7 Reasons to Request a Current Certificate of Insurance

7 Reasons to Request a Current Certificate of Insurance

A current Certificate of Insurance (COI) is not just a piece of paper; it’s a critical tool that provides peace of mind, reduces financial risks, and ensures compliance with contractual and regulatory requirements. Maintaining up-to-date COIs is essential for your business, complete with real-world examples and practical insights.

1. Ensuring Active Coverage

Insurance companies may cancel or let policies lapse for various reasons, such as non-payment or expiration. A COI dated within a recent timeframe ensures the insurance coverage is active and valid at the time of the agreement.

• Example: Imagine hiring a contractor to renovate your office building. If their General Liability policy has expired, any damages they cause during the project could become your financial responsibility. A current COI confirms that the policy is in force, protecting you from unexpected expenses.

This ensures your business is always aware of an expired policy.

Learn more about active coverage in our  Top 5 Mistakes in Certificate of Insurance Management guide.

2. Verifying Appropriate Coverage Limits

Every project or business agreement involves unique risks that require specific insurance coverage limits. A current COI shows the exact coverage amounts, allowing you to confirm that they meet your contractual requirements.

• Example: A large event venue may require a wedding planner to carry $2 million in liability coverage. The venue faces significant risk if the planner's coverage is limited to only $500,000. Reviewing a current COI ensures that the planner’s insurance matches the venue’s standards.

This verification step is crucial for safeguarding your business against underinsured risks.

Check out our article on how certificates differentiate between liability policies for more details.

3. Confirming Additional Insured Status

Your business may need to be listed as an Additional Insured on another party's insurance policy for added protection. A current COI will directly specify if it names you, giving you rights to that insurance coverage.

• Example: A property management company hires a landscaping service to maintain the grounds of a commercial building. The property manager could be held liable if a passerby slips due to an unmarked hazard. A COI showing the property management company as an additional insured on the landscaper’s policy would offer crucial protection.

Always ensure your additional insured status is up to date on any COI.

Read more about this in Additional Insured Explained.

4. Protecting Against Liability and Financial Loss

Your business might be held responsible for accidents or damages caused by contractors or vendors if there is no valid insurance coverage. A current COI shifts this risk, helping you avoid costly out-of-pocket expenses.

• Example: Suppose a catering service is hired for a corporate event and accidentally starts a fire in the kitchen. If their insurance coverage lapses, your business may need to cover the damage and legal fees. Verifying a current COI protects you from exposure to such financial risks.

Keeping insurance records current is a crucial aspect of risk management.

5. Meeting Regulatory or Contractual Requirements

Many industries have regulations requiring specific insurance types, and contracts often stipulate proof of coverage. A current COI ensures compliance, avoiding legal and financial repercussions.

• Example: A city government may require all vendors working on municipal projects to carry Workers’ Compensation and General Liability insurance. The city could face penalties or project delays if a vendor fails to provide a current COI. Requesting and maintaining up-to-date COIs keeps your business compliant.

Ensuring regulatory compliance helps you avoid fines and operational setbacks.

Read our comprehensive guide on What To Include In A Certificate of Insurance for more compliance tips.

6. Protecting High-Risk Industries

Industries like construction, manufacturing, and event planning have more significant risks, making current COIs even more essential.

• Construction Projects: Roofers or general contractors working in hazardous environments must have active insurance. A lapse in Workers’ Compensation or General Liability coverage could lead to severe legal and financial consequences.
• Manufacturing Operations: If your business relies on suppliers with Product Liability insurance, ensure their COIs are current to cover any product defects.

Staying proactive with COIs is critical in these high-risk fields.

Discover more about industry-specific risks in our Business Hazard Insurance article.

7. Ensuring Compliance for Property and Event Management

If you lease property or organize significant events, you must be vigilant about your vendors’ or tenants' insurance.

• Commercial Leases: Property owners should require tenants to provide updated Property Insurance COIs. For example, if a tenant's equipment causes a fire and their policy has expired, you could be responsible for damages.
• Event Organizers: Always request COIs from all vendors, like sound equipment providers, to ensure liability coverage. A vendor’s lapsed policy could result in significant financial losses if an accident occurs.

This ensures all parties involved in property or event management are protected.

For more on property coverage, read Whether Homeowner Insurance Covers Mold.

FAQs on Requesting a Current Certificate of Insurance

How often should I request a COI?

• Always request before new projects start or when a vendor renews their policy.

What happens if a COI expires?

• An expired COI leaves you vulnerable to liability, making getting updated proof of coverage essential.

Are digital COIs acceptable?

• Yes, digital COIs are legally valid and streamline document management.

Why is additional insured status important?

• It extends liability coverage to your business, offering direct protection.

How quickly can I obtain a current COI?

• Most insurance providers issue COIs within 24-48 hours, depending on the complexity of the request.

Related Blogs for Further Reading

• Cyber Insurance coverage Silverfort: Learn how to protect your business from digital threats.
• Whether renters Insurance Covers Mold: Understand property insurance coverage in detail.
• CPA US Course: Boost your financial expertise and risk management knowledge.
• AICPA  IFRS: Ideal for finance professionals aiming to upskill.

Requesting a current COI is a proactive measure to ensure your business is protected, compliant, and ready to handle unexpected challenges. Stay diligent, stay insured, and secure your operations!