It is good risk management for customers to check and make sure their vendors have insurance.
Because of this small business owners are often asked to prove to their customers they do indeed have insurance. When customers ask for proof of insurance what they are often asking for is a form called a certificate of insurance. A certificate of insurance gives the basic information of a business insurance policy. It tells things such as the insurance company's name, dates the policy covers, name of the insurance agency who handles the policy and highlights the different types of liability coverages the policy has and the limits or amount of insurance in each of those coverages.
Any type of business can be asked to provide a certificate of insurance. Three areas where you see certificates of insurance most commonly asked for are construction and maintenance contractors, businesses that lease space and consultants. The reason that construction and maintenance contractors are often asked to show certificates of insurance are because their customers want to be sure if they cause injury around their premises or damage around their premises that they are covered. Also, many contractors are acting as subcontractors to other construction and maintenance companies. If their subs cause damage or injury, they want to be sure they have insurance because if they do not, they will then be the responsible ones.
People that lease space are asked for certificates because the owner of the building wants to make sure that if they cause damage to the building, they have insurance to put the building back as it was prior to incident that caused damage. They also want to make sure if the person leasing space is responsible for someone’s injuries while they are visiting the building that they have insurance in place to cover those injuries.
Consultants are asked to provide certificates of insurance in order to meet contract requirements. Often, consultants sign a contract with their customers and in the contract, there is always an insurance section that outlines the required coverages they must have. The best way for that customer to make sure the consultant is meeting the requirements is to ask for a certificate of insurance.
So, the next time you are asked by a customer to show proof of insurance you will understand that you are being asked for a certificate of insurance. Contact your agent and let them know you need a certificate of insurance. Make sure to provide them with the name and address of the company or individual that is asking you for the certificate.