So you just accepted an exciting project from a new client, and you can’t wait to get started. But they required a copy of your certificate of insurance before you can begin work. You ask yourself, “What is a Certificate of Insurance? Why do I need one?”
A certificate of insurances is a business tool that provides proof of your small business insurance. Make sure to be ready for these questions from your next client and have your certificates of insurance prepared ahead of time.
What Is a Certificate of Insurance?
A certificate of insurance is essentially a summary of what your small business insurance entails. This document explains what the coverage is, who it covers, the effective dates of the policy, and liability and deductible information. This proof of insurance is very similar to your car or health insurance card, it is just for your small business insurance instead. Insurance providers are required to provide a certificate of insurance upon your request, but most will also include a copy with your initial paperwork.
Now you may be thinking “that’s all good to know, but why is it important for me to maintain one of my own?” Well, here are just four of the many, many reasons you should always maintain a current certificate of insurance.
Prove Your Insurance Status
A certificate of insurance does not alter or add anything to the insurance policy you have in place. However, it does provide some very important information about your policy that you may need to present to a potential client. It will present information on a standard form, including exactly who and what is covered, and the limits of that coverage. Many clients will have software or services in charge of certificate tracking to ensure that their vendors have valid certificates of insurance. As such, it is very important to have this proof of insurance so you can sign the contract with that new client and get the ball rolling for your business.
Quick Access to Information
When a client requests a copy of your certificate of insurance, you have to provide them the current documents before you can begin work. Your insurance company is required to provide you with a copy of your certificate of insurance, so the information should be fairly easy to get. However, it could take a little bit of time to get in touch with your insurance provider, have them send you a copy, and then finally get it to the potential client. If you don’t already have a copy to hand to your client, you could potentially lose their business to another company who had their certificate of insurance ready to go.
Reduces Your Liability
The certificate of insurance, itself, does not reduce your liability, but provides proof of your insurance policy, which does reduce your liability. There are different forms of small business insurance that will protect you if something happens while you are under contract. This is extremely important to have, because if somebody sues you for something that happened while you were under contract, the small business insurance can protect you from them trying to go after your business, or worse yet, your home and personal possessions.
Protect Yourself When You Outsource
If you outsource your work or hire a vendor, it is a good idea to get a certificate of insurance from them and keep it on file. Set yourself up with a system to notify you when a certificate of insurance expires. If you conduct business with vendors whose certificates of insurance have expired, you could end up with the repercussions. Another thing to consider, depending on the type of business you conduct, is to have your vendors add you onto their certificate of insurance. This could potentially reduce your risk and deductibles, if something were to happen.