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Importance of Having a Certificate of Insurance for Contractors

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By Next Insurance Staff
May 12, 2019 min read

When you’re a business owner, having insurance is essential for your long-term success. As a contractor, this is especially true. For you, insurance is more than an advisable practice. Insurance is a must have that keeps your business afloat. And that’s for a number of reasons.

Contractors insurance helps protect your business financially in case you are sued. How it works is pretty simple: When you pay your insurance premiums, you are basically transferring financial risk to the insurance company. So, if a customer sues you for something like bodily injury (from tripping over your toolbox), property damage (from an accidental cracking of their marble floor), or advertising harm (from using images of your work without the client’s consent) the insurance company will cover your costs. This liability insurance can save you and your company a significant amount of money over the long haul.

But more than that, general liability insurance gives you peace of mind. With a good policy in-hand, you don’t have to put aside huge sums of money to cover your expenses in case of a costly mistake. Just as significantly, with insurance, you don’t have to waste your energy worrying about the cost of an accident. If one happens, the money will come from your insurance company, not out of pocket. This means you can just get on with your business knowing that you’re covered.

The other big benefit of a contractor’s insurance policy is the certificate of insurance it brings. A certificate of insurance for contractors is your ticket to landing many jobs. In fact, it’s so significant, that most, if not all customers will ask to see your certificate of insurance in order to close a deal and hire you.

What is a certificate of insurance? 

A certificate of insurance, often shortened to COI, is an actual certificate issued to you by your insurance company. It is your tangible proof that you are covered by the insurance policy you have purchased. In addition to serving as proof of insurance, in many cases, it also outlines the basic conditions of your policy. This includes what types of accidents, mistakes, or incidents are covered by your policy, as well as effective dates.

Each line of work has its own liability policy. And accordingly, each profession has its own COI. That means, for example, certificates of insurance for subcontractors are simply certificates of insurance specific to that exact line of work.

Why is a certificate of insurance important?

Nowadays, as a contractor, it is virtually impossible to land a job without a valid certificate of insurance. In fact, a certificate of insurance for contractors is pretty much a prerequisite for any job. This is certainly true if you are going after government contracts. And it likely applies to pretty much any tender as well. But it’s not only big institutes that want to see certificate of insurance for independent contractors. Even small, one-off clients in today’s world will insist that you have a certificate of insurance before you get started. In other words, it’s safe to say that a certificate of insurance for contractors is a business basic that you absolutely must have.

When and why someone can ask a contractor for a certificate of insurance

Pretty much any potential client can and will ask you for a certificate of insurance. This is their right, and truthfully, an advisable practice. After all, as a professional, you know, enforcing such standards is good for the industry as a whole, and by association, your business.

In addition to proving that you’re a professional, a certificate of insurance also tells clients that you’re financially covered in case of an accident. This, in turn, gives them the peace of mind to hire you with the confidence that in the off chance of a costly mistake, losses and repairs will be covered.

Keep in mind, without a COI, your business options are extremely limited. While private persons may choose to turn a blind eye and not request a certificate of insurance, you will not be able to answer a government tender or sign a government contract without one. Most larger businesses and organizations – like private schools, hospitals, and factories – will also require a certificate of insurance. So if you’re planning on building your business, and picking up more customers, it’s highly advisable that you have one.

How do you get a certificate of insurance and how much does it cost?

In order to get a certificate of insurance for your contractor business, you need to first purchase an insurance policy. Once you’ve done that, you can request a certificate of insurance. Usually, you will need to call your insurance agent or send an email, and they’ll then mail you a hard copy. This is usually done at a cost, with a small fee charged each time.

Next Insurance, however, operates differently. Instead of having to make contact with your agent or the insurance company’s helpline, you can simply log in to your account and download as many Live Certificates as you like, any time you want, for free. As a business owner, this is a fantastic convenience that prevents last-minute scrambling to find a valid copy to bring to a client’s site. It also allows you to act spontaneously, so you’re prepared for jobs that come your way, every hour of the day. More than that, you can print the Live Certificate yourself, send it off as an email or text message link, or even add it to a social media post. All that you need to prove your business insurance is there at the click of a button and zero extra charge.

Bottom line on certificates of insurance for contractors

Liability insurance is an essential part of any contractor business. But it’s not enough for you to know that you’re covered. Potential clients want to know too. As such, you must have a policy that gives you quick and easy access to your valid certificate of insurance. This way you can get on with your work, close more deals, and build the successful business you desire.

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By Next Insurance Staff
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