A certificate of liability insurance is a document that list pertinent facts about the insurance policy and that is often utilized when individuals or organizations want to prove that the insurance policy is in place.
What is Liability Insurance?
Liability insurance coverage protects the individual or organization from the legal liability of loss or damage. Business liability insurance offers various types of coverage for your company protecting you against the liability for damages done to someone outside of the company. This policy does not cover something done within the business by its employees, this is for what is termed a third-party, or someone outside the business (like a client or customer) that is hurt at your place of business or by an employee of the company, or damage is done to their home or other property. If awarded, the money is not paid to you, but to the third-party.
The damage might stem from someone falling in your store, a vehicle accident caused by a delivery truck, or if a contractor causes plumbing damage that floods a clientâ€™s home. There are various types of damage and injuries that business liability insurance will cover the cost of, while saving your company from financial distress. Just as there are several types of liability insurance that may cover products, professional services, automotive liability for business vehicles, and even to protect a business from its employees.
Certificate of Liability Insurance
The certificates of insurance typically consists of one or just a few pages, instead of the insured having to provide the entire, somewhat lengthy, insurance policy. This liability insurance certificate summarizes the terms and conditions of the insurance coverage.
Where the entire liability policy might hold proprietary information on the business, including rates, business volumes, and other information that the insured may not want made public, the insurance certificate provides only the basic information that proves the policy is in place
The certificate of liability insurance supplies information that includes:
- The insuredâ€™s name or the party or parties that are insured
- The agent or broker that issued the certificate
- Policy numbers
- Effective date of the policy and its expiration date
- The specific type of policy, including the insurance limits or exclusions, and what the policy is intended for
The certificate of liability insurance would also contain any key details, all disclaimers and events that would lead to cancellation of the policy on both the part of the insurer and the insured, as well as how and when the insured would be notified if the insurance coverage were to be cancelled.
Use of Liability Insurance Certificates
Business use of the certificate often follows a transaction where one party agrees to indemnify or cover the other person or entity. The certificate is used to show proof that there is coverage in place to financially uphold this agreement. Contractors and business owners often have to carry liability insurance to protect themselves or their company from any lawsuit due to loss or damages.
If contracted to do the work, the person hiring the contractor or business may want to see that you are covered for any negligence before they award the job. The certificate of liability insurance would then be used as proof that you carry such insurance.
Insurance Certificates – History
There is a standard form available through ACORD, which stands for Association for Cooperative Operations Research and Development. This site provides information on insurance standards and changes in regulations.
There are other organizations, such as ISO or the Insurance Services Office, Inc that have introduced their own version of the insurance certificate. There are also non-standard forms available; these forms are sometimes referred to as manuscript forms instead of certificates.
Certificate of Liability Insurance Disclaimer
It is important to remember that this certificate is not the insurance policy, but merely a snapshot of what the policy entails. The certificate actually has a disclaimer that while it contains information about the policy as it was when the certificate was generated, it does not confer any rights to the holder of that certificate. There are also no indications on the certificate if there have been any modifications of coverage.
A Certificate of Liability Insurance serves as a simple rundown and proof that the insured has liability insurance that would protect others against negligence that causes loss or damage to property. This is not the actual insurance policy, but a breakdown of what the policy covers and its limitations.
It is important for the insured, as well as those who require proof of insurance to understand the what the Certificate of Liability Insurance covers, the limits of the policy, and when the insurance would cover any loss or damages caused by the insured.