A certificate of insurance (COI) serves as proof that you have a valid cyber insurance policy. It typically consists of a single page that includes essential information such as the issuing insurer, type of coverage, policy limits and deductibles, and any additional insureds. It’s a vital document for many businesses entering into contractual agreements with other entities that require business partners to have adequate cyber insurance coverage.
What is Included in a Certificate of Insurance?
A certificate of insurance includes information about the type of coverage you have and some of the specifics of your policy, including:
- Your company’s legal name and business information
- The issuing insurer (the insurer that issued the policy)
- Your policy number
- Your policy’s effective date and expiration date
- The type of insurance
- The coverage provided under the policy
- Coverage limits
- Additional insureds (any other individuals or entities covered under the policy)
- Coverage exclusions (in some cases)
- Waiver of subrogation (if applicable)
Essentially, a certificate of insurance includes all the essential information a third party would need to verify that a potential partner or contractor has the right type of insurance coverage with adequate coverage limits. Certificates of insurance are typically issued by the insurance company or broker to a third party who needs to verify a company’s insurance coverage.
How Do Insurance Certificates Work?
Certificates of insurance are typically used in business contexts, such as for subcontractors or small business owners seeking to enter contracts or partnerships with third-party companies. Because these companies want to minimize their risk, they often require partners or contractors to have adequate insurance coverage. A COI is a faster and easier way to verify a potential contractor’s or partner’s insurance coverage compared to requesting a copy of the full policy and reviewing the policy in detail.
Without a certificate of insurance, it can be difficult for companies to win contracts and enter partnerships with third parties. Companies entering into agreements with contractors or agencies don’t want to assume the risk if their partners, contractors, or agencies are responsible for damage. In some instances, companies will request a COI to verify that the policy has been amended to include their company as an additional insured.
Some companies may also require prospective partners or contractors to have an insurance policy that includes a waiver of subrogation, which ensures that the insurer can’t seek to recover costs from the company for any claims it pays on behalf of the contractor or partner. In these cases, the company may request a certificate of insurance to verify that the policy has been amended to include a waiver of subrogation.
How Do You Get a Certificate of Insurance?
Companies requesting certificates of insurance for third parties, including prospective business partners or contractors, should request the COI from the insurance company or broker. After obtaining the certificate of insurance, the company becomes a certificate holder.
Certificate holders should verify that the business’s name matches the name of the insured on the COI. They should also confirm that the effective date for the insurance coverage is current and check the expiration date. If the policy’s expiration date is before the date work is expected to be complete, the company should secure a new certificate prior to the expiration date to ensure continued coverage through the duration of the contract.
How Much Does a Certificate of Insurance Cost?
If you have an insurance policy in place, your insurer should provide certificates of insurance at no extra cost. However, if you require a certificate of insurance to verify that your policy has been amended to include an additional insured, a waiver of subrogation, or any other changes that result in higher premium costs, you’ll have to pay the additional premium for the coverage options or policy terms required by the company with which you’re entering into a contract or agreement.
What is the Difference Between an Insurance Certificate and an Insurance Policy?
A certificate of insurance is a summary of a cyber insurance policy’s basics, but it doesn’t include the complete contract terms and conditions of coverage. While some certificates of insurance list coverage exclusions, others do not.
Because it’s just a summary and not the full policy, certificates of insurance typically include a clause that states that the certificate is issued for information purposes only and does not confer any rights on the certificate holder. This clause may also include a statement indicating that the certificate doesn’t change, alter, or extend the coverage reported in the full insurance policy. When policy changes are needed, such as the addition of an additional insured or a waiver of subrogation, a new certificate of insurance should be provided to verify those amendments.
Cyber insurance coverage is a must for businesses of all sizes today. Data breaches are expensive, especially when coupled with costly fines and penalties for non-compliance with data protection laws and industry regulations like SOC 2 and PCI DSS. Certificates of insurance provide assurance to your prospective partners and clients that you have adequate cyber insurance coverage not only to protect your business, but to minimize their risk in the event of a cybersecurity incident. With comprehensive cyber insurance coverage and certificates of insurance to prove it, you’ll win more contracts so you can continue to grow your business.
