Certificates of Insurance -- what are they and when do we use them?

A certificate of insurance is a document that provides information about insurance policies.  In the US, millions of insurance certificates are issued every year.  Most of the certificates are issued upon a policy renewal to provide information regarding the renewal to third parties (e.g., landlords, lenders).  Certificates of insurance list out the various lines of insurance that a policy holder carries, the limits associated with each of these coverages and the identifies the insurer providing the coverage.

Here are some examples of when a policyholder might request a "certificate of insurance":

• The policyholder is a tenant and the landlord is requesting evidence of liability insurance (and possibly also property insurance if the lease places that responsibility on the tenant)
• The policyholder is mortgaging real property and the lender requires information regarding the existence of property insurance at closing on the loan and upon each renewal
• The policyholder has leased equipment and the owner of the equipment wants to verify that the existence of property insurance while the equipment is in the policyholder's possession
• The policyholder needs evidence of workers compensation insurance to comply with a contract obligation or in bidding for a contract

A certificate of insurance is not an insurance policy; it merely provides information about policies that a policyholder has.

Typically there will be one certificate for liability insurance and a separate certificate for property insurance.  This is due to the fact that a standard property insurance policy obligates the insurer to notify the mortgage holder in the event of policy cancellation.  However, a typical liability policy only obligates an insurer to notify the first named insured and no one else of policy cancellation, unless the policy is endorsed to provide notice to another party.  Often the certificates of insurance used in connection with loan financing are issued on ACORD 27 and 28 forms. These 2 forms are designed for delivery to parties that have a financial interest in the property covered by the policy listed on each. These parties are typically lending institutions and they prefer the title "Evidence of Insurance".  Substantively, however, these forms are still certificates of insurance.

"ACORD" stands for Association for Cooperative Operations Research and Development, and is a global, nonprofit standards development organization serving the insurance industry and other related financial services industries.