From complex device connections to satellite operations on site, there comes a time when internal resources meet their limit.
Once their capabilities have been maxed out, many companies hire subcontractors to complete the job, benefiting from their experience and expertise. Whether these subcontractors are needed for one particular task or are brought on board for a long-term project, ensuring that you and your company are protected is key.
While subcontractors add specialized knowledge, they also introduce risk – and an increased level of exposure to the insured. Securing the proper insurance documentation and coverage limits could be the deciding factor between a major loss and a minor inconvenience. We’ve highlighted the key components of a certificate of insurance below, along with tips for determining if a subcontractor’s coverage limits align with your protection. Keep reading to learn more!
An Introduction to Certificates of Insurance
What is a Certificate of Insurance?
A certificate of insurance, or COI, is a document containing the essential details of the subcontractor’s liability insurance policy. A COI, commonly presented with the heading of “Certificate of Liability Insurance,” will contain the following information about the subcontractor’s insurance policy:
- Insurance provider
- Type of coverage
- Business/ Policyholder’s name
- Policy number
- Coverage limits
- Exclusions (if any)
- Policy effective and expiration dates
A COI is evidence that the third-party vendor has coverage in place if losses pertaining to property or bodily injury occur. Keep in mind that a certificate of insurance does not take the place of a contract, so proper contract and insurance documentation is still needed to provide protection in the event of a loss.
Types of Certificates of Insurance
COIs are available for a variety of policy types, making it essential to choose the form that provides adequate protection limits for the type of project and risks involved.
- Certificate of Liability Insurance
Certificate of Liability Insurance is the most common representation of a COI, considered a critical part of risk transfer from the project owner to the third-party vendor.
- Certificate of Workers Compensation Insurance
Workers’ Compensation insurance covers an employee’s medical care, lost wages, and other work injury-related expenses. This should always be required and must be properly written per state statutes and laws.
- Certificate of Auto Liability Insurance
This type of insurance should be monitored if the third party will be using an owned, leased, non-owned and/or hired vehicle during the course of the project.
Elements of a COI Document
Obtaining a certificate of insurance is an important first step, but being able to interpret the information provided on the Acord form may be a bit more challenging. But Telcom Insurance Group is here to help. Understanding the COI means understanding the protection that is in place should a loss occur, and ensuring your needs as an employer are met. The following is a section breakdown of a COI document with helpful explanations included:
- Disclaimer: Located at the very top, the disclaimer states that the document is used for informational purposes only and is a representation of existing coverage limits. It also states that a COI is not a contract.
- Producer: The producer of the COI is the subcontractor’s insurance company. This portion will include the name of the insurance provider and their address.
- Insured: Found underneath the producer section, this section states the legal name and address of the subcontractor or their business.
- Insurers Affording Coverage: The subcontractor’s business insurance coverage is likely a combination of policies written to provide comprehensive coverage. This section, located on the top right, will list out the insurance companies that the subcontractor has policies under.
- Coverages: The coverage section is one of the most important, as it breaks down the type of insurance, the policy limits, and other crucial information. It is broken down into the following subsections:
- INSR LTR (Insurer Letter): This column will provide a letter that refers to the list in the Insurers Affording Coverage section, indicating which insurance company houses this specific policy.
- Type of Insurance: Will indicate the type of policy, such as general liability or Workers’ Compensation.
- ADD’L INSRD (Additional Insured): This column will have an “X” if the person covered by the COI is an additional insured on the policy.
- SUBR WVD (Subrogation Waived): This column will have an “X” if the certificate holder (the client) denies the right of the insurance company to pursue legal activity. This stands even when the certificate holder is directly responsible for the damages.
- Policy Number: This is simply the individual policy number, listed in full.
- Effective Dates: This section lists the dates when the policy begins and when the policy is set to expire.
- Limits: Here you’ll find the specific policy limits, up to the specified amounts, as stated in the policy coverage.
- Description of Operations: Located in the second row from the bottom, this section covers specific information regarding the project the COI was obtained for. It should include specific operations, locations, and project numbers or identifiers. It will also list details of additional insured and subrogation waivers.
- Certificate Holder: The certificate holder is the individual or business requesting the certificate. This section will include their name and address.
- Cancellation: If the policy is canceled before the expiration date, the certificate holder will be notified. This section indicates the number of days before cancellation that notification will occur, with thirty days as the standard.
- Authorized Representative: This section is to be completed by the issuing insurance agent, then signed to verify that everything is correct.
When to Obtain a Certificate of Insurance from Subcontractors
Before a subcontractor or their employees officially get to work, it is important to obtain a certificate of insurance. A verbal verification from the subcontractor provides no guarantee of their insurance limitations – and no protection for your company if a loss were to occur – so it is highly discouraged.
A COI can only be issued on behalf of the insured party by their insurance company. The insurance company will issue a copy of the COI at the time the policy is purchased or upon request. If a subcontractor submits a COI, but coverage limits are inadequate or the policy’s effective date is inactive, it is important to request a new COI as proof that changes have been made.
Trust Telcom Insurance Group to Secure the Proper Third-Party Documentation
Hiring a subcontractor requires more than finding someone with the right skillset. It means putting the proper protection in place to help mitigate the potential for risk. The right documentation is also needed to ensure your company is covered just in case “what if?” becomes “what now?”
At Telcom Insurance Group, we understand that obtaining the proper paperwork can be a chore. That’s why our qualified team works to provide our clients within the telecommunications industry with the knowledge and confidence needed to move forward.
This overview of certificates of insurance includes the basics, but there are additional components specific to your company not fully detailed here. To find out exactly which limits of insurance to request for each line of business or to dive deeper into risk transfer, contact us today. We’d be happy to provide more information tailored to your business, including specific descriptions of operations and 30-day notice of cancellation endorsements. If you’re not sure what you should request from your contractors, we can help with that too.