Understanding the Implications for Employers
For employers working with contractors, vendors, or third-party service providers, navigating insurance requirements is crucial. Two terms you'll often encounter are Certificate of Insurance (COI) and endorsement. While they may appear similar, they serve distinct purposes and understanding these differences is vital to shield your business from potential risks and liabilities.
Do you know if a COI is enough, or should you request an endorsement? This blog aims to demystify these insurance documents, explaining why each is important and offering actionable steps to ensure your business is protected.
What is a Certificate of Insurance (COI)?
A Certificate of Insurance is a one-page document issued by an insurer that summarizes the insurance coverage held by a business or individual. It includes:
- Policyholder’s name
- Coverage types (e.g., general liability, workers’ comp, auto)
- Policy limits and effective dates
- Insurer’s contact details
Why is a COI important? Before hiring a third party, requesting a COI verifies that they have the required coverage in place, thus reducing liability risks for your business.
Explaining an Endorsement (Policy Modification)
An endorsement, or a rider, modifies an existing insurance policy to include, exclude, or change coverage terms. Common endorsements include:
- Increasing policy limits
- Adding an additional insured (e.g., listing the employer on the contractor’s policy)
- Expanding coverage to address new risks
Endorsements are essential when additional protection is required beyond what the standard policy provides, ensuring coverage aligns with specific needs.
Key Differences between COIs and Endorsements
A clear comparison can help clarify:
- A COI serves as proof of existing insurance but does not alter policy terms.
- An endorsement legally modifies a policy and can add or remove coverage.
Employer Best Practices
Employers should adopt the following practices to ensure adequate coverage:
1. Always request a COI before engaging contractors or vendors.
2. Review COI details carefully, checking policy limits and expiration dates.
3. If additional coverage is needed, request an endorsement to ensure proper protection.
Understanding the roles of COIs and endorsements in business contracts is crucial. While a COI confirms coverage, an endorsement ensures the coverage meets your specific needs. Employers should meticulously review their insurance requirements and consult with a qualified insurance professional before hiring third parties. Ensuring proper insurance can safeguard your business and provide peace of mind.
