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What a Certificate Holder Needs to Know?

Certificates of Insurance are not common for most people in most walks of life. Unless you work in accounting, make purchasing decisions for your company, manage promotional events, or oversee contractors; you have probably never seen a certificate of insurance. A certificate of insurance is a document used to provide information about specific insurance coverages secured by one person within a contract. The certificate verifies insurance coverage has been secured, the types of coverage secured, and the limits of those policies. Also, it will include the insurance carrier, the policy number, the named insured, and the policy effective dates. Now that you know what a certificate of insurance is, here are some tips to remember when you are a certificate holder.

Business Meeting with a certificate holder.

Who is the Certificate Holder?

Being a certificate holder means that you are given proof that insurance is in effect. One of the most common examples of a certificate holder is when a business partners with contractors on a project and it is part of the contract for the contractor to carry their own particular coverage. Here are some additional examples of the types of businesses who frequently need to have certificate holders:

Food Truck
Yoga Instructor
Promotional Events
Owner/Operator Truck Drivers
Lawncare/Landscaping Companies
Maintenance/Janitorial Services Companies

What coverage does the Certificate Holder have?

One common misconception about a certificate holder is that they are not covered under the policy mentioned in the certificate. The certificate is just verification that the other party in the transaction has the required coverage. The person, people, or business covered under the policy is provided on the certificate. It may include both the named insured and the additional insured depending upon the specifics of each policy.

Engineering Contractors need to have a certificate holder when entering into a contract.

What Other Parties are Involved with a Certificate of Insurance?

The holder of a certificate of insurance is a third party to the insurance relationship. The insurance carrier and the named insured are the two primary parties involved with the insurance coverage. An additional insured can be added if it is necessary. Partnering with an independent insurance agent is the best way to determine how to best navigate these issues.

What Types of Coverage Frequently Need a Certificate Holder

General Liability

General Liability Insurance needs to be provided to a ceritificate holder because it is the primary coverage that protects the business or person from third party liabilities for damages. This is essential when hiring contractors, because if a business hires contractors and fails to make sure the contractor has adequate insurance, the business can be liable for damages caused by the contractor.

Business Auto

Business owners who have employees who operate a motor vehicle as part of their job need to secure proper insurance. If the business owns the vehicles being used the policy is commercial auto. If the employee is driving their personal vehicle or a vehicle rented by the business, the correct policy is hired and non owned auto. This may be needed when a business is providing transportation for a special event like a limousine driver for a wedding.

Umbrella Coverage

Umbrella Insurance Coverage is also referred to as Excess Liability Coverage. Umbrella Insurance provides additional liability coverage above the limits of other existing policies. A certificate holder may need umbrella coverage added to the certificate because the contract requires a certain level of insurance limit for the contract to be valid.

Workers Compensation & Employers’ Liability

Workers’ Compensation Insurance is often referred to as the ‘Exclusive Remedy‘. It is called the ‘Exclusive Remedy’ because the coverage provides medical expenses and some lost wages for employees who are injured on the job. Employers benefit from the peace of mind they cannot be sued for injuries to employees who are hurt because of normal business operations. A Certificate Might be requested because the state laws and regulations require contractors to carry workers comp coverage in order to engage in certain types of work or contracts. The certificate proves the certificate holder made sure the contractor was up to date on all necessary coverages.

What is an Additional Insured?

According to the Insurance and Risk Management Institute (IRMI), an Additional Insured is, ‘A person or organization not automatically included as an insured under an insurance policy who is included or added as an insured under the policy at the request of the named insured‘. Now let me try to help you understand what that means in layman’s terms. This refers to any person who is not the policyholder, but is covered by an insurance policy. This coverage may be limited to a single event like a wedding, or it could last the lifetime of the policy like when a contractor who will be working for the business throughout the entire year. Thie first and most important thing for anyone to understand are the three different entities involved in a certificate of insurance. Those three entities are the additional insured, the certificate holder, and the policy holder. Here is a brief description of each entity and when it is best to add an Additional Insured or use a Waiver of Subrogation.

Additional Insured listed on a certificate of insurance.

Entities to an Insurance Agreement

Policy Holder:

The policy holder of an insurance policy is the person or business whose name is on the policy. It is important to distinguish this person from the name insured. The named insured is the person or business the policy is purchased to cover.

Additional Insured:

A person or organization that is added to an insurance policy and that person or organization enjoys the benefits of being insured under the policy. This coverage is in addition to the person or organization who originally purchased the insurance policy. The additional insured is named on a certificate of insurance. They only have a certificate if you send them a copy.

Certificate Holder:

The certificate holder is the entity that is provided a certificate of insurance as evidence of the insurance maintained by another entity. In its most simple form, a certificate of insurance is proof of insurance. The certificate holder is holding the certificate of insurance proves a business made sure to check the insurance coverages of contractors they partner with.

Digital picture of a certificate.

When Should Someone Add An Additional Insured?

One of the most common examples of when is a landlord of a commercial building. Landlords commonly require tennants to add the landlord under their insurance policies in order to lease the facility. Another good reason to be add is your business rents a piece of equipment from another business. You may want to add the other business as an additional under your insurance policies involving the equipment.

12 terms to familiarize yourself with before your next renewal.

Insured

The person, group, or organization whose life or property is covered by an insurance policy.

Insurer

Insurance company that issues a particular insurance policy to an insured. In case of a very large risk, several insurance companies may combine to issue one policy.

Named Insured

Any person, firm, or organization, or any of its members specifically designated by name as an insured(s) in an insurance policy. .

Premium

The price or amount paid for insurance.

Claim

A formal request to an insurance company asking for a payment based on the terms of the insurance policy.

Carrier

A company that offers and underwrites insurance policies.

Policy

A document detailing the terms and conditions of a contract of insurance.

Underwriter

The person who decides whether to provide insurance and under what terms.

Agent/Broker/Producer

A person licensed by a state and employed by an insurance company to sell insurance policies on the company’s behalf.

Umbrella Coverage

Umbrella coverage protects your business when your existing liability insurance policy limits can’t cover all the expenses of a claim.

Hired and Non-owned Auto

A coverage that is commonly added or endorsed onto a commercial auto insurance policy. This endorsement adds additional coverages for the insured in the event there becomes a liability issue for an automobile accident involving a vehicle they don’t directly insure (rentals or employee owned cars).

Experience Modification Rating

An employers’ Experience Modification Rating refers the factor calculated from actual loss experience. It is used to adjust the businesses premiums (higher or lower) based on the businesses loss experience relative to the average underlying manual premiums for workers compensation coverage. The Modifier (Mod) compares the insured experience to the average class experience.

Additional Terms to consider familiarizing yourself with before your nest renewal

Waiver of Subrogation

A Waiver of Subrogation is a contractual provision whereby an insured waives the right of their insurance carrier to seek redress or seek compensation for losses from a negligent third party.

Certificate of Insurance

A certificate of insurance is a document that is used to provide info on specific insurance coverage and provide verification insurance is in place at the time of issuance. The certificate contains the types and limits of coverage, the carrier, policy number, named insured, and the policies’ effective dates.

Certificate Holder

The certificate holder is the person, business, or nonprofit organization who is provided with a certificate of insurance to prove coverage is in place at the time of issuance. The certificate holder will be notified if at any time the policy is cancelled before the listed policy effective date.

Additional Insured

The Additional Insured is the person or organization who is not automatically included as an insured on an insurance policy, but who is included under the policy at the request of the named insured.