The insurance landscape is shifting fast. More businesses are shopping for coverage and switching carriers than ever before. This creates new challenges for compliance and financial security. Contractors and businesses must ask: Are your policies—or your subcontractors’—as strong as they seem?
What You Need to Know About Certificates of Insurance (COIs)
COIs provide a quick snapshot of a policy at a specific moment. They summarize key details of a subcontractor’s or vendor’s insurance coverage. But they’re not foolproof. Over time, the COI may no longer match the actual policy.
Here’s what every contractor and business should consider:
- Exclusions Matter: Do you know what exclusions apply to the limits shown on the COI?
- Policy Updates: Have your subcontractor’s coverage terms or limits changed since the COI was issued?
- The Bigger Picture: A COI only confirms a policy exists. It doesn’t guarantee adequate or comprehensive coverage.
To truly understand your subcontractors’ coverage, you need to dig deeper than the COI.
The Danger of Blind Trust
Collecting and reviewing COIs is essential. It’s required for insurance audits. But relying solely on COIs can leave your business exposed. The limits on a COI might not protect you—or your subcontractor—when something goes wrong. Behind those limits are hundreds of pages detailing what is and isn’t covered. Without a trained eye, you could miss critical risks.
A Real-World Wake-Up Call
One of the nation’s largest homebuilders recently required all subcontractors to submit full insurance policies—not just COIs. During the audit, they found a major issue. Their largest subcontractor’s policy excluded work on residential homes. If a claim arose from that subcontractor’s work, there would be NO COVERAGE. The hiring contractor would bear the loss.
How to Protect Your Business
If your business relies on a few key subcontractors, partner with your broker to audit their policies. Think of it as an extension of your own insurance program. This extra diligence ensures compliance and reduces risk.
At Kapnick, we specialize in helping contractors navigate these challenges. Let us help you protect your business and gain peace of mind.
