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The Difference between Your GL Policy and Certificate of Insurance

Most contractors are experts on things like tools, building, cutting, hammering, measuring, and all the other aspects of their special area of work. But, when it comes to various legal documents, like licensing, certificates of insurance, and insurance policies, they prefer not to think about them. Not because they don’t understand the documents, but typically because they don’t pay attention because they’re busy with their business of building or repairing things.


What is a Certificate of Insurance (COI) and Why Should I Care?


A COI is a one-page universally accepted document that includes the details of your insurance policy. It is a simple method for offering proof to a third-party who has requested it that you carry commercial insurance. Its purpose is for notification only. There are no rights provided with the certificate. It can become confusing because there are eight different certificates that can describe the type of insurance you carry. For purposes of this article, we will be discussing the certificate that is most used, which is the Certificate of Liability Insurance (Acord 25).


Since most general liability policies are anywhere between 25 and 50 pages, it makes very good sense to have a one-page form that you can use for proof of insurance. The COI summarizes the coverage and limits of your General Liability policy and includes the following information:

  • Producer (Insurance Agency)
  • Insured (You or your business name)
  • Insurers Affording Coverage (The names of your insurance company or companies)
  • Type of insurance
  • Policy number
  • Effective and expiration date
  • Limits of each coverage listed
  • Description of the insured’s operation or vehicles covered under the policies
  • The certificate holder and whether they are listed as “additional insured.”

This form summarizes all the information in your insurance policies for the third-party requiring it. It gives a snapshot of your policy, not the details of it.


Two Important Statements to Take Notice Of


  2. The Certificate of Insurance on the reverse side of this form does not constitute a contract between the issuing insurer(s), authorized representative or producer, and the certificate holder, nor does it affirmatively or negatively amend, extend or alter the coverage afforded by the policies listed thereon.


Item number 2 is found on the back or second page of the COI but is rarely sent along with the first page. So then, when you look closely, the certificate summarizes the coverage you have but does not confer any RIGHTS to the certificate holder, only the policy can do that.


What is an Insurance Policy and Why Should I Care?


Your insurance policy is the actual contract between you (or your business) and the insurance company. In simple terms, it is a promise between you and the insurer. The contract states that in exchange for the required premium, the insurer will pay for any covered claim up to the limit stated in the policy.

Certainly, there is more to it than a promise to pay. Your policy provides all the terms and conditions that are related to their promise. In fact, most policies have a page or two of definitions for the unusual terms in the policy because the policy is written in legal terms that only insurance people understand.

Think of it this way: Your insurance policy is a reference book, and the certificate of insurance is the cliff-notes. For more information about certificates of insurance for a third party, contact the insurance professionals at Fairbanks Insurance Brokers.

And while we’re discussing your financial risks, it’s a good idea to make certain you have the right coverage and are paying the most affordable rates.

Here is What We Recommend

General Liability: Contractors General Liability will be the foundation of protection for your business. The coverage will respond if you or your employees are found liable for bodily injury, property damage, or have a products/completed operations complaint. The coverage also covers defense costs for your business to respond to any lawsuits brought by a third party.

Workers’ Comp: Many states will require contractors to provide workers’ compensation coverage for their workers before they can begin a project. Accidents will happen at the job site that can result in an employee becoming injured and missing work. Your workers’ compensation coverage will provide financial assistance for medical expenses and lost wages.

Surety Bonds: It’s very likely that your state will require you to be licensed before you can begin operations. Most states and customers will require contractors to offer a license or surety bond before you are allowed to bid on a job or begin working.

Commercial Auto: Typically, most contractors will have light and heavy vehicles that require commercial auto insurance to make certain their vehicles can be repaired or replaced in the event of an accident, vandalism, or theft.

Tool Coverage: Also known as Inland Marine Insurance, this policy will provide for reimbursement for expenses to repair or replace tools and equipment. Your tools represent an important part of your livelihood, so we always encourage carpentry contractors to consider this valuable coverage.

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