Understanding the Certificate of Insurance

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Certificate of Insurance - Acord 25 Form

Business insurance policyholders are commonly asked to provide a certificate of insurance to a 3rd party. Typical requestors include a landlord, finance or leasing company, government entity, or as part of a construction agreement. While commonly requested, the purpose of insurance certificates is often a mystery to policyholders.

What is a certificate of insurance?

A certificate of insurance is simply a document issued by or on behalf of an insurance company that conveys basic policy coverage limits. Most certificates of insurance are for informational purposes only and are used to show the existence of coverage to a 3rd party (someone other than the named insured). The ACORD certificate of insurance (form 25) is commonly used by agents and brokers, but insurance companies may also develop their own version.

It is important to remember that a certificate of insurance is not an insurance policy and does not modify the coverage. The certificate is considered a snapshot of coverage at the time of issuance. The certificate of insurance makes no guarantees that the policy coverage will not be amended or altered in the future.

Certificates of insurance may also be used to indicate additional insured status for liability policies, subject to the actual policy provisions. If additional insured status is indicated on the certificate, the actual policy endorsement should be attached or included.

What type of coverage can be shown on a certificate of insurance?

There are several types of certificates of insurance that are used for both property and liability insurance. The ACORD 25 has sections for general liability, workers compensation, auto liability, umbrella or excess liability and a free-form area for miscellaneous policies. In addition, the certificate has fields to list the one or more insurance companies that may provide this coverage. For example, the certificate may show Insurance Company A for general liability, umbrella and workers compensation. Insurance Company B may be listed for business auto insurance.

There are specific certificate of insurance forms for aviation insurance (form 20 & 21), commercial automobile insurance (form 23) and property insurance (form 24).

Who requires a certificate of insurance?

There are numerous interested parties that may request a certificate including landlords, contractors, equipment lessors, vendors, and municipalities. Certificates are commonly used in construction insurance to convey coverage limits and additional insured status. Landlords typically request a certificate from tenants to verify coverage exists and has the proper limits. Manufacturers may provide vendors with a certificate of insurance to disclose the limits of their products liability coverage.

At Safeguard Insurance, we offer our customers same day certificate of insurance issuance and online access to your policies. We can provide you a complete business insurance program and the convenience of having one agent handle all your policies. Contact us today for any questions about certificates or business insurance in general.

Related: General Liability, Workers Compensation, Business Auto InsuranceSmall Business Insurance, Contractor Insurance