A Certificate of Insurance is not the legal equivalent of your policy. It also does not create a contractual relationship between the insurance carrier and the certificate holder.
So, if it’s not the legal equivalent of the policy, then why is it used (or important)? Great question!
A Certificate of Insurance is a document providing evidence that certain general types of insurance coverages and limits have been purchased by the party required to furnish the certificate. This is the best way to illustrate to a third party that you have insurance coverage and what those coverages are. This document is issued by the insurance agency/broker on behalf of an insurer that says a policy has been issued to an Insured for a general type of risk.
Here is a brief list of information provided in a Certificate of Insurance.
Name of Agent
Name of the issuing carrier
As a Certificate Holder, you are simply being provided with proof of insurance on behalf of Named Insured. In most cases, this will satisfy the individual or third party requesting this document. However, at times, a third party may request you add them to your policy as Additional Insured and/or Loss Payee.
What does this mean? An individual or entity you are conducting business with is requiring financial protection.
What’s the difference between Additional Insured and Loss Payee?
An Additional Insured is a party listed on your policy providing liability protection to them against your negligence. Only an additional insured endorsement can create additional insured rights under the policy. Some carriers charge a premium to add an Additional Insured to your policy. The cost associated with this request to a property or liability insurance policy is generally low, as compared to the costs of the original premium.
A Loss Payee can be a person or entity that is entitled to all or a portion of the insurance proceeds in connection with the covered property in which it has an interest. Say you lease a photocopy machine for your business; the entity providing you with the equipment may request you add them to your policy as a Loss Payee to protect them in the event of a loss—event though the Loss Payee is not a Named Insured.
Keeping up with all of the insurance terms and nuances is a key aspect to ensure your property is covered—especially when the terms and meanings can seem to mix together. That’s what we’re here for. If you have any questions, please contact us and we’ll be glad to help you through this process.