Policies and certificates of insurance (or COIs) are two fundamental concepts in the insurance world. In this blog, we’ll discuss the critical differences between the two, as well as a few best practices for dealing with them.
What Is The Definition Of A Policy And Certificate Of Insurance?
Let’s start with the basics by explaining the definitions of two very important legal concepts: insurance policies and certificates of insurance.
Policy Definition + Examples
A policy is a legal contract issued to someone by an insurer that outlines the terms and conditions of their insurance coverage. It’s essentially a set of rules that you and an insurance company agree to follow and outlines how the insurance company will protect you in the event of losses or damages.
Policy documents are typically lengthy and cover details about the coverage, such as the scope of coverage, risks covered, exclusions, deductibles, limits of liability, and premiums payable. The person that is covered by the policy is called the “policyholder.”
Some examples of insurance policies include:
- Car insurance policies. These will include information such as what types of damages to your car are covered, what types aren’t, how much you’ll be reimbursed in the case of damage or theft, your deductible (how much you’ll have to pay before your insurance kicks in), and any special exclusions that may apply.
- Health insurance policies. These will explain what medical treatments are covered and how much you will be reimbursed for them.
- Business insurance policies. These policies will outline what risks are covered for a particular business, such as property damage or liability.
Certificate Of Insurance Definition + Examples
A certificate of insurance, on the other hand, is not a legal contract but rather a document that provides proof that someone is being covered by an insurance policy. Insurance companies will issue these, typically at the request of the policyholder, in order to provide evidence of insurance coverage of a third-party vendor or contractor to a party hiring that company.
Certificates of insurance normally include contact information for the policyholder and insurer and important information about the policy, such as the policy number, effective dates of coverage, expiration date, endorsem*nts, and types and limits of the coverage provided.
Some examples of when you’d request a COI include:
- Before starting a construction project, a contractor or subcontractor typically provides their client with a COI to show that they have liability insurance in case they cause damages or injuries while on the job.
- To prove that someone has renters insurance to cover damages or losses of their belongings, tenants are sometimes required to provide a COI.
- Event organizers at a trade show may require their vendors to provide COIs of liability coverage in case any accidents occur at the event booths.
Certificates Of Insurance Best Practices
Let’s discuss some best practices you can follow when it comes to obtaining and tracking certificates of insurance.
- Ensure that the certificate is current and accurate. It’s crucial that COIs reflect the correct policy dates, details, and coverage amounts, so be sure to review them thoroughly.
- Ensure that the certificate meets the requirements of the requesting party. For example, some clients have special endorsem*nts they want to be included, such as being listed as an additional insured on the policy.
- Verify the authenticity of the certificate. Unfortunately, there have been cases in the past of people providing fraudulent certificates, so it’s important to confirm that any COI you receive is legitimate, issued by a reputable insurance company, etc. To do this, you will need to contact the insurance provider/underwriter.
- Keep track of all of the certificates you receive. This is difficult, especially when you have lots of certificates to keep track of across various third parties. This brings us to our final point…
- Consider using a COI management service. Software like myCOI can help streamline many of the manual, error-prone tasks related to COI tracking making you more efficient and closing coverage gaps.
Insurance Policy Best Practices
Insurance policies provide coverage so that you are prepared and protected in case of unexpected events. Here are a few insurance policy best practices you can follow:
- Understand what your policy covers. Read through your policy document carefully and make sure you are aware of what it covers and what it doesn’t. Don’t be afraid to ask your insurance provider for clarification if needed.
- Review your policy regularly. As your insurance needs may change over time, we recommend that you periodically review your policy and make sure it’s still providing the coverage that you need at a price that works for you.
- Consider bundling policies. If you need multiple types of insurance, such as home and auto, consider purchasing both policies together, as many insurance companies offer discounts if you do.
What Is The Difference Between A Policy And A Certificate Of Insurance
The relationship between a policy and a certificate of insurance is essentially this: the former is the actual insurance contract itself; the latter is a summarized document that provides proof of the coverage under that policy.
Keep Up With Your COIs With MyCOI
Managing COIs can be time consuming, tedious, anf frankly downright ineffective. At least, that’s how it used to be with manual COI management. With myCOI, you can automate and optimize your COI management. Let us do the heavy lifting when it comes to your COI request, verification, tracking, and more. Reach out to us today.
