Why You Need a Certificate of Liability Insurance

liability

Why You Need a Certificate of Liability Insurance

Imagine for a moment, that you take your car to an auto repair shop to have the engine tuned up. Moments after picking up your car and driving away, the engine blows. You call the repair shop and ask them to send a tow truck to return the car for repair. The repair shop states that they are not responsible once you accept delivery of the car and leave the premises. Yes, you are probably on the hook for the repairs, unless the repair shop has liability insurance and you can prove that the blown engine was the result of their carelessness. That is why you should always assure that any company you do business with has liability insurance and why you should request a certificate of insurance (COI) from them before contracting with them.

A COI is a simple document issued by your insurance company. The details it shares include the types of coverage, the issuing insurance company, your policy number, the named insured, and the policy’s effective dates, and the types and dollar amount of limits and deductibles.

When liability and losses are a concern a COI is a must-have document for all parties involved. For example, if you’re providing screenprinting services for a client, they may require a certificate of insurance to prove that certain liabilities will be covered during the course of the project. No matter what kind of client you’re working with, having the right insurance policy and proof of insurance will protect you and your client and give you both peace of mind.

Don’t be alarmed if the client also requests that they are added to your COI as a certificate holder. This is a common request, and complying does not give the client any legal rights under a certificate, because the certificate only establishes that an insurance policy exists.

Usually, the COI is issued along with your policy and should be one of the documents you receive when you purchase insurance for your business. If you did not receive one, you can easily request a certificate of liability insurance by contacting your insurance provider. Even if you haven’t been asked to show a COI, it’s an added benefit of having proof of your small business coverage.

Note: Most insurance policies are written using a cookie-cutter form. You should read over your current or potential future policy to assure that it meets your requirements specific to your business needs before entering into a contract with your insurance provider. You may find out that you may not be covered for the things that could potentially wipe out your business.

Contract Work

It is common to have a COI required in order to win contract work, i.e. printing on client-supplied goods. Many companies and individuals that hire screenprint contractors need to know that they won’t be held liable for damages, injuries, or substandard work, and therefore require that you have insurance. Yes, if the company claims that the work is substandard and files a claim with your insurance provider, the provider may cover the losses to the client in some instances, depending on the wording in the policy. This is often seen in instances of contract work, where the client is providing substrates to be printed. They want to know that if the screenprinter damages the goods in any matter, that the cost of those goods will be covered by an insurance policy.

Liability Insurance

This is known as commercial insurance and protects you in the event you are sued for claims that come within the coverage of your liability insurance policy. There are generally three types of liability insurances and the type of insurance you choose depends on the details of your business.

  • General Liability Insurance is also known as a commercial general liability (CGL) protects your business from another person or business’s claims of bodily injury, associated medical costs and damage to property.
  • Professional Liability Insurance sometimes called errors and omissions insurance (E&O insurance) is coverage for another person’s claims against businesses that provide professional and personal services.
  • Business Owner Policy (BOP) is a combination of general liability and business property insurance.
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