What is a Certificate of Insurance?
A Certificate of Insurance is a standardized form used in the insurance industry to illustrate what liability coverages an insured has to a certificate holder. The form itself was developed and is maintained by ACORD a non-profit organization within the insurance industry responsible for standardizing forms and electronic standards.
I can’t emphasize enough that a certificate only illustrates liability coverages. The top header on a Certificate of Insurance or ACORD 25 Form says that “This certificate is issued as a matter of information only and confers no rights upon the certificate holder.
The header further goes on to say that “This certificate does not affirmatively or negatively amend, extend, or alter the coverage afforded by the policies below. This certificate of insurance does not constitute a contract between the issuing insurers, authorized representative or producer, and the certificate holder”.
I’m making a big deal about this limiting language because I believe that some certificate holders place too much faith in a certificate and rely on a cert or COI as they are sometimes called to be proof of insurance.
True, a cert is proof of insurance the moment it is issued. But the next moment, those policies could be canceled, terminated, or altered, so it’s only proof for a short period.
Now, let’s talk about Additional Insured Status which certificate holders are often requesting.
Broadly speaking an insured can grant additional insured status on their liability policies in one of two ways.
The first is through a blanket additional insured endorsement that many package policies and business owners or BOP policies automatically provide. But be aware that the language in that endorsement to the policy says that the insurer will provide additional insured status to the certificate holder only when required by written contract. If there’s no contract between the parties mandating additional insured status, then no status is granted.
Second, additional insured status can be extended or granted by specifically endorsing the insured’s general liability policy with the name of the person or entity requesting additional insured status. There can be an additional premium for this type of endorsement.
The point is that if there is no contract between the parties or if the certificate holder has not been endorsed to the insured’s liability policy, there is no additional insured status.
The last point I want to make about AI or additional insured status – which I could make an entire video about – is that Additional Insured status is not as broad as many people think it is.
While there are dozens of additional insured endorsements the key feature of all of them is that it provides status as an “insured” to the additional insured but only for the negligent acts or omissions of the named insured.
Additional Insured status does not relieve you of having your liability insurance and is not all-encompassing. It’s not a bulletproof way of protecting yourself, so be careful.
Finally, a certificate is used to illustrate general liability, auto liability, umbrella or excess liability, and workers compensation policies of an insured. It is not intended to illustrate property coverages or other forms of insurance, although other policy forms often sneak their way into the comments or description box.
Have other questions on certs or business insurance in general? Why not click the button below to get the process started. I love working with business owners and look forward to chatting with you about your concerns.