COI Explained: How Certificates of Insurance Protect Your Business

Introduction

If you hire contractors, work with vendors, or lease commercial properties, you’ve probably encountered the term COI - short for Certificate of Insurance. But what does a COI mean, who needs one, and how can it protect your company from unexpected risks?

This in-depth guide explains what a Certificate of Insurance is, who requires it, how it works, and how you can manage COIs properly to avoid costly surprises.

What Is a COI?

A Certificate of Insurance (COI) is a document issued by an insurance provider or agent to prove that an individual or business holds valid insurance coverage.

A COI provides a quick snapshot of important policy details, including:

    The insured party’s name and address

    The insurance carrier’s information

    Types of coverage (general liability, workers’ compensation, auto liability, etc.)

    Policy numbers

    Coverage limits

    Effective and expiration dates

    The certificate holder’s name (the party requesting proof)

    Any relevant endorsements or special terms

A COI does not replace the full insurance policy. Instead, it is a convenient way to share the critical facts showing that insurance is in place and meets contractual requirements.

Most businesses in the United States rely a standard Certificate of Liability Insurance format that is recognized industry-wide.

Why Do Companies Require Certificates of Insurance?

Requiring a COI is a straightforward way to confirm that your contractors, vendors, or tenants can cover potential damages, accidents, or lawsuits without involving your own insurance first.

For example:

• In construction, general contractors demand COIs from subcontractors before work begins to ensure they have liability and workers’ compensation insurance.
• In property management, landlords request COIs to verify that tenants and service providers carry coverage to handle damages or injuries on-site.
• In government contracting, bid requirements often mandate proof of specific coverage types and limits.

Without a COI, you could be stuck paying for an incident caused by an uninsured or underinsured third party.

COIs in Real Estate

In real estate, COIs are especially critical for owners and property managers. A landlord, for instance, should request COIs before leasing space to a commercial tenant or hiring a contractor for maintenance or renovations. This confirms that the tenant or contractor has current liability and workers’ compensation insurance, protecting the property owner from third-party claims related to the tenant’s or contractor’s actions.

Who Is the Certificate Holder?

The certificate holder is the individual or organization that asks for proof of insurance. The certificate holder’s information appears on the COI, and they are notified if the insurance is canceled before its expiration date.

However, it’s a common misconception that being listed as the certificate holder means you’re covered. In reality, the certificate holder is just being informed of the insurance status - they do not receive insurance benefits from the policy itself.

If you want actual coverage under someone else’s policy, you must be listed as an additional insured. This requires a separate policy endorsement, not just a note on the COI.

For example, if a property owner wants protection against claims arising from a contractor’s work on their building, they must ensure the contractor’s policy includes an additional insured endorsement naming the owner.

How to Request and Review COIs

To properly protect your business:

1. Include clear insurance requirements in every contract. Define what types of coverage are required, minimum policy limits, and whether you need to be named as an additional insured.
2. Request the COI directly from the vendor’s or contractor’s insurance agent or broker. This helps prevent fraud and ensures the certificate is legitimate.
3. Review each COI carefully. Confirm the types of insurance, coverage amounts, policy effective dates, and certificate holder details match your contract.
4. Check for the correct endorsements. If you require additional insured status, verify that it is included as an official endorsement to the policy, not just mentioned on the COI.
5. Track expiration dates and renewals. Policies typically renew annually. Make sure you receive updated COIs before the old ones expire.

Common COI Pitfalls

Even well-meaning businesses can slip up when handling COIs. Typical mistakes include:

• Accepting expired or incomplete COIs
• Assuming a COI alone guarantees coverage for the certificate holder
• Failing to follow up for updated COIs when policies renew
• Filing certificates in scattered emails or spreadsheets instead of using a centralized system

These oversights can leave you open to claims that should have been covered by the other party’s insurance.

Why Automate COI Tracking?

Manually requesting, reviewing, and renewing COIs is time-consuming and error-prone, especially for companies managing many vendors or tenants.

COI tracking software and risk management services help by:

• Automatically requesting COIs directly from insurance agents
• Verifying that certificates meet your requirements
• Sending reminders when a policy is about to expire
• Storing all COIs in one organized, searchable database
• Providing audit trails for compliance checks

Many companies also choose to outsource COI tracking to a specialized third-party firm. This ensures compliance while freeing up your team to focus on higher-value tasks.

How Vertikal RMS Simplifies COI Management

Vertikal RMS provides businesses with a robust vendor risk management platform that takes the hassle out of COI tracking and compliance. With Vertikal RMS, you can:

• Automate collection of COIs directly from insurance providers
• Get real-time alerts for missing, incomplete, or expired COIs
• Ensure vendors meet your specific insurance requirements
• Maintain up-to-date, easily accessible records
• Pass audits with confidence

This reduces legal and financial exposure and lets you spend less time tracking paperwork and more time growing your business.

Frequently Asked Questions (FAQ)

What does COI stand for?
COI means Certificate of Insurance.

Who provides a COI?
A COI must be issued by a licensed insurance company or agent. It cannot be self-created.

Is a COI legally binding?
A COI is evidence that a valid insurance policy exists but does not itself provide coverage. Coverage is governed by the actual insurance policy.

Can a COI be forged?
Unfortunately, yes. This is why it’s best practice to request COIs directly from the issuing insurance agent and to verify authenticity.

How long is a COI valid?
A COI is valid for the duration of the underlying policy, typically one year. Always request an updated COI upon renewal.

Do I need a COI from every vendor?
You should require COIs from any vendor, contractor, or tenant whose activities could expose your business to liability.

Should I outsource COI tracking?
Outsourcing COI tracking to a trusted third-party can help ensure compliance, reduce internal workload, and eliminate costly oversights.

Final Thoughts

A Certificate of Insurance is more than just a formality - it’s an essential safeguard that keeps your business protected from unnecessary risk. By requiring, verifying, and tracking COIs properly, you make sure liability stays where it belongs: with the party doing the work and their insurer.

Ready to modernize your COI management and vendor compliance? Contact Vertikal RMS today to learn how we can help you protect your business with confidence.