The insurance market is shifting rapidly, with more businesses shopping for coverage and switching carriers now than ever before. This evolving landscape introduces new challenges and uncertainties for compliance and financial security. A critical question for contractors and businesses alike is: Are the policies you rely on today, whether for your business or your subcontractors, as robust as they appear?
Understanding Certificates of Insurance (COIs)
Certificates of Insurance (COIs) offer a snapshot of a policy at a specific time. They summarize the key details of a subcontractor’s or vendor’s insurance coverage, but they are not infallible. Over time, what the COI reflects may no longer align with the policy’s actual terms.
Here’s what every contractor and business should consider about COIs:
- Exclusions Matter: Do you know what exclusions are included in the limits shown on your COI?
- Policy Updates: Have your subcontractor’s policy limits or coverage terms changed since the COI was issued?
- The Bigger Picture: A COI doesn’t necessarily indicate adequate or comprehensive coverage; it merely indicates the existence of a policy.
This highlights the importance of going beyond a COI to truly understand the nuances of your subcontractors’ coverage.
The Risks of Blind Trust
Collecting and reviewing COI’s is a necessary and important policy for contractors. It is required for an insurance audit from you carrier, but a higher level of diligence is required to protect your business from inadequately insured subs. Unfortunately, you cannot always trust that the limits on a COI will be there to protect you (or your subcontractor) when something goes wrong. Behind those limits are hundreds of pages describing what is and isn’t covered, and it takes a trained eye to ensure what is in those pages doesn’t put you at risk
Real World Example
A homebuilder, one of the largest in the nation, recently adopted a policy requiring all subcontractors to submit their insurance policies (not just COI’s) for review. Upon auditing the policies of their largest subcontractor, they discovered an exclusion for work on residential homes. If a claim originated from that subcontractor’s work, they would have NO COVERAGE for it, resulting in a loss for the hiring contractor.
Partnering with Experts for Peace of Mind
If your business depends on a limited number of subcontractors, you should partner with your broker to get those policies audited. Think of this as an extension of your own program. Diligence from every party ensures compliance and reduces risk.
At Kapnick, we specialize in serving the needs of contractors and are always here to help.
