How to Read a Certificate of Insurance Form

A certificate of insurance form is often needed when a business needs to provide evidence that certain general types of insurance coverage and limits have been purchased. In a nutshell, it summarizes your insurance coverage to a single document. This may be important if a claim occurs and the business is found liable while providing their service or engaged in their trade.

Essential Components of a Certificate of Insurance Form

There are four common components that make up a certificate of insurance form:

  1. Liability insurance policies
  2. Coverage limits
  3. Policy effective dates
  4. Cancellation notification

Note: It is in the business’s best interest to also consider requesting additional information be included in the certificate of insurance form (we’ll get to that in a moment).

How to Read a Certificate of Insurance Form

Once you have received the certificate of insurance form from a vendor or contractor, there are a number of elements to verify.

  • Ensure the business name on the form matches the vendor name for which you are hiring.
  • Examine the policy expiration date to make sure it does not come before the completion date of the service or project. If it does, request the contractor submit another certificate of insurance form confirming the policy’s renewal.
  • Review the liability insurance policies carefully; look for commercial general liability, commercial auto liability at minimum, as well as workers compensation and umbrella if applicable. Liability insurance can provide coverage for third-party losses (including property damage, bodily injuries, etc.) the vendor causes, as well as any injuries to his or her employees during the rendering of services.
  • Check liability limits to ensure they meet or exceed the limits on your own insurance. If they don’t, consider requiring the person to purchase additional insurance.

Asking for the most recent certificate of insurance form helps verify a potential vendor or subcontractor’s financial responsibility and is a best practice before entering into any business agreement. There is no set format for a certificate of insurance form, but the Association for Cooperative Operations Research and Development (ACORD) provides standardized certificates and forms that are commonly used by insurers, agents, and businesses. This particular form provides even more important information.

An ACORD Certificate of Insurance Form Includes:

  • The date the form was issued
  • A disclaimer that summarizes the nature of the certificate of insurance form
  • The name of the insurance agent who issued the certificate of insurance form
  • The name and address of the person(s) or business covered by the policy
  • Types of insurance coverages
  • Policy numbers with policy expiration dates
  • All companies providing the insurance coverage
  • Limits of liability included in dollar amounts that each policy provides
  • Description of operations, locations, vehicles, etc.
  • The certificate holders name and/or company
  • Cancellation details that specifies that the certificate holder will be notified if the insured cancels the policy before the expiration date
  • Signature of the insurance agent or an authorized representative

Importance of Requiring a Certificate of Insurance Form

Why should you require a certificate of insurance form? Let’s say, for example, you hire a snowplow contractor to plow your parking lot, clear sidewalks and apply ice melt. There is an expectation this will be done efficiently and safely. But what if the snowplow driver hits and damages a parked car while plowing your lot? The car owner will look to you, the parking lot owner, to pay for damages. Naturally, you will expect the snowplow contractor to pay for the damage because they caused it. If the snowplow contractor doesn’t have auto or liability insurance, you may have no choice but to pay out damages to the car owner. This is why it’s very important to require a certificate of insurance form.

Whenever a business enters into a contract or service agreement with another business, they should require that a certificate of insurance form be provided before any work begins. The certificate of insurance form should be for all lines of coverage. Note that commercial general liability and commercial auto liability are different from personal insurance. Do not accept personal insurance. Personal auto coverage, for example, specifically excludes using vehicles while engaged in any business.

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Should You Require Additional Insurance Documents?

It’s important to note that a certificate of insurance is NOT an insurance policy. It does not provide, endorse, amend, extend or alter the terms of an insurance policy. Only an endorsement, rider or amendment to the insurance policy can effect changes in coverage. A certificate of insurance provides evidence that certain general types of insurance coverages and limits have been purchased, but it does not guarantee coverage or that the policy will remain in effect. Someone could present their certificate of insurance form on Monday and cancel the policy on Tuesday. In order to protect your business, you should at a minimum ask to be notified in writing when the insurance policy is being changed or canceled.

A certificate of insurance simply shows that the contractor had insurance at one point in time that covers themselves. An even better safeguard is to ask to be listed as an additional insured on the contractor’s policy. When listed as an additional insured, you will be notified if the policy is cancelled or lapses and it also provides a much better chance of recovery if a loss were to occur.

Obtaining a Certificate of Insurance Form

Society Insurance policy holders can contact their Society agent for a certificate of insurance form.

Additionally, the information provided here is not intended to give legal advice or take the place of a consultation with your insurance agent or legal counsel. Always consult with your insurance agent and legal counsel, and even your insurance carrier, before entering into any contractual agreements.

Download our white paper, ‘Using Contracts to Protect Your Business’ to learn more about certificate of insurance forms or contact your local Society agent to obtain answers to your most unique business insurance coverage questions.

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