Unless you work in the purchasing department, manage promotional events, oversee contractors or work in accounting, you probably don't know about insurance certificates. Certificates of insurance summarize a company's or person's insurance policies, coverage amounts and limits associated with these policies. It includes the name of the insured, the coverage period and other insurance information. Sometimes the certificate lists the name of the holder of the certificate and indicates whether the holder is additionally insured under the policy.
Certificate of Insurance
Businesses need insurance to protect them against liabilities or risks that arise in the course of doing business. For example, when a company needs to hire a contractor to build something, it's important to make certain the contractor has insurance in the event something he or one of his employees does causes a costly accident. Like the insurance card you keep in your car to show your proof of insurance to a law enforcement officer when you're pulled over, a certificate of insurance tells a hiring company that the vendor or contractor has insurance. A certificate of insurance is nothing more than proof of insurance coverage.
While it sounds officious, a certificate holder is only the entity to whom the certificate of insurance was issued upon request. Certificate of insurance forms have a special place on them to add the name and address of the certificate holder. When you work in a company that hires outside businesses to provide services, which could include janitorial or landscaping services, for example, your company will need these businesses to provide proof they have insurance. Unless the vendor can give the hiring company the certificate of insurance listing it as the certificate holder, it's highly unlikely the vendor will get the contracting work.
When the company you work for is listed as the "additionally insured" on the vendor's certificate of insurance, it means it enjoys protection under the vendor's insurance policy. In the event of a future claim, the listed entity under additionally insured has rights under the policy coverage. For instance, on your car insurance policy, when you list your spouse, a friend or sibling under your policy, they have the same insurance coverage as you do -- they are additionally insured under your policy. It works the same for companies that require their vendors or subcontractors to list them as additionally insured. But if the company in question is listed as only the certificate holder without being additionally insured, it does not have the benefits of coverage under the subcontractor or vendor's policy.
Promotional events usually involve a certificate of insurance before they occur. For example, when you go to the mall and you notice an art show or other promotional event, the company that put on the event had to provide the mall's owner or management team a certificate of insurance, usually naming the mall's owner as additionally insured. If a person tripped over an improperly covered light cord during the event and were injured, the event sponsor's insurance provides protection for the sponsor and the mall.
One place where you might come across the need for a certificate of insurance in your personal life is when you rent an apartment. Some landlords require that you carry renter's insurance -- especially if you have a dog -- and provide them with proof of insurance. Your insurance carrier -- at your request -- would list them as a certificate holder on your policy, unless the landlord requires that he be additionally insured to protect his interests. Some insurance companies will raise your insurance premium when you add an additional insured to your policy.
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