Most business enterprises based in Canada require a Certificate of Insurance when entering into official contracts with individuals and other business enterprises. This includes small businesses operating in all provinces of Canada including Alberta.
Irrespective of whether you are a B2B business or a B2C business, as long as you are offering your services or products for consulting work, or sale, your business falls under the purview of this certificate.
What is a Certificate of Insurance (COI)?
A certificate of insurance (COI), also known as an ACORD certificate of liability insurance is an important document. It contains details on your specific insurance coverage.
It certifies that your insurance has been verified by listing out information on the type of insurance you have, the limits of coverage, name of insurance company, policy number, named insured, and the policies’ effective periods.
Why is the Certificate of Insurance required?
This certificate is usually issued to your potential customers, who want some evidence or assurance that an insurance policy has been issued and working with you will not increase their legal liability. Similarly, when you hire vendors, or subcontractors, you want assurance that hiring them won’t increase your liability.
What is the importance of the Certificate of Insurance?
It is a prudent business practice to request for a COI as it helps to verify a potential vendor or subcontractor’s financial-responsibility claims. The reason is that vendors might:
- Not be as skilled as they claim to be.
- May fail to mention prior legal disputes.
- Claim to still have insurance, although it might have expired many years ago.
In which cases is a Certificate of Insurance practically used?
Certificates of insurance are widely used in the industry as all parties to a transaction are worried about losses and legal liability. As per data with business insurance Calgary, below are some typical cases where they are used:
A commercial property owner asks for a COI in case tenants cause a fire or injure a visitor. Without a COI, the owner might have to bear the costs of repair.
A manufacturer asks a contractor to provide a COI prior to starting work to renovate a facility. Without a COI, the owner might have to pay for structural damage the remodeler causes.
A building design firm asks for a COI to secure itself against the risks of bringing subcontractors to its construction sites. Without a COI, it is exposed to the risk of having to pay for the medical costs of any workers employed by the subcontractor, who might get injured at the site.
A commercial bank asks for a COI before accepting the collateral pledged against a construction loan. This assures them that the loan will still serve as a collateral even if the pledged property, for instance is destroyed due to a burning incident.
A municipal government asks for a COI from an engineering firm before starting a road construction project. This safeguards the municipality and reduces its liability, in case the engineering firm draws up faulty plans.
From the above examples it is clear that whenever businesses engage in projects that could be a cause for a loss for multiple parties, certificates of insurance are the absolute must have document.
Is a Certificate of Insurance same as an Insurance policy?
No, a certificate of insurance is just a summary of your existing insurance coverage. It is by no means an actual insurance policy.
In other words, when you give your customer your COI, you are just providing the customer evidence that you are covered with insurance in the event there is a loss. You are not entering into a contract to cover the losses of your customer.
In certain instances, you may wish to provide coverage to the certificate holder. You can do this by making your customer an “additional insured” on your policy. This can easily be done.
You simply need to call your broker who deals in Business Insurance Calgary and they will amend your declarations page to include the name of your customer.
Need information on Certificate of Insurance?
Beneficial Insurance Solutions provides business insurance in Calgary and other areas throughout Alberta. Contact our experienced team to help you make the right decision about business insurance.
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