Is a Certificate of Insurance the Same as an Insurance Policy?

Insurance policies and certificates of insurance services (or COIs, for short) are two very important legal documents in our space—but a lot of confusion exists around which one is which.

Insurance policies can exist without certificates of insurance, but certificates of insurance could not exist without corresponding insurance policies, and in this blog, we’ll explain why.

Follow along as we answer some of the frequently asked COI questions such as, “Why would someone request a certificate of insurance?” and “Is a COI the same as an insurance policy?” so that you can become a compliance pro. Let’s get started.

Is a Certificate of Insurance the Same as a Policy?

To put it plainly: no, a COI is not the same as an insurance policy. While both are documents that are essential in the insurance industry, and both can only be generated by an insurance broker or agent, they serve very different purposes. As a business owner or person who deals with hiring external third parties vendors, you’ll start to become more familiar with COIs.

What Is the Difference Between a Certificate of Insurance and a Policy?

Let’s dive into the differences between an insurance policy and a corresponding certificate of insurance to clear up how these documents are related but, importantly, distinct.

Insurance Policy

An insurance policy is a legally binding contract between an insurer and a policyholder that outlines the terms and conditions of financial protections. The policyholder pays monthly premiums for a specified purpose and policy. In exchange, the insurer agrees that in the case of any covered events, they’ll be financially responsible for any incurred damages, not the policyholder.

Insurance exists to protect people from financial ramifications, especially when they occur from predictable, unintended, on-the-job events. For example, contractors often obtain general liability insurance to protect themselves from incidents related to property damage and bodily injury, two very possible outcomes in their line of work.

Certificate of Insurance

A certificate of insurance, or COI, is a document that essentially provides evidence of an insurance policy. They must be issued by the same insurer that is providing the insurance coverage in question and are typically free of charge. COIs are much shorter documents than policies as they are really just summarizing the key points of coverage.

COIs exist to help individuals and clients verify a policyholder’s coverage and ensure that it meets their standards. For example, a contractor protected with general liability insurance would want to prove to potential clients that they have the insurance they say they do and would obtain and send over a general liability COI for that purpose. Below, we’ll cover some of the specifics of what’s usually included in a certificate of insurance.

What Is Included in a Certificate of Insurance?

COI Certifications include the most important, sweeping details of someone’s insurance policy. This includes who is being covered (the policyholder) and by whom (the insurer). The final entity named on a COI will be the certificate holder, which is the one requesting the proof of coverage (the hirer, aka you).

Regarding the policy itself, the insurance certificate will provide information such as the type of insurance being provided, the levels of coverage, and the effective dates and expiration dates of the policy. These details are all important pieces of information that allow you to ensure a worker’s compliance with your requirements and other obligations.

Additionally, some industries or companies will have more certificate of insurance requirements, such as the request to be added to the policy in the form of an additional insured endorsement, which grants coverage to the hiring party as well as the hired. In these types of cases, any endorsements will also be included in the certificate. Adding an insurance certificate tracking service can be highly beneficial in managing these crucial details.

Why Would Someone Request a Certificate of Insurance?

It might not seem immediately obvious why someone would need proof of someone else’s insurance coverage. Here are a few reasons why smart businesses always request COIs from their third-party vendors, contractors, and service providers:

• It helps them ensure that the worker has adequate coverage in place.
• It helps them ensure that, because the work has adequate coverage in place, their business will not be held financially responsible for any accidents that could turn into claims.
• It helps them ensure that any regulatory, contractural, industry-wide, or other kind of compliance requirement is met.

When Do You Need a Certificate of Insurance From a Vendor?

It’s important to get a certificate of insurance for vendors that you are considering working with in order to confirm that they have an appropriate level of insurance coverage for a job. In terms of timing, it’s usually best to request a COI from a vendor before you hire them and get them started, as even a small uncovered mistake on the job can lead to large financial consequences.

Let Lumie handle the paperwork

Keeping every certificate current is a lot to ask of any team. illumend, from myCOI, reads each certificate and endorsement against your requirements, flags what’s missing, and follows up with your third-party partners for you. You’ll see who’s covered, and who isn’t, without chasing a single email.

Want to see it in your workflow? Schedule a demo and we’ll show you how illumend fits.