Certificates Of
Insurance
Business transactions
frequently require the valuable protection provided by insurance. A Certificate
of Insurance is a document that is often requested as proof that adequate
insurance exists. A certificate is not the same as a policy and certificates do
not affect the coverage provided by a particular insurance policy. Therefore,
requests to "endorse the certificate of insurance" are inappropriate
and misleading. A certificate is a separate document that is used to comply
with a common contract requirement to verify certain types and amounts of
insurance.
Certificate holders, the
entity or party requiring the certificate, often demand that they appear as
"additional insureds." This requires an endorsement (change) to the
policy and it gives them coverage for injury or damage resulting from the
contract.
Example: Tenant A leases a building from
Property Owner B. Property Owner B demands that the tenant changes its
insurance policy to also show the property owner as an additional insured. If a
tenant’s customer is injured on the premises and sues both the property owner
and the tenant, the tenant's liability policy would provide coverage for both
parties.
Construction contracts
require certain forms of insurance, certain insurance limits, a hold harmless
agreement and the inclusion on insurance policies as additional insureds. A
"hold harmless" agreement is a contract provision that states how
much responsibility each party accepts for damages arising out of the
agreement.
A certificate of insurance
can confirm that the appropriate policies were issued and that other
requirements were also met. It is important to have a system for monitoring
receipt of certificates BEFORE any sub-contractors are allowed to begin work.
If certificates are not obtained or kept up-to-date, when the contractor’s
Workers Compensation and General Liability policies are audited, the payroll
for the sub-contractors without Certificates will be included with the
contractor's resulting in an additional premium charge.
Ask your insurance agent to
help determine if you should be obtaining or providing certificates of insurance
in conjunction with your business. In addition, when you’re required to provide
a Certificate, send your agent a copy of the contract. The contract allows the
agent to assist you in determining what liabilities you are accepting and what
can be done to modify your insurance program to best protect your financial
well-being.
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