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Ask an Insurance Expert: How Do I Verify Insurance?

May 19, 2022

 

Good afternoon, this is Bob with Evident, and today we’re going to answer the question, “How do I verify insurance?

Now to do that, we’re going to walk through an example of how you’d verify insurance the old fashioned way, which is manually.

The first thing you’re going to need if you want to verify insurance are insurance requirements. Insurance requirements are the insurance coverages that other businesses are required to carry based on some type of contractual agreement between your company and theres. The specifics will vary by company, but it’s pretty common to ask for coverages, like General Liability, Automobile Liability, or Workers Compensation. Now, these coverages are designed as a first line of defense for your company in case that other company causes a loss. It also affects your company, so once you have all of those contractual requirements in place, you’re going to actually need to ask that other company for a Certificate of Insurance because it shows that they have the right coverages in place.

We’ve already covered what a proof of insurance is in another video – aptly titled What is a COI – so if you missed that, be sure to check it out. You may also know that getting a Certificate of Insurance can involve a number of follow ups and it can be a pretty painful process to do manually, but let’s just say that you get a response on your first try for the purposes of this video.

So you have your requirements, you have your proof of insurance, and now you can actually compare what you are given to what you asked for. Since the most common Certificate of Insurance is produced by an organization called a chord we’re gonna look at one of those things specifically, we’re going to look at an ACORD 25 form – which relates to a Certificate of Liability Insurance.

  1. Here, we have an ACORD 25 Certificate of Liability Insurance on the left part of this screen, and on the right we have our requirements, our hypothetical insurance requirements for two coverage types: General Liability and Auto Liability.
      • For General Liability, we require that the policy is active that means that for the duration of the contract we have with our third party, that policy must be in effect. We need at least a million dollars to the current limit. We need at least $2 million of aggregate limit. We need at least $1 million of products completed operations limit and we need an additional insured endorsement to that insurance. A policy saying that Acme Widgets and its subsidiaries are named as Additional Insured were required by written contract.
      • For auto we need the same thing. We need an active policy, we need at least $1 million of combined single limit and we need coverage. For any automobiles or owned automobiles. So let’s take a look now at this Certificate of Insurance.
  2. First thing you’ll see is up here on the top right – the date that it was issued. It’s important to take a look at this and make sure that it makes sense that it wasn’t issued in the future and it wasn’t issued years ago.
      • You want something that’s relevant to when you ask for the certificate to be produced.
      • Most of the time, this certificate will be produced by a producer an agent or a broker or directly by a carrier, so this is the address of that agency or carrier or broker that produced that Certificate of Insurance.
  3. Next, you’ll see the insurance name, you’re gonna want to make sure that this matches the name that you would expect from the company you’re doing business with, so if this reads something else, it may not be the right certificate.
      • These are the insurance carriers that have actually issued the policies for that insured, so the first Insurer here is named “Liability Insurer and Company,” and this is their NIC number which is issued by the National Association of Insurance Commissioners.
      • Same goes with car insurance company, which also has an AIC number.
  4. Now we’re going to move down to the bottom of the screen in this area here, which has information about the different coverages now, because the ACORD is a template for it, and we’re gonna see coverages on here that we care about, but we’re also going to see coverages we don’t.
      • We have General Liability and we care about that. We have Auto Liability, we care about that.
      • We didn’t ask for anything around Umbrella or Excess Liability.
      • We did not ask about Workers Compensation or Employee Liability, and then there’s another box down here that just provided to capture some free-for-all kinds of coverages that may or may not be asked for.
  5. Starting with General Liability, moving from left to right, we’re gonna see this first thing here. This is insurer letter. This corresponds to this insurer letter up here, which means that liability insurer in CO wrote this General Liability policy.
      • There’s some stuff that’s special to General Liability policies here. This isn’t relevant to our requirements. The boxes to the right are Additional Insured and set by the Waiver of Subrogation that we did ask for an Additional Insured endorsement, so this check here indicates that there is an amendment to that policy, adding someone as an Additional Insured, and we’ll take a look at that in a few seconds.
      • We didn’t ask for a Waiver of Subrogation, so we’ll skip that.
  6. It’s important to make sure that there’s a policy number. So we’ve been given a policy number GL 12345. That looks good.
      • We were given a policy effective date and a policy expiration date, which tells us about when that policy is in effect.
      • We did ask for an active policy up here in the top right, so if today is May 17, 2022, this policy would be good. It doesn’t expire until January of next year.
  7. Then we asked for three different types of limits. We asked for an Occurrence Limit – which matches our $1 million requirement or more – we asked for an Aggregate Limit of $2 million or more, and we asked for a Products and Completed Operations a limit of $1 million or more. So looks good on those fronts.
      • I’m going to circle back to this Additional Insured status in a moment.
  8. Now, looking at the next item, you’d have B, which corresponds to Insurer B up here: Car Insurance Company.
      • We did ask specifically for either any auto coverage or owned automobiles.
      • We have this box checked, so that means we’ve met that requirement up in the top right.
      • We did not ask for an Additional Insured or Waiver of Subrogation, so we don’t have to worry about those.
  9. We need a policy number to make sure that it’s a real COI, so once again, we have a good policy number there, but if we look at the policy effective in the expiration dates, we’ll see that this actually expired before today.
      • This policy is no longer active, which means it would fail our check for an active policy.
      • We’re going to have to go back and ask this insured for updated auto information, but we will see that this policy did have the right limit, so hopefully they just forgot to update the information here when we go back and ask them for updated information.
      • We didn’t ask for Umbrella or Excess Liability coverage.
      • We didn’t ask for Workers Compensation or Employers Liability, and we didn’t ask for any special coverages that weren’t already listed on this form, so we can skip those.
  10. The next box we’ll look at is called the Description of Operations or the “DLL,” and this is just a freeform text box that companies might use to provide information about things relevant to the contract like locations or vehicles.
      • It can also be used to include the language that was used in something like an Additional Insured endorsement to make it a little easier to make sure that it checks out.
      • It’s really important to know that this whole form is not something that modifies a policy, so if the limits are wrong on here, it doesn’t give more coverage to this insured.
      • If the Additional Insured endorsement hasn’t been actually processed, it’s not part of the policy so it doesn’t exist, so this is really just for your reference to give you some peace of mind that this company does have insurance and this is how it’s presented to you.
  11. The last few things we’re going to look at here are the Certificate Holder.
      • This is typically your company’s information and this gives you another layer of confidence that says “Hey, this was at least issued to me, so it’s not just some paper that’s been reused 500 times” – it’s specifically addressed to you.
  12. At the bottom right there’s a signature block – sometimes it’s text, sometimes its signature, but it’s whoever was working for this producer in the top right here.
      • This is the person who actually created that Certificate of Insurance.

Now, if you’re thinking: “This is a ton of work to do hundreds of thousands of times a year.” You’re absolutely right – it is, and that’s why companies like ours are automating every step of the process we’ve talked about today so you can focus on running your business.

Bob Wykoff

For over 11 years, Bob has driven innovation and led digital transformation across the insurance vertical. Bob has developed a connected view of the insurance industry by managing risk from multiple perspectives. Today, at Evident, he's leveraging that connected perspective to help the industry rethink the way third-party risk is managed.

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