TITLE: What Is a Certificate of Insurance and Why Do Arizona Contractors Keep Getting Asked for One?
META DESCRIPTION: Learn what a certificate of insurance shows, why contractors are asked for COIs, and how additional insured requests differ from proof of coverage.
What Is a Certificate of Insurance and Why Do Arizona Contractors Keep Getting Asked for One?
You win a job. The general contractor sends over the subcontract agreement. Before you’re allowed on the site, someone asks for your COI.
Then comes another request: “We also need to be listed as additional insured.”
For contractors, these requests become so routine that it’s easy to treat a certificate of insurance as another piece of paperwork standing between you and the job. But a COI has a specific purpose, and there are some important things it does not do.
Understanding the difference matters, particularly when you’re dealing with commercial general liability, workers’ compensation and other contractor insurance.
What Is a Certificate of Insurance?
A certificate of insurance, commonly called a COI, is a document used to provide evidence and a summary of insurance coverage.
For a contractor, it may show information such as:
- The named insured
- The insurance producer
- The insurance companies providing coverage
- Types of insurance carried
- Policy numbers
- Policy effective and expiration dates
- Coverage limits
- The certificate holder
Depending on the contractor and project, a COI might show commercial general liability, commercial auto, workers’ compensation, umbrella or excess liability coverage.
It gives the person requesting the certificate a quick way to review evidence of the insurance shown on the document.
Why Do General Contractors Ask Subcontractors for COIs?
Think about a general contractor managing a project with electricians, plumbers, roofers, concrete crews and other subcontractors coming and going.
The GC doesn’t want to simply take everyone’s word that they’re insured.
A certificate helps document the insurance a subcontractor has in place at the time the certificate is issued. Property owners, developers and commercial clients may have similar requirements before allowing a contractor to begin work.
Insurance requirements may also be written directly into the construction contract.
That’s why having the right contractor liability insurance is only part of the equation. Contractors also need to be able to document their coverage when a customer or GC requests it.
A COI Is Not the Insurance Policy
This is the distinction contractors need to understand.
The certificate summarizes or provides evidence of coverage. The actual insurance policy, including its forms and endorsements, determines the coverage.
Arizona has specifically addressed this distinction in legislation concerning certificates of insurance. Under Arizona’s certificate-of-insurance requirements, a COI does not itself amend, extend or alter coverage provided by an insurance policy, nor does it create new rights beyond those provided by the policy.
The Arizona Legislature’s certificate of insurance legislation also prohibits certificates that contain false or misleading information or purport to alter coverage provided by the underlying policy.
That’s an important point.
You can’t create insurance coverage by typing something onto a certificate.
What Does “Certificate Holder” Mean?
The certificate holder is generally the person or organization receiving the certificate.
If ABC General Contractors asks your plumbing company to provide a COI, ABC may be identified as the certificate holder.
That alone does not necessarily make ABC General Contractors an additional insured under your liability policy.
This is probably one of the most common COI misunderstandings.
Certificate Holder vs. Additional Insured: What’s the Difference?
Being an additional insured involves rights under the actual insurance policy or applicable endorsement. Being listed as a certificate holder on a COI is different.
A general contractor, building owner or developer may require additional insured status as part of its contract with you. If so, the request needs to be reviewed against your policy and the appropriate endorsement requirements.
Don’t assume that putting a company’s name in the certificate holder box accomplishes the same thing.
It doesn’t.
If a contract requires additional insured status, send the requirement to your commercial insurance agent so the actual policy and endorsements can be reviewed.
Why Am I Being Asked for Specific Liability Limits?
A GC may require subcontractors to maintain minimum insurance limits before working on a project.
For example, the contract might establish requirements for general liability, workers’ compensation, commercial auto or umbrella coverage. The exact requirements vary by project and contract.
Your COI may then be used to show the limits associated with the policies listed.
If your current limits don’t satisfy the contract, changing the numbers on the certificate isn’t an option. The underlying insurance coverage has to support what the certificate says.
This is where reviewing insurance requirements before signing a major contract can prevent an unpleasant surprise.
Does a COI Guarantee Coverage for a Claim?
No.
A certificate isn’t a guarantee that every possible accident or claim is covered. Coverage ultimately depends on the actual policy, endorsements, exclusions, facts of the claim and other applicable terms.
That’s why contractors shouldn’t use a COI as a substitute for understanding their business insurance coverage.
The certificate is a useful snapshot. The policy is where the coverage lives.
Does the Certificate Holder Automatically Get Cancellation Notices?
Don’t assume so.
Arizona’s certificate-of-insurance rules state that someone other than the policyholder is entitled to notice of cancellation, nonrenewal or a material policy change only when the policy or an endorsement provides that person with those notice rights.
Again, wording on the certificate can’t independently create a right that doesn’t exist under the policy.
Why Do Contractors Get Repeated COI Requests?
Insurance changes.
Policies renew. Projects change. New general contractors have their own requirements. A certificate that was current last year may show a policy that has since expired.
If your company works with multiple GCs, property managers or commercial clients, expect certificate requests to be a normal part of doing business.
Keep your insurance agent informed about the type of work you’re doing and the contracts you’re taking on. That can make COI requests considerably easier to handle.
What Should You Do When a Customer Requests an Additional Insured Endorsement?
Send the exact request or contract language to your insurance professional.
Don’t guess at what the customer means, and don’t promise that a requirement can be satisfied before your policy has been reviewed.
There are different additional insured endorsements and contractual requirements. The right response depends on your policy and what the contract actually requires.
This is especially relevant for contractors combining general liability, workers’ compensation, commercial auto, umbrella coverage and surety bonds as part of their overall insurance program.
Certificate of Insurance FAQs
Is a COI proof that a contractor has liability insurance?
A COI is commonly used as evidence of the insurance coverage shown on the certificate. It is not the insurance policy itself and doesn’t create coverage that isn’t contained in the policy.
Does being a certificate holder make you an additional insured?
No. Certificate holder and additional insured are different concepts. Additional insured status depends on the underlying policy or endorsement.
Can my insurance agent just add wording requested by a general contractor to my COI?
Certificate wording cannot legitimately change the coverage provided by the insurance policy. If a contract requires particular coverage or additional insured status, the underlying policy and endorsements need to support that requirement.
Why does a GC need a new certificate every year?
Insurance policies have effective and expiration dates. A GC or property owner may request an updated COI after renewal so it has current evidence of the coverage being carried.
Should I review insurance requirements before signing a construction contract?
Yes. If the contract requires specific limits, additional insured status or other insurance provisions, reviewing those requirements with your insurance professional before signing can help identify issues while there’s still time to address them.
Don’t Treat the COI as Meaningless Paperwork
A certificate of insurance is simple on the surface, but the requirements behind it can matter.
Check what the contract actually requires. Know the difference between a certificate holder and an additional insured. Make sure the coverage and limits shown on the COI match the underlying policies.
And if a GC sends you a complicated insurance requirement, don’t try to solve it by editing certificate language yourself.
For help with commercial general liability, workers’ compensation, commercial auto, umbrella and contractor insurance, talk with your insurance professional about the coverage your business carries and the certificate requirements you’re receiving from customers and general contractors.