What is a COI, and why should you care?

You’ve likely been asked to provide proof of insurance at some point in your life. Sometimes it’s
as simple as providing your health insurance card for a routine visit, or your auto insurance card
for verification by law enforcement or in the case of an accident.
Another form of verification used primarily for business purposes is a Certificate of Insurance
(COI). This form is widely used by most businesses; however, it’s likely the most misunderstood
form in the industry.
A COI is a snapshot of coverage issued and provides proof of specific coverage on the date the
certificate is issued. The certificate is not:

• A contract.
• A guarantee that the insurance policy will remain in force beyond the certificate date.
• A guarantee of coverage by the insurance company.
• Proof that the policy covers the request.

Sometimes, a third party requesting a certificate will ask for the COI to include “Additional
Insured” status. It’s very important to understand that the certificate does not govern coverage,
rather the insurance policy (contract) is the governing mechanism. Therefore, unless the actual
policy states that the requesting party is an additional insured, that status won’t be granted,
even if it’s stated on the COI form. There are two ways that “Additional Insured” status can be
granted. One is by specifically naming the additional insured party through a policy
endorsement. Another is through a “Blanket Additional Insured” endorsement, whereby each
qualifying entity can be named an additional insured if they comply with the blanket additional
insured conditions. The same concept applies to those entities that request that “Waiver of
Subrogation” be added to the COI. Again, the policy governs whether that clause is in effect.
You might be wondering why a certificate is used since it really doesn’t apply coverage. The
best answer is that a certificate, like a balance sheet, shows a snapshot of coverage on a
specific date. Most times, the requesting party wants to make sure that you are covered for
certain types of liability, based upon the exposure to risk. A good example is when you hire a
contractor to work in your home. You certainly want to make sure that the person has
insurance to cover any personal losses that he or she might experience and any losses to you
while he or she is working on your property. The caveat is that you need to remember that it is
the contractor’s insurance policy that governs coverage, not the COI. He or she might represent
that a general liability policy exists with an aggregate limit of $1,000,000. However, if he or she
has already had a claim during the year for $750,000, you now only have $250,000 worth of
coverage, even though the policy and the COI indicates a limit of $1,000,000. If you really want
to ensure that you know the coverage limits and you are in doubt as to the validity of what’s
being represented on the COI, it’s best to ask to review the actual policy form.

You can rest assured knowing that most COI forms issued are reliable reference documents and
prepared by professional agents who understand the policy limits and coverage details. Just
don’t mistake the COI as coverage. It’s simply a snapshot in time of what the existing policy
represents. The coverage details and settlement clauses are in the policy.