What Is A Vendor Certificate of Insurance?

August 7, 2023

Every time that your company uses vendors – such as contractors, subcontractors, suppliers of goods, etc – as part of its operations, you are inherently taking on risk. The level of risk that you are taking on, of course, depends on the vendor you are dealing with and what the interaction with that vendor will be.

To mitigate these risks — and to protect your business — it’s important to have specific insurance requirements in place for every vendor with which you work. Of course, simply having the insurance requirements isn’t enough. You need to verify that the vendors are in compliance with your requirements and stay so.

The way to do this is through a vendor Certificate of Insurance. Below, we’ll go into further detail about what a vendor COI is and what it’s used for.

What is a COI Intended For?

A COI is a proof of insurance document. 

It outlines the: 

  • policy holder
  • type of insurance policy they have
  • coverage amounts
  • time period for which the insurance is active 
  • additional parties that are covered under the insurance

Businesses can request COIs from their vendors’ insurance companies to prove that the vendor meets all the insurance requirements they have. By requesting a COI from your vendors, you’ll be able to rest comfortably knowing that your business won’t be at risk should damages or injuries occur that the vendor would be responsible for covering.

A COI will outline whether a vendor is in compliance with your insurance requirements. If they’re not, you can decide to either not work with them, or tell them what they need to do in order to qualify.

What Types of Vendors Need a Liability Insurance Policy?

Just about any vendor needs to have a liability insurance policy. This is especially true of any vendor that has interactions with the public.

Individual vendors at a local fair, for example, that interact with people who are attending the event all risk being sued should someone be injured at their booth. Someone could trip on a display and get hurt. Someone might be burned by hot food or a spill.

All of this could result in a liability lawsuit. And if the vendor doesn’t carry a liability insurance policy, the business that is hosting the fair will be held responsible.

Some types of vendors carry more potential liability, such as any who work with hot equipment or serve food that will be consumed. That being said, all vendors should carry a liability insurance policy.

Consider the Risks When Determining Vendor Insurance Requirements

What type of insurance you should require of your vendors depends on the risks that will be most present. In addition to general liability insurance, you might also require commercial property insurance, product liability insurance, and commercial auto insurance.

It’s important to assess the risks to your business — and to all of your vendors — first before determining the specific insurance requirements you should have for your vendors.

Four Reasons Why Certificates of Insurance Are Essential

COIs are essential for any business that is working with vendors, as you can see. Here are the four top reasons why they’re so important.

1. They Prove Insurance Status

With COIs, there is no guessing. You don’t have to wonder whether a vendor holds the requisite insurance, and you don’t have to take their word for it. You’ll have written proof that your vendors do, or don’t, carry the proper insurance.

2. They Reduce Your Liability

If one of your vendors causes damage or injury, having a COI will allow you to transfer liability to the vendor responsible easily. Again, there won’t be a question as to who is liable for the damage, since you required vendors not only carry certain insurance but prove they have it.

3. They Protect Your Profitability

Lawsuits can be extremely costly, even if they don’t prove fruitful to those who file them. By having COIs from each of your vendors, you can easily avoid having to go through arduous legal processes should a lawsuit arise.

4. They Give You All the Information in One Place

Another reason why COIs are essential is that they provide you with all the information about vendors’ insurance policies in one place. Should a situation arise where your vendors’ insurance coverage comes into question, you can go to one quick place to gather all the pertinent information. This saves time, which saves money.

Details of Certificate of Insurance

Every Certificate of Insurance should have some basic information on it. This includes …

  • Name and address of the policy holder
  • Name and contact information for the insurance carrier
  • Type of insurance policy
  • Policy coverage limits and effective dates
  • Any additional insureds
  • Name of Certificate Holder

This basic information should be on every COI you request.

Types of Certificates of Insurance

There are many different types of Certificates of Insurance. Making sure your vendors are providing you with the proper one is important. Here are some of the main types …

  • Certificate of Liability: General liability insurance is the most common form of business insurance. It provides overarching coverage for damages, bodily injury, and more. It can extend to any additional insureds, such as subcontractors that the policy holder might hire.
  • Commercial Property: Commercial property insurance provides coverage for any equipment or other property that the vendor owns. It could be commercial ovens for a food vendor, for instance, or display materials.
  • Workers Compensation: Worker’s compensation insurance covers any medical bills and loss of income should an employee get hurt while on the job.
  • Commercial Auto: Commercial auto insurance provides coverage for any vehicles that are owned by the business and used for work purposes. 

How Long is a Certificate of Insurance Good For?

Most Certificates of Insurance are good for five years. That being said, it is very important for certificate holders to consistently check the details of the insurance policies on the COI, as they might expire before that five-year period.

Stay on Top of Your COIs with Evident

Requesting, receiving, managing, and tracking insurance policies from vendors can be quite the job if you need the right tools to do so. Trying to do all of this manually can cause quite a headache, and can open your business to liability it doesn’t need to take on.

When you work with Evident, your business can gain peace of mind and efficiency in operations. Evident’s impressive COI tracking software helps all businesses ensure that their vendors are always in compliance with insurance requirements, and makes tracking COIs simple and easy.

Contact us today to find out more.

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