If you regularly hire contractors, sign commercial leases, manage properties, or work under contracts, chances are you have requested or provided a certificate of insurance.
Most businesses view certificates of insurance as routine paperwork.
Unfortunately, many also misunderstand what these documents actually do.
One of the most common misconceptions in commercial insurance is believing that a certificate of insurance creates coverage.
It does not.
Understanding the difference between a certificate and the actual insurance policy can help businesses avoid costly mistakes when claims arise.
What Is a Certificate of Insurance?
A certificate of insurance (COI) is a document that provides evidence of insurance coverage on a specific date.
Typically, it includes:
- Policy types
- Insurance carriers
- Policy limits
- Effective dates
- Expiration dates
The purpose of the certificate is to provide a snapshot of an insurance program at a specific point in time.
It is not an insurance policy.
It does not modify policy terms.
And it does not create new coverage.
In fact, standard ACORD certificates specifically state they are issued for informational purposes only and do not alter coverage provided by the underlying policies.
Why Businesses Get Into Trouble
Many contracts require specific insurance provisions such as:
- Additional insured status
- Waiver of subrogation
- Primary and noncontributory wording
- Notice of cancellation provisions
When businesses receive a certificate showing insurance is in place, they often assume these requirements have been satisfied.
That assumption can create problems.
A certificate can reference coverage, but it cannot create endorsements that do not exist in the policy.
The policy itself always controls.
The Additional Insured Problem
This issue frequently appears in construction and commercial contracting.
For example, a general contractor may require a subcontractor to provide additional insured status.
The subcontractor provides a certificate.
Everyone assumes the requirement has been met.
Months later, a claim occurs.
When the policy is reviewed, it turns out the necessary endorsement was never added.
The certificate did not create coverage.
The policy language controls.
This can create disputes between contractors, owners, and insurers when claims arise.
What Businesses Should Review
Certificates are useful, but they should not be the only document reviewed.
When contracts require specific coverage provisions, businesses should confirm:
- Additional insured endorsements
- Waiver of subrogation endorsements
- Primary and noncontributory wording
- Applicable policy limits
- Completed operations requirements
Simply relying on the certificate may not be enough.
Why Contract Review Matters
Insurance and contracts should work together.
A contract may require protections that are not automatically included in the policy.
If there is a mismatch between the contract and the insurance program, problems often surface during a claim.
Unfortunately, that is also the most expensive time to discover the issue.
Final Thoughts
Certificates of insurance serve an important purpose.
They help verify that insurance exists.
What they do not do is create coverage.
Businesses that rely solely on certificates without reviewing policy endorsements may be exposing themselves to unnecessary risk.
At The Bunker Insurance & Risk Management, we help contractors, property managers, manufacturers, and business owners review contracts, certificates, and insurance requirements to identify potential gaps before claims occur.
Because when it comes to risk transfer, what matters is not what the certificate says.
It is what the policy actually provides.