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ARI Blog: Article

What is a certificate of insurance?


What is a ‘Certificate Of Insurance'

A certificate of insurance is a document issued by an insurance company/broker that is used to verify the existence of insurance coverage under specific conditions granted to listed individuals. More specifically, the document lists the effective date of the policy, the type of insurance coverage purchased, and the types and dollar amount of applicable liability. A certificate of insurance is often demanded in situations where liability and significant losses are a concern.

Breaking Down ‘Certificate Of Insurance

Restoration contractors often have a certificate of insurance protecting against liability for workplace accidents or injuries. The certificate is issued when purchasing liability insurance. It details the types and limits of coverage, the issuing insurance company, the policy number, the named insured, and the policy’s effective dates.

Importance of Certificate of Insurance

A certificate of insurance is often required for restoration contractors to win contracts. Because many companies and individuals hire contractors, the potential client must know that a business owner or contractor has liability insurance and that the client may not be liable for damages, injuries, or substandard work.

Validating a Certificate of Insurance

Typically, the client requests a certificate directly from the insurance agency (or company) rather than through the business owner or contractor. The client should confirm the name of the insured on the certificate is an exact match for the company or contractor being hired. In addition, the client should check the policy coverage dates and ensure they are current. If the policy is set to expire before the job is completed, another certificate should be obtained at that time.

Example of Certificate of Insurance

A certificate of insurance contains separate sections for different types of liability: general, auto, umbrella, and worker’s compensation. “Insured” refers to the person or company named on the certificate as having insurance.The certificate includes the insured’s name and mailing address; the insured’s insurance agent’s name and mailing address; the insurance agency’s contact person; and the names of the insured’s insurers. The certificate also describes the operations the insured performs; the name and address of the certificate holder; and a statement outlining the insurer’s obligation, if any, for notifying the certificate holder if the insured’s insurance is canceled.

The certificate briefly describes the insured’s policies and limits for each coverage type. For example, the general liability section summarizes the policy's six limits and indicates whether coverage applies on a claims-made or occurrence basis. Because state laws determine the benefits provided to injured workers, no limitation is listed for worker’s compensation coverage. However, limits should be listed for the employer’s liability coverage.

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