Understanding Certificates of Insurance

What is a Certificate of Insurance?

“A certificate of insurance is a document issued by or on behalf of an insurance company to a third party who has not contracted with the insurer to purchase an insurance policy. The most common type of certificate is that provided for informational purposes to advise a third party of the existence and amount of insurance issued to the named insured.”

Allan D. Windt, Insurance Claims and Disputes, 4th ed., 2001

Publishers of Certificate of Insurance Forms

While there are varying types of certificate of insurance forms that are published by various vendors, the most commonly used forms are created by The Association for Cooperative Operations Research and Development (aka ACORD)  ACORD’s instructions state that certificates are for informational purposes only.

Before You Sign a Contract

Before you sign a contract, whether it is for a construction job, lease, use of premises or facility, use of equipment, etc., it is important that the terms of the contract be reviewed with your insurance provider for several reasons.

  • For a construction job, the contract may only grant payment after a properly constructed certificate of insurance has been submitted.
  • The contract may require that you carry insurance coverage that you currently do not have in effect.  Your provider needs to advise you regarding the availability and cost of this missing coverage.  A certificate can only be issued for coverages that are in effect during the policy periods disclosed on the certificate
  • The contract may require certain phrases or wording to be contained within the certificate.  This wording should be reviewed by your insurance provider to determine validity within the scope of your insurance and whether or not these requirements can be met.

Common Items Requested

  • Additional Insured – This is a type of endorsement that can be added usually for a premium charge.  An “additional insured” is a person or organization not automatically included as an insured under an insurance policy, but for whom insured status is arranged, usually by endorsement.  Caution should be taken with this endorsement as the policy liability limits are shared among all additional insureds on the policy.  Consideration should be made for increasing the liability limits when attaching this endorsement.
  • Waiver of Subrogation – This endorsement can be added usually for a premium charge.  A waiver of subrogation clause is often placed into contracts to minimize lawsuits and claims among the parties.  It is the relinquishment by an insurer of the right to collect from another party for damages paid on behalf of the insured.  Phrased differently, it waives the right of the insurer to pursue someone else’s claim.
  •  “Primary and Non-Contributory” – This term is commonly used in contract insurance requirements to stipulate the order in which multiple policies triggered by the same loss are to respond and requires an additional insured endorsement.  For example, a contractor may be required to provide liability insurance that is primary and non-contributory. This means that the contractor’s policy must pay before other applicable policies (primary) and without seeking contribution from other policies that also claim to be primary (non-contributory).  Caution should be taken when seeking special language of this nature as it can be dependent on how the language is written in the additional insured endorsement for the sub-contractor and the liability policy(ies) for the general contractor.
  • Excess Liability Limits – Often, a contract will require the insured to provide higher liability limits than they presently carry.  In most cases, the limits requested require a Commercial Umbrella Policy or Commercial Excess Policy which can be purchased.
  • Rental Coverage – Many equipment rental companies require the “renter” to provide evidence of liability insurance and physical damage insurance for the items being rented.  Insurance to cover the physical damage to rented equipment can be purchased or can be added to certain types of policies for an additional charge.

Copyright Issues

Certificate of Insurance Forms are copyrighted and licensed for use.  They cannot be modified outside the license agreement.  Certain states expressly prohibit modification of certificates since they have to be filed with the department of insurance.

Regulatory Issues

Many states have taken legislative and/or regulatory action to address issues pertaining to certificates of insurance.  Since many states forbid agents from issuing certificates that imply coverage the policies do not provide, agents and insurers are subject to fines, penalties and disciplinary action for the improper use of certificates of insurance.  Improper use includes modifying the form outside the license agreement, inaccurately reflecting insurance coverage and/or amending, expanding or altering the terms of the underlying insurance policies.


It is often misunderstood that a certificate of insurance is a contract between the certificate holder, the insured, the insurance company and the insurance agent.  A certificate of insurance is nothing more than a snapshot of the insurance coverages in place for the referenced policy periods.

While a certificate of insurance represents the insurance policies that are in force, it does not provide insurance coverage.  Only the actual insurance policies provide insurance coverage.

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