Insurance certificates can be a great way to manage risk by transferring some of that risk to another party. But if you don’t know the “ins and outs” of these certificates, it’s easy to overlook important protections or leave yourself with less protection that you thought, especially when you’re working with a business with whom you have no prior experience. If you don’t have a lot of experience with insurance certificates, here’s a quick rundown of some of the most important elements:
First, the basics: An insurance certificate doesn’t just provide proof of insurance; it also contains all the insurance information about another business or subcontractor, and it’s most commonly used to transfer risk from the contracting company to the party that’s being contracted.
When requesting a certificate or if one has been requested of you, consider including these important elements:
Effective dates: Make sure the start and termination dates span the complete period when coverage is needed. If the end of the certificate’s term is near, be sure to request an extension certificate in advance of the expiration date so coverage remains in effect.
Notice of cancellation: This clause stipulates you’ll be notified if the insurance is canceled at any time during the certificate’s effective period. It provides important protection in case the other party winds up dropping their insurance without notifying you first.
Cross liability: If a loss occurs, a cross liability clause means each party is treated separately when it comes to assessing liability. Having a cross liability clause can come in handy if one party needs to defend against the other in the event of a loss.
Limitations and coverages: Be sure to consult your agent about the coverage amounts and any limiting clauses so you’re fully and appropriately protected. They’ll have the skill and experience to make sure the coverage amounts are sufficient and the limits are reasonable for the activity that’s being insured as well as your potential risk exposure.
Finally, regardless of how experienced you are in handling insurance certificates, before agreeing to accept or provide a certificate, you’ll need to contact your broker. Only an insurance representative can issue a certificate, so when reviewing a certificate that’s presented to you, make sure it’s issued by an insurance company and have your broker call to confirm.
