What is a Certificate of Insurance (COI)?

As a small business owner, your business is a big deal. It requires careful planning and protection to ensure you have the proper insurance to cover potential risks. A Certificate of Insurance (COI) is a document that many business contracts and leases require to show that your business has the correct type of insurance. Obtaining a COI is integral to ensuring your business is adequately protected. With a COI, you can easily demonstrate that your business is covered correctly and that you are taking all necessary steps to protect it.

Insurance is crucial for businesses and, in most states, required by law. As a small business owner, it is essential to understand the importance of having the right insurance coverage to protect your business from financial loss.

One of the key insurance policies that businesses should have is workers’ compensation insurance. This type of insurance covers medical expenses and lost wages for injured employees who become ill. Having workers’ compensation insurance not only protects your employees but also protects your business from potential lawsuits and financial strain.

Another vital insurance policy to consider is a Business Owner’s Policy (BOP). This policy combines general liability insurance and property insurance to provide comprehensive coverage for your business.

The right insurance policies protect your business from financial loss and build credibility with customers and contractors. It shows that you are taking the necessary steps to protect your business and its users. By investing in insurance coverage, you can have peace of mind knowing that your business is adequately protected.

The two foundational types of insurance coverage that most small businesses should consider are General Liability Insurance and Commercial Property Insurance.

General Liability Insurance

What Is It?

General Liability Insurance protects your business from various risks, including legal costs and payouts for bodily injury, property damage, or personal and advertising injuries.

Key Coverage Points

Bodily Injury: Covers medical expenses if someone is injured on your property or due to your business operations.
Property Damage: Pays for damages to someone else’s property caused by you or your employees.
Personal and Advertising Injury: Offers protection for non-physical damages such as slander, libel, or copyright infringement.
Legal Defense: Covers legal fees if your business is sued under a covered claim.

When Is It Necessary?

• As soon as you launch your business.
• When entering into contracts.
• Before hiring employees, depending on your industry and state requirements.

Factors Influencing Cost

• Your industry and type of business
• Your business location
• The size of your business
• Previous claims history

Commercial Property Insurance

What Is It?

Commercial Property Insurance safeguards your business’s physical assets against loss or damage from fire, theft, and natural disasters among other risks.

Key Coverage Points

Buildings: Covers your business locations and fixtures.
Equipment: Protects machinery, computers, and other tools crucial to your business.
Inventory: Covers the products you sell or use for service provision.
Furniture: Includes desks, chairs, and other furnishings.
Records: Protects essential documents, books, and papers.

When Is It Necessary?

• Upon acquiring a physical location or valuable business assets.
• If you maintain a sizable inventory.
• When your operations rely on specialized or costly equipment.

Factors Influencing Cost

• The overall value of your property
• The geographical location and its associated risks
• Your industry
• Building type and condition

Both General Liability and Commercial Property Insurance are essential for most small businesses. They provide a fundamental level of protection against common risks and liabilities. Many insurers offer these policies bundled into a Business Owner’s Policy (BOP) for cost-effectiveness.
By understanding and investing in these insurance types, you are building a safety net that could be vital for the longevity and prosperity of your business.

Steps for Obtaining Insurance Quotes

• Identify Coverage Needs: Determine which types of insurance are crucial for your business. You may consult with a risk assessment advisor for guidance.
• Research Providers: Identify insurance providers who specialize in covering businesses in your specific industry.
• Get Multiple Quotes: Aim to obtain at least three different quotes to compare coverage options and costs.
• Check Credentials: Confirm that the providers are licensed to operate in your state and have good financial stability ratings, often available on websites like AM Best.
• Review and Customize: Go through the terms and conditions meticulously. Consider customizing the policy to match your business needs.
• Ask Questions: Resolve any questions or uncertainties before agreeing to any terms. This may include clarifying policy limits or understanding any exclusions.
• Confirm Costs: Understand the premium and any deductibles, copayments, or additional out-of-pocket expenses.

Steps for Requesting a Certificate of Insurance (COI) If You Already Have a Policy

• Contact Your Provider: Contact your insurance provider to request a COI. Many providers offer an online platform for this request.
• Specify Details: If you need additional insured or specific endorsements mentioned, make that clear when you request the COI.
• Verify Information: Once received, confirm that all information on the COI is accurate, including types of coverage, policy numbers, and limits.
• Digital Storage: Save a digital copy of your COI for easy sharing and access.
• Expiration Reminders: COIs contain the expiration dates of your policies. Set calendar reminders for renewals.
• Update as Needed: If there are any changes to your business activities or coverage, request an updated COI to reflect these changes.

Remember that the cheapest insurance policy is not always the best. Aim for a balance between cost and comprehensive coverage. Digital platforms are making it easier than ever to obtain and manage your Certificates of Insurance but always double-check the details to ensure they match your contractual and business needs.

By following these guidelines, you’ll be better prepared to select the right insurance coverage for your business and to obtain the necessary documentation to prove it.