What is a Certificate of Liability Insurance?

A certificate of liability insurance is used commonly in business as proof of insurance. As a document that describes details of the insurance policies held by the insured, a certificate of insurance provides insurance policy numbers, effective dates, expiration dates, and name of the insurance company providing coverage.



Certificates of liability insurance are often used in business transactions whereby one party indemnifies another party. The indemnified party, referred to as the indemnitee, requires a certificate of insurance document as proof and evidence from the indemnifying party, know as the indemnitor. In other words, the certificate of insurance serves as evidence of insurance in the event of a loss.



Because it would be unrealistic and cumbersome to present an entire insurance policy every time evidence of an insurance policy is required, the certificate of insurance has been customary in business transactions as a means to show proof of insurance.



If you are in the service business, other businesses or individuals may request to see a copy of your certificate of insurance to ensure that you’re adequately insured.



To illustrate: suppose you are looking to hire a tree service company to remove a large tree on your property. You’ll undoubtedly want to be sure that the tree service company has adequate insurance should a worker become injured on your property or there is damage to your property as a result of the tree being removed. In this case, you’ll likely want proof that the tree service company has General Liability and Workers’ Compensation insurance. As an extra precaution, you can even call the insurance company listed on the Certificate of Insurance to verify the existence of insurance. But don’t call the number listed on the Certificate of Insurance. Instead, look up the phone number yourself independently, before making the call.



Anytime your small business hires a contractor — particularly if they are working on your property — it’s wise to verify that the contractor is covered by insurance. Because in the absence of insurance, you or your small business may be financially responsible should an injury or accident occur while the contractor you hired is working on your job.

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