Tag Archives: Liability Insurance Certificates

ACORD Insurance Certificates

Insurance Certificate exampleThere are three standard forms of insurance certificates from ACORD, the industry-supported organization that is charged with standardizing certificates of insurance. Although only three of ACORD’s more than 300 forms are certificates of insurance, they account for more than 10 percent – or 6 million – of the printed forms they issue.

The three ACORD forms are: the Certificate of Liability Insurance (ACORD 25-S); Certificate of Property Insurance (ACORD 24); and the Evidence of Property Insurance (ACORD 27). Each form has its own use.

The ACORD 25-S proves liability coverage, and is used to show a concerned party that another party has liability insurance in place. A simple example of the use of ACORD 25-S is that of a building owner needing to verify liability coverage of a contractor prior to the contractor beginning work.

The ACORD 24 is the property version of the 27-S and is used as evidence that appropriate property coverage is in place. Form 24 might be used by a building tenant who is required to maintain property coverage on leased premises.

ACORD 27 is for when the certificate holder has interest in the covered property, such as a lien holder or mortgagee. This form provides an assurance for mortgagees, additional insureds and loss payees that the property is properly insured.

The certificate of insurance is merely evidence of insurance coverage. It is not a policy, nor can it be relied on as a policy. It is not coverage itself.

What is a Certificate of Insurance?

A certificate of insurance is a document used to provide information on specific insurance coverage. The certificate provides “proof” of the insurance and usually contains information on types and limits of coverage, insurance company, policy number, named insured, and the policies’ effective periods.

A certificate of insurance is often demanded in situations where liability and large losses are a concern. For example, a company wishes to hire a driver from a temp agency. The company will most likely ask the agency to show them a certificate of insurance that proves that certain liabilities will be covered by insurance in the event the driver causes problems, such as incurring damages from driving the company’s vehicles.

Policyholders may request a certificate of insurance for many reasons. Some of the more common are:

  • They are a tenant, and a building owner is requesting information about the existence of liability insurance coverage
  • They are the mortgagor of a building, and are requesting information about the existence of property insurance coverage upon closing or renewal
  • They leased equipment and the owner of equipment wants information about the existence of property insurance coverage while equipment is in possession of the client
  • They need evidence of workers compensation insurance in order to obtain a contract

Such requirements are particularly common in construction contracts with large contractors, government entities, and major corporations. For contracting purposes, insureds are required to name or schedule specified persons or organizations onto their insurance policies. Such requests are accommodated by adding endorsements to the insurance policies. Collecting actual copies of the required insurance endorsements along with the certificate of insurance is essential, as certificates generally do not alter, extend or afford coverage to any party other than the named insured(s).

Certificates are simply snapshots of basic policy coverages and limits at the time of issuance of the certificate. Certificates cannot modify coverages or change the terms of the insurance contract.

When Do You Use a Certificate of Liability Insurance?

Certificates of Liability Insurance can be used to demonstrate proof of coverage, which is often a key step in securing a new contract.

For example: Imagine you’re about to close a contract with a new client. However, the contract requires you to have a Certificate of Liability Insurance that shows you have $1 million in Errors and Omissions Insurance before they’ll sign any paperwork.  If you already have an E&O policy with a $1 million limit, you can request a Certificate of Insurance from your provider.

A client may ask you to provide a Certificate of Liability Insurance for a number of reasons, including…

  1. Their insurance provider requires proof of coverage. Many insurance providers require proof of insurance for all contractors and business partners of their policyholders. Your Certificate of Liability Insurance serves as proof of your coverage.
  2. They want reassurance that you’re covered. Even if their insurance providers don’t require proof of coverage, your clients may want to know you have business insurance. Why? Because when you have a policy in place, it means you have the financial backing to compensate them for losses if anything goes wrong.
  3. They want all your insurance information in one place. Certificates of Liability Insurance are concise and information-dense. Your clients can easily find any information about your coverage they need without combing through pages of paperwork.

Insurance certificates simplify the process of signing contracts. They provide a quick way for businesses to exchange important information about their coverage in an easy-to-read document they can keep on file.

Certificates of Liability Insurance are useful because they allow contractors, freelancers, and small-business owners to demonstrate proof of insurance and share coverage information with clients through a single-page document rather than an entire insurance policy.

 

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