Most commercial agreements, such as leases, service contracts or vendor agreements, contain risk allocation and insurance provisions that require one party to accept responsibility for certain losses and to obtain a sufficient amount of insurance to be able to meet the financial obligations should losses occur. Certificates of insurance are the customary method of showing that the party providing the certificate has met the insurance requirements.

What Is a Certificate of Insurance?

A certificate of insurance is issued by an insurer or their authorized representative as evidence that a company carries insurance. The certificate summarizes the essential terms, conditions and duration of the policy at the time that the certificate is prepared.

Typical information provided includes:

  • Contact information for the insured, the broker or agent issuing the certificate
  • The person being issued the certificate
  • Names of all insurers providing coverage documented on the certificate
  • Policy numbers
  • Types and limits of insurance
  • Coverage dates
  • Signature of the insurer’s agent or representative

In addition, the certificate should include any special insurance requirements that have been specified in the commercial agreement, such as the naming of the certificate holder as an additional insured.

Benefits of Certificates

Certificates of insurance offer several benefits compared to requesting certified copies of the policies themselves. The primary benefit is convenience. Certificates can be obtained more quickly and easily, requiring fewer resources to review and store than the policy itself. They can be used to demonstrate the coverage that existed at a particular time and provide the basic information needed in the event a claim is filed or a dispute arises.

The certificate does not contain any confidential business information that would be part of the policy, such as company sales or payroll information. Also, the certificate holder is less at risk for inadvertently waiving potential coverage arguments for failure to adequately review the policy.

What Certificates are Not

Certificates do not guarantee that:

  • The insurance will not be cancelled after certificate issuance and before the completion of the contractual arrangement
  • The coverage limits will not be exhausted by other claims
  • All required endorsements have been added to the policy
  • The policy does not contain other endorsements that reduce coverage, which are not included on the certificate.

Most importantly, a certificate of insurance is not the legal equivalent of a policy and does not create a contractual relationship between the certificate holder and the insurance company issuing the policy. Because of this, as a general rule, courts will enforce the language of the policy over the certificate of insurance in the event of a conflict between the two documents.