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Certificate of Insurance basics

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There are numerous topics of discussion available on the internet pertaining to certificates of insurance (COI). However, there is very little information regarding the management of certificates of insurance and other related insurance documents.

If you're charged with managing COI's, then it's important that you have a clear understanding of the following:

  1. What is a certificate of insurance?
  2. Why am I asking for a certificate of insurance from my tenants, vendors, contractors or others (referred to as "Insureds")?
  3. What am I asking the Insureds to provide as it relates to our existing business relationship?
  4. Is everyone involved in the COI management process clear as to why COI's are important to the organization?

What is a certificate of insurance?

A certificate of insurance is a representation of certain insurance terms and conditions. Certificates of insurances typically contain the named Insured, coverage terms, coverage limits, insuring companies, deductibles, effective and expiration dates and other policy information.

A certificate of insurance is typically formatted on an ACORD form, which is a widely acceptable template used by certificate holders and Insureds. A certificate of insurance is not an insurance policy. While information provided on a certificate of insurance may represent what is contained within the insurance policies, it is not a replacement for the actual insurance policy terms and conditions.

Why am I asking for a certificate of insurance from my tenants, vendors, contractors or others (referred to as "Insureds")?

Certificates of insurance provide a "snapshot" of coverage terms and conditions which enable the Insured and certificate holder to exchange policy information in an efficient and expedient manner. Certificate holders request certificates of insurance from their tenants, vendors, contractors or others (Insureds) as a means of obtaining insurance coverage information that is typically required in a lease, rental agreement, contract or other agreement between the certificate holder and Insured.

What am I asking the Insureds to provide as it relates to our existing business relationship?

Typically, the certificate holder is asking the Insured to show proof of insurance coverage as it relates to their insurance obligations as set forth in a lease or rental agreement, contract or other agreement.

Insurance provisions contained within the agreement or contract are fairly straightforward. However, on occasion, certain coverages and/or limits are requested that require the Insured to obtain additional insurance and/or augment their current coverage.

Is everyone involved in the COI management process clear as to why COI's are important to the organization?

Requests for certificates of insurance are often viewed as hindrances or annoyances as they are misunderstood or disregarded until they hold up "the deal" so to speak. Therefore, it is vital that those involved in securing a certificate of insurance clearly understand its importance. For example, lenders are especially diligent about securing certificates of insurance from their borrowers. Lenders want to make sure their borrowers have adequate insurance coverage. If the borrower's asset were to burn to the ground, the additional Insured (bank or lender) named on the policy will want to receive the proceeds from the borrower's insurance policy.

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