How to Read a Certificate of Liability in Insurance
The ACORD 25 Certificate of Liability Insurance is a one-page document that summarizes essential information about an organization's insurance coverage. It gives information such as types of coverage, policy numbers, limits of insurance in force, and policy effective and expiration dates. It is very common for owners and general contractors of construction projects to require subcontractors to provide a Certificate of Liability Insurance. Landlords of commercial properties also often require it of their tenants. Some organizations mistakenly believe that a certificate conveys contractual rights to them, but ACORD (Association for Cooperative Operation Research and Development) designed it only as a means of providing information to the recipient.
- Difficulty:
- Moderate
Instructions
-
How To Read A Certificate of Liability Insurance
-
1
Read the disclaimer at the top of the page; it begins with the phrase "THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY." It explicitly states that the certificate does not convey legal rights to the certificate holder, does not change the policies listed on it, and is not a contract between the certificate holder, insurance company and producer.
-
2
Read the warning that begins with the word IMPORTANT. This statement reminds the certificate holder that if the certificate describes the holder as an additional insured, the listed policies must contain endorsements stating as much. It also states that the policies may require endorsements for the insurance companies to waive their subrogation rights against the holder.
-
3
Look for boxes labeled PRODUCER and INSURED. Both will contain the names and addresses of people or entities. The producer is the agent or broker from whom the insured purchased the insurance, and is also usually the entity that issues the certificate. The insured is the person or entity whose name is on the described insurance policies.
-
4
Review the list with the heading INSURER(S) AFFORDING COVERAGE. Each insurance company on the list will be designated by a letter; for example "INSURER A: Continental Casualty Co." The certificate may also provide the company's identification number assigned by the National Association of Insurance Commissioners (NAIC).
-
5
Review the information provided for each type of coverage (GENERAL LIABILITY, AUTOMOBILE LIABILITY, UMBRELLA, etc.) For each type, note the following items: The letter designating the insurance company providing the coverage (A, B, C, etc.); check boxes describing the insurance. For example, the General Liability section will have check boxes indicating whether the insurer issued the policy on an "occurrence" or "claims made" basis. The Automobile Liability section has boxes to indicate whether coverage applies to all autos, only owned autos, specifically described autos, etc.; whether the policy contains an additional insured endorsement or waiver of subrogation endorsement; the policy number; the effective and expiration dates; and the limits of insurance
-
6
Read the information in the box labeled DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES. This box may contain descriptions of a construction project, insured property location, one or more motor vehicles, or any other information of concern to the certificate holder.
-
7
Review for accuracy the name and address in the box at the bottom labeled CERTIFICATE HOLDER. It will contain the name of the person or entity to whom the producer has issued the certificate.
-
8
Verify that the producer has signed the certificate in the box labeled AUTHORIZED REPRESENTATIVE. Most states require certificates to carry a signature.
-
1
Tips & Warnings
Report any errors in the certificate immediately. If you are the certificate holder, report them to the insured. If you are the insured, report them to the producer. If you are the certificate holder and have questions about any of the listed policies that the certificate does not answer, request a copy of the policy from the insured.
