Keep a COI on File?

Requesting a COI from your insurer and keeping it on hand at all times is the best way to future-proof your business. Why?

First of all, the certificate has no expiration date and is valid as long as the policy itself remains active.

Secondly, in the modern, extremely dynamic business landscape, speed is often a decisive factor. The employer may need to kick off a project immediately, so they require all necessary documentation upfront. In such cases, if you need “a few days, maybe a week” to produce your COI, you risk losing the opportunity to a competitor who already has theirs ready. In these cases, having the COI available can be the tipping point that secures the contract.

Besides, issues may arise after the project ends. All claims and issues can be addressed promptly and resolved more smoothly if you have the certificate of insurance readily accessible, allowing you to protect your position and satisfy all parties concerned.

To Sum It Up

A certificate of insurance (COI) is an official document serving as proof that an insurance policy exists and is currently active. Issued at the request of the policyholder, the COI includes essential details such as the name of the insurance agency and the policyholder (called “the insured” in it), their contact information, the policy number, and its details, such as the duration period, the type of coverage, and its limits.

This document is typically required by an organization while hiring a vendor, contractor, or service provider to ensure that the hired party holds an insurance policy that will cover the costs of any project-related damage, such as workers’ injuries, property damage, workplace incidents, or substandard outcomes. After receiving a COI, the hiring party should confirm that the insurer is legitimate and properly licensed and verify that the COI details match the contract. Specifically, ensure that the insured’s name on the COI exactly matches the contractor’s legal name, and check that the policy dates and coverage limits align with the project’s requirements.