The Need for Insurance Certificates

By: Karen Blanchard (Capstone Brokerage)

In the construction industry many aspects of insurance are very important to understand. Perhaps one of the most important is the need for insurance certificates. An insurance certificate is important documentation for an insured to have in order to step onto a jobsite. Prior to entering into a contract with a general contractor, subcontractors need to have an understanding of what will be required on their insurance policies to allow them to complete the contracted project. All subcontractors should review contracts prior to signing them to ensure that their policies have all of the endorsements necessary to comply with the contractor’s requirements.

In the event that the policy does not meet all requirements, the insured may be able to negotiate with the contractor to waive certain requirements. Should this not be possible, the insured will have to request that the necessary endorsements be added by the carrier (most endorsements will have a fee attached as well). An Endorsement is a written document that is attached to an insurance policy that modifies the policy by changing the coverage afforded under the policy. In most cases carriers will not allow additional coverages to be endorsed onto a policy after the work has been completed, and in some cases, certain endorsements may not be available at all. It is suggested that insured’s get written approval from the contractor that their certificate and endorsements are in compliance PRIOR to setting foot on the jobsite, to make sure that there will be no questions when payment is due.

If a subcontractor does not verify their coverage’s before they sign a legal contract with a contractor it can cause major headaches when trying to get paid on the work they perform. Contractors will sometimes allow them on the jobsite and allow them to complete the job but when it comes time to pay them, they will withhold payment if the insured did not comply with all of the insurance requirements.

Insurance certificates are designed to show current policies, carrier names, effective dates and policy limits and are issued as a matter of information only. They do not affirmatively or negatively amend, extend or alter the coverage afforded by the policies themselves. It is good practice to keep updated certificates on file to be able to provide proof of insurance to vendors or contractors.