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You already know you need general liability insurance for your business, which protects you from accidents and injuries within your workplace or at job sites. If you already have the coverage, why do you need a certificate of liability insurance (COI) as well?

What is Liability Insurance?

Just to be sure we are on the same page, liability insurance, your business in the event that a claim is brought up against you. Three types of liability insurances exist. 

Professional liability insurance protects a business from claims against personal and professional services offered by your business. This is also referred to as errors and omissions insurance (E&O insurance)

General liability insurance, or commercial general liability (CGL), offers protection for your business from other business’ or individuals’ claims of physical harm that occurred at your workplace.

A business owners’ policy (BOP) combines both professional liability insurance and general liability insurance.

What is a Certificate of Liability Insurance?

How is a certificate of liability insurance different? Well, it isn’t really. Basically, it is a fancy name for a piece of paper that displays all of your liability insurance coverages. It is the same coverage you already have (not an additional form of coverage). In other words, this is the proof of your company’s protection. The information on the paper includes the name of your insurance company, your business name, your policy number, the policy’s effective dates and the types of coverage you have along with the limits.

COI’s exist because it would be cumbersome to display your entire insurance policy each time proof of insurance is required. This is a customary piece of paper in business transactions that is used to show proof of insurance.

You should receive a copy of the certificate of insurance once you purchase your business insurance. If you don’t have a copy, you can simply ask your insurance broker to provide you with one. They can send one directly to your client, send it to you to distribute and/or provide you with a hard copy to keep in your files.

Why do you need one?

Prospective clients may ask for a copy of your certificate of liability insurance when considering doing business with you. Many individuals and companies that hire other companies and contractors need verification that you have insurance so they are not held liable for anything, should something go wrong on the job.

What if my client asks to be added to my certificate of insurance?

In many cases, clients ask to be added as a holder to your certificate of liability insurance. This is a common request that is made in order for the requesting party to establish that you do in fact have an active insurance policy. A certificate holder is anyone who is named in and insured through your policy. They do not have any legal rights under your certificate. A certificate holder will, however, be notified if your policy is canceled before it expires.
Posted 12:53 PM  View Comments

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