Certificates Of Insurance

Business transactions frequently require insurance and a Certificate of Insurance as proof of compliance. A certificate is not the same as the policy. It canít alter an insurance policy, so requests to "endorse the certificate of insurance" are inappropriate. A certificate is a separate document used to comply with a common contract requirement to verify certain types and amounts of insurance.

Certificate holders, the entity requiring the certificate, often demand being named "additional insureds." This requires an endorsement to the policy and it gives them coverage for injury or damage resulting from the contract. A lease of premises is a common example. The tenant is required to add the property owner to their insurance coverage as an additional insured. If a customer is injured on the premises and sues both the property owner and the tenant, the tenant's liability policy would provide coverage for both parties.

Construction contracts require certain forms of insurance, certain limits be maintained, hold harmless agreement and additional insured requirements. A "hold harmless" agreement is a contract provision that states how much responsibility each party accepts for damages arising out of the agreement.

The Certificate of Insurance can confirm that the appropriate policies were issued and that the other requirements were also met. It is important to have a system for monitoring receipt of the Certificates of Insurance BEFORE any sub-contractors are allowed to begin work. If Certificates are not obtained or kept current, when the contractorís Workers Compensation and General Liability policies are audited, the payroll for the sub-contractors without Certificates will be included with the contractor's resulting in an additional premium charge.

Ask your insurance agent to help determine if you should be obtaining Certificates of Insurance from your business relationships. In addition, when youíre required to provide a Certificate, send your agent a copy of the contract. The contract allows the agent to assist you in determining what liabilities you are accepting and what can be done to modify your insurance program to best protect your financial well-being.

COPYRIGHT: Insurance Publishing Plus, Inc. 2002

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