What Is The Purpose Of A COI?
You're about to hire a contractor, and they mention needing a certificate of insurance. Or maybe someone's asking you for one. Either way, you're wondering what the purpose of it actually is and whether you really need to deal with this paperwork.
Here's the straightforward answer: a certificate of insurance (COI) proves that a business carries active insurance coverage. It's the document that shows you won't be financially responsible if something goes wrong during a project. Think of it as a safety net for everyone involved in a business transaction. Let's dive in!
What Does COI Stand For?
COI stands for certificate of insurance. It's a one-page document issued by an insurance company or insurance agent that summarizes someone's current insurance policy. The COI includes key details like policy numbers, coverage types, policy limits, and effective dates.
The standard form is called an ACORD 25, which most insurance providers use. This consistency makes it easier to review COIs once you understand the basic layout.
Why Is a COI Important?
A COI serves as your verification tool before entering into any agreement with contractors or vendors. Without it, you're taking on significant financial risk. The Associated General Contractors of America reports that 95% of construction contracts require subcontractors to provide liability insurance certificates—and nearly four in five businesses receive COI requests annually.
When you request a COI, you're confirming that the other party has the necessary insurance coverage to handle potential claims. This protects your business from being named in lawsuits or covering damages that should fall under their liability insurance." To read more about why companies require a COI, read our blog.
How Does A Certificate Of Insurance Protect Your Business?
The protection works both ways. If you're the certificate holder, the COI confirms that your contractor carries appropriate insurance coverage to handle incidents during your project. Let's say you hire a construction company to renovate your office. If their employee gets injured on site, their workers' compensation insurance policy covers those medical costs, not yours.
For small business owners hiring contractors for the first time, this document prevents you from becoming responsible for bodily injury claims, property damage, or other liabilities caused by third parties.
When Should You Ask For A COI?
Request a COI before any work begins, especially when hiring contractors who'll work on your property or interact with your customers. Common situations include construction projects, leasing commercial space, hiring professional services, or bringing on temporary staff. To read more about how to ask for a COI and when you need one, read our blog.
You should also ask for updated certificates of insurance if a project extends beyond the original policy expiration date. Making this a standard part of your vendor onboarding process removes the awkwardness: it's simply how responsible businesses operate.
What Does COI Insurance Typically Cover?
Most COIs show four core coverage types: general liability, workers' compensation, auto liability, and umbrella or excess liability insurance. General liability covers property damage and bodily injury claims from business operations. Workers' compensation handles employee injuries, required by state laws for most businesses.
Auto liability protects against vehicle-related incidents if the vendor uses company vehicles. The COI lists the specific policy coverage amounts for each type, showing whether coverage meets your requirements.
The document also shows coverage details like the insured party, insurance provider contact information, and whether you're listed as an additional insured. Being named as an additional insured extends the vendor's coverage to protect you directly if a covered claim arises from their work.
Why Would A Vendor Ask For A COI?
Vendors request COIs for the same reasons you do: risk protection. When a construction company or small business owner takes on a project, they want confirmation that you carry adequate coverage. This protects them if your lack of correct insurance creates liability issues.
Client requests for COIs are standard practice across industries. It's not personal; it's simply smart risk management. Having your COI ready to provide proof demonstrates professionalism and can help you secure more business transactions.
How Long Is A COI Valid For?
A certificate of insurance remains valid as long as the underlying actual insurance policy stays active. Most policies run for one year, meaning COIs typically expire annually on the policy expiration date listed on the form.
You'll need to request a new certificate of insurance whenever your policy renews or when the expiration date approaches during an ongoing project. The insurance company should notify the certificate holder of any policy cancellations before the scheduled end date.
How Can illumend Simplify COI Tracking?
If you've been managing insurance tracking through spreadsheets and email follow-ups, you know how quickly COIs can slip through the cracks. illumend, powered by myCOI, empowers you to automate the entire insurance compliance process. The platform tracks all four core coverage types in one central system.
With one-click vendor invites, you can request COIs without awkward back-and-forth or portal logins. illumend's Lumie™ AI guide explains insurance requirements in plain language, no insurance degree required. The platform integrates directly with Procore for construction project workflows and provides real-time alerts when coverage expires.
Built on 15 years of insurance compliance expertise, illumend turns confusing insurance verification into a straightforward process. Ready to stop chasing COIs? Visit illumend to see how the platform empowers a better understanding of insurance compliance for your entire vendor network.
