What is an insurance certificate and why is it needed?

December 2nd, 2015 | in Insurance

Insurance certificates and proof of insurance for our commercial clients

These terms are usually interchanged and essentially mean the same thing but there are subtle differences. Proof of insurance could be as simple as providing a current copy of your insurance policy. If a more formal acknowledgement of existing insurance coverage is required for legal and/or insurance purposes then a certificate of insurance is sought. While a certificate does provide proof of insurance with a summary of insurance limits, it does not completely spell out the terms and conditions contained in the actual insurance policy.  If a more exact detail of coverage is required then additional notes may be added to the certificate to satisfy that need. However, if a claim arises, the original policy wording will prevail over any information contained in a certificate. The insurance policy is an actual contract between the insurance company and the insured party.  A certificate is not.

How do I obtain a certificate to show that I am covered?

Usually, you can contact your broker who handles your insurance with the details of the request. The party that is requesting the certificate will want a copy and they will want details of the event and location that is included. They may even want to be added to the policy as additional insured. Once the coverage has been confirmed by the broker, the certificate is issued accordingly.

Additional insured and additional named insured may sound the same but they are very different

Sometimes there is a request that goes beyond just having a certificate issued. The third party wants to be added to the policy for the duration of the term or other period of time. Additional insured refers to the relationship the third party and insured have with respect to only those activities the insured participates in and the policy was based on. There is a liability interest involved. Additional insureds cannot file claims or make policy changes or cancel coverage.

Additional named insured enjoins the third party for every other activity the insured is involved with. For example, if a company performed construction but also did design work and consulting or inspections, adding the third party as an additional named insured would also bind the insurance company to cover all of these activities and not just the actual construction work. As a result, insurance companies are very hesitant to use additional named insured unless there is a compelling, logical reason such as an insurable interest.