How to Read a Certificate of Insurance

If you’re an experienced business person, certificates of insurance are probably not new to you. You’ve likely requested and read one many times before. But can you read a certificate of insurance from top to bottom and be sure that you understand everything there?

On the other hand, if you are a new startup or small business owner, you possibly haven’t even had the chance to come across, let alone read, a certificate of insurance. They could be a true mystery for you then. So, let’s first explain briefly what a certificate of insurance is.

Simply put, a certificate of insurance (COI) is proof of having insurance coverage. It is a document that summarizes your insurance policies and provides the necessary coverage details when your clients or vendors, for example, request that from you.

The certificate of insurance is valid for as long as your policy is active. Once your policy expires, your certificate can only be used to prove that you had insurance coverage at a given period, but it doesn’t help with future projects.

You can obtain a certificate for any type of insurance policy you have in place with your insurer(s). The most common types of certificates insureds request are the certificate of liability insurance and property insurance certificate.

Certificate of liability insurance can list the details of the requested liability policies, such as general liability, errors & omissions (professional liability), workers compensation, or employers’ liability, for example.

Commercial property insurance certificate provides details of the commercial property insurance policy, outlining coverage information and insured perils. Banks usually request this type of certificate from their clients because they hold the mortgage over the property when giving out loans.

In What Situations Do Businesses Need a COI?

Whenever you are starting a new project or a partnership, you should ensure that the new parties you work with provide adequate insurance policy certificates. You don’t want to be responsible for the claims related to their work and suffer financial losses in the process.

Also, you shouldn’t be surprised when the same is asked of you. Providing a COI to your partners proves that you run a financially responsible business that is fully insured and poses no legal liability to them. If you are a startup looking to raise funding, you can expect investors to ask for your certificate of directors and officers liability insurance.

A certificate of insurance provides security to all the parties listed in the contract and involved in the project. If you rent some equipment, lease new office space, or add a new supplier to your product chain, all involved parties will likely need to provide proof of insurance.

If you plan to renovate your offices or any other facilities you own and want to hire contractors to do that job for you, ask them for their certificate of insurance. Mistakes and accidents happen, and you don’t want to be liable unless you are responsible for them.

You also have the option of adding an “additional insured” to your liability policy when you start working with them. You add the additional insured to your coverage by including an endorsement that lists them as added insured to your current policy. Note, however, that this depends on your primary policy and the terms you have agreed with your insurer, and you might have to pay an additional fee.

What Are the Main Elements of a COI?

The good thing about COIs is that there are standardized forms that most insurance carriers, brokers, and agents use to provide proof of insurance to their clients. Those forms are called ACORD certificates, named after the nonprofit organization that developed them, The Association for Cooperative Operations Research and Development (ACORD).

Assembling hundreds of insurance companies worldwide under its roof, ACORD is now a standards-forming body for insurance services. For the past 50 years, they have been creating standardized tools and forms to improve the data flow and make the insurance industry more efficient.

The most commonly used ACORD certificates are ACORD 25 and ACORD 27 and 28. Insurers use ACORD 25 for proof of liability insurance and ACORD 27 or 28 to provide evidence of property insurance.

We will use the example of an ACORD 25 certificate form to explain the main elements of a COI. Other certificates they created are similar since they all follow the pattern that ACORD provides. Let’s look at the sections all ACORD 25 certificates have:

1. Date: This is merely the certificate issuance date.
2. Disclaimer: The statement indicating that this document is proof of insurance but doesn’t in any way amend, extend, or alter the agreed coverage(s) named in the certificate.
3. Producer: The name of the insurer, agent, or broker who handled the insurance purchase and issued the certificate to the insured. The field should include the name and the business address.
4. Insured: This field refers to the policyholder. It should state the name of the individual or business entity holding the policy and their business address, just like the previous field.
5. Insurer(s) affording coverage: This section lists the names and NAIC numbers of insurance carriers providing the listed coverages to the insured. If there are multiple insurers, their names should stand in separate lines, as Insurer A, Insurer B, and so on.
6. Type of insurance (+ Insr. ltr:): All the relevant insurance coverages are listed in this section, right next to the “Insurance letter” box. The Insurance letter indicates which carrier holds what policy, and they match the companies from the “Insurer(s) affording coverage” section. This field already contains a list of some liability policies (such as general liability or automobile) and some blank space to add additional policies for which the policyholder needs proof of possessing.
7. Policy EFF: The policy effective date is when the named coverage begins.
8. Policy EXP: The policy expiration date shows when the coverage ends under the named policy.
9. Policy limits: Lists the limits of each specific coverage within the policy.
10. Description of operations/locations/vehicles: The producers can use this field to add any properties or entities included on any of the policies as additional insured(s). This space is also for any existing waivers of subrogation.
11. Certificate holder: The name of the person/business who requested the certificate.
12. Cancellation: The notice stating that the producer will notify the certificate holder if either party cancels the policy before its expiration date.
13. Authorized representative: The place for the signature of the authorized agent or broker.
14. Additional remarks page: If the space left in field 10 was insufficient to include all additional insureds, properties, or waivers, the producer should add all the necessary information here.

How to Read a Certificate of Insurance Form?

Most of these fields are self-explanatory and contain all the necessary information for the certificate holder. However, there are a few things you should look into when reading a COI. Suppose that you are looking at an ACORD 25 certificate provided by a business partner right now. Here’s what you should pay attention to:

• Does the business name of the insured match the name of the partner/vendor with whom you are starting the business relationship?
• Does the policy expire before the date you expect to complete your cooperation? Ask for the timely new certificate upon the policy renewal if it does.
• Does the certificate list all the necessary coverages?
• Are the limits to the listed policies adequate? If not, you should ask the other party to increase their policy limits to match or exceed your own.

If everything seems to be in order, you are good to go. However, you should be aware that a COI can be counterfeit. The best way to prevent getting one of these is to be careful when choosing your contractors, vendors, and business partners. Make sure they are reliable and potentially recommended by someone from your business network.

Should you have any reason to suspect a COI you received is fake, a few things could help you determine that. 

First, as we said before, almost all insurance brokers and carriers use standardized ACORD forms. Check for the recognizable logo in the upper left corner; if it’s not there, that could mean the certificate is not genuine.

You can also search the Internet to check if the producer’s information is correct. Extend the search to their website to check if they offer the insurance lines listed in the certificate. Also, the document shouldn’t be editable because it would indicate that it could have been tampered with before it reached you.

Another sign could be weird formatting. If you notice some strange zeros, different fonts, or inconsistent capitalization, that could be a reason to suspect foul play.

In case you still have suspicions about the document’s authenticity, you can even ask the carrier directly to send you the insured’s proof of insurance.

How to Obtain a Certificate of Insurance?

Traditionally, this process involved going back and forth between you, your broker, and your carrier, potentially printing the documents and ensuring they reached your partners. Had there been some irregularities, the certificate would have to go back to you and then to your broker to start the process again from the beginning.

Luckily, things have changed over the years, and obtaining a COI has become significantly easier. The process has become even more streamlined with the expansion of insurtechs, which are slowly but steadily modernizing the traditional insurance industry. The process for requesting a COI from your broker is now digitized and considerably more efficient than it used to be.

If you have the policy with Embroker, you can get your certificate of insurance online instantly. Simply log into your Embroker account, choose which policy you’d like a certificate for, and get started. Your business partner will receive the certificate immediately. You can also download a copy of your certificate from your Emrboker account.

If you need a customized certificate, you can also request it in your account, and it will be ready for you within 24 hours.