Understanding the Essentials of COIs and Endorsements
If you're a business owner working with contractors, vendors, or third-party service providers, you've likely come across the terms Certificate of Insurance (COI) and endorsement. While these may seem interchangeable, they actually serve distinct purposes. Understanding these differences is crucial for protecting your business from potential risks and liabilities.
Do you know if a COI is enough, or should you request an endorsement? Let's break down the key differences between COIs and endorsements, why each matters, and what steps you should take as an employer.
Defining a Certificate of Insurance (COI)
A Certificate of Insurance (COI) is a summary document issued by an insurer that confirms a business or individual has active coverage. This document contains essential information such as:
- Policyholder’s name
- Coverage types (general liability, workers’ comp, auto, etc.)
- Policy limits and effective dates
- Insurer’s contact details
Why does this matter? Requesting a COI before hiring a third party ensures the business has the necessary coverage in place, reducing liability risks. It acts as proof that a third party carries valid insurance.
Explaining an Endorsement (Policy Modification)
An endorsement, also known as a rider, is a modification to an existing policy that adds, removes, or alters coverage terms. Common examples of endorsements include:
- Increasing policy limits
- Adding an additional insured (e.g., listing the employer on the contractor’s policy)
- Expanding protection to cover new risks
Endorsements are important because they ensure coverage aligns with specific needs, especially when additional protection is required beyond what the standard policy provides.
Key Differences Between COI and Endorsements
To make it easy for you to grasp:
- A COI serves as proof of existing insurance but does not alter policy terms.
- An endorsement legally modifies a policy and can add or remove coverage.
Employer Best Practices
To ensure proper coverage, employers should:
- Always request a COI before engaging contractors or vendors.
- Review COI details carefully, checking policy limits and expiration dates.
- If additional coverage is needed, request an endorsement to ensure proper protection.
Understanding COIs and endorsements is critical in business contracts. While a COI confirms coverage, an endorsement ensures that coverage meets your specific needs.
Review your insurance requirements carefully and consult with a qualified insurance professional before hiring third parties to safeguard your business against unforeseen risks.
