What Is a Certificate of Insurance (COI) for Contractors — and When Do You Need One?

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Last Updated Aug 23, 2023

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Why a Certificate of Insurance is Vital for Contractors

When engaging in contract work, it is essential to possess a Certificate of Insurance (COI) as it serves as proof that you have the appropriate insurance policies in place. This not only fulfills the requirements set by project owners and general contractors (GCs), but also instills confidence in potential clients regarding their financial security. By providing a COI, you can effectively meet contractual obligations and demonstrate your commitment to ensuring the safety and well-being of all parties involved in the project.

Situations Requiring a COI

A COI is not only necessary for project owners and GCs, but may also be requested by government entities before considering you for a bid. This is particularly important when working with local, state, or federal governments, as they require proof of liability insurance for the contractors they hire. Given the unpredictable nature of construction projects, accidents can occur and result in damages or injuries. In such cases, a COI provides evidence of the specialty contractor’s insurance coverage, alleviating the responsibility from project owners and GCs.

What Should be Included in a COI?

A standard-form COI, which serves as proof of liability insurance, should contain the following information:

  • Name of the insured contractor
  • Policy number and type of insurance coverage
  • Effective dates of the policy
  • Limits of liability
  • Additional insured endorsements, if applicable

It is essential to thoroughly review each COI, ensuring that all the necessary information is accurately displayed.

The Significance of Maintaining COI Records

Even though a COI may have an expiration date, it is valuable to keep a record of these certificates. In the event of future incidents or insurance claims, a COI can provide proof of coverage at the time the job was performed. Additionally, organizing and tracking COIs can help with audit purposes, as well as differentiate between employee and independent contractor statuses. By maintaining a centralized system for storing COIs, you can save both time and money.

How Long Should COIs be Retained?

While there is no specific rule regarding the retention period of COIs, it is advisable to store them for as long as your business is operational, and beyond. As insurance claims can be filed years later, having a COI as evidence of insurance coverage provides an extra layer of protection for your company.

The Importance of Requesting a COI

If you are a general contractor hiring specialty contractors, it is essential to request a COI from each party. This is due to the additional risks associated with the specialty contractor relationship. By ensuring that specialty contractors possess insurance coverage, you can avoid potential liability for any injuries or damages caused by uninsured contractors. Additionally, both specialty contractors and general contractors should request COIs from vendors, as the supplier’s faulty products or tools can lead to accidents at the job site. In such cases, the legal system allows for the harmed party to seek damages from the contractor if the supplier operates without insurance.

COI vs. Insurance Policy

A COI serves the purpose of demonstrating that you have contractor’s insurance in place, and can also indicate that you have named the project owner or GC as an additional insured party. It summarizes important information included in the insurance policy, which is a detailed contract between your business and the insurance company. The policy contains comprehensive information regarding coverage, potential claims, and specific requirements. COIs are commonly requested by project owners to ensure compliance with contractual obligations, and it is prudent to retain these documents for the duration of your business operation.

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