Intro to insurance
Insurance is a catchall term for a type of business arrangement that offers a certain level of compensation if a specific circumstance occurs. In other words, it is protection against risk.
It is easy to buy insurance for all types of risks. Some common types of insurance include:
- Health insurance
- Car insurance
- Homeowner’s insurance
- Renter’s insurance
- Workers’ compensation insurance
- Life insurance
Insurance is used to protect against unfortunate circumstances. An insurance company pools together the premiums—the amount that the policyholders pay to the insurance company every month—of a large group of people or businesses so that the level of risk is distributed between them. Because it is unlikely that all the people or businesses in the pool will need to file a claim with the insurance company at the same time, the insurance company is able to properly compensate the person or business that experiences a loss.
When a policyholder experiences something that causes them to file a claim with their insurance company, the experience is called a “risk event.” This term refers to any kind of event that the policyholder is insured against.
For example, with health insurance, many months or even years may go by before a policyholder needs compensation from the insurance company for a major health event, such as heart surgery. This means that for all that time prior to the health event, all those premiums were paid into the larger pool of health insurance policyholders, allowing others to benefit from their relatively risk-free years.
Proof of insurance
When the specified risk event occurs, it is critical to be able to show evidence of carrying insurance against that event. For example, in the event of a car accident, each party should be able to produce a certificate of coverage, or proof of coverage, to prove that they have auto insurance. This way the insurance companies can immediately get involved and help sort out payments for damages or liability.
A certificate of coverage for workers’ compensation is a little different from auto insurance proof of coverage in that the business owner is typically the policyholder, not the employees who are the beneficiaries of workers’ compensation. The business owner should always have a certificate of insurance at the ready. Business employees do not need access to the certificate of coverage.
Get your Certificate of Insurance
What to expect on a certificate of coverage
A certificate of insurance coverage is not a generic document. Although all active policyholders should receive one, each certificate of coverage will contain information specific to each policyholder, such as:
- Business name
- Address
- Policy number
- Effective date
- Expiration date
- Carrier name/insurance company name
The certificate of insurance may also require a signature, a date, and the title of the person signing it.
When is it necessary to have a certificate of coverage?
A certificate of insurance is an important document to have when securing new business deals. A new customer may request it for particularly high-risk, high-profile, or costly projects. This is because the customer will want to know that, the business is covered in the event of an accident or adverse event.
Workers’ compensation is mandatory in most states, so it is important for policyholders to be able to provide a certificate of coverage. Situations in which a business might be asked to produce a certificate of workers’ compensation can include:
- Onboarding a new employee
- Signing on a new contract
- Securing a new business partnership
A business should be able to produce a certificate of workers’ compensation upon request, particularly if workers’ comp for employers is mandatory in that state. A business owner should be proactive and request a certificate of coverage from their insurance carrier as soon as they start paying into an insurance plan.
A certificate of workers’ compensation provides proof that an insurance policy is active and applies to all employees. Unfortunately, some employers commit workers’ comp fraud by lying to new employees about their access to workers’ compensation benefits. For example, employers may tell their employees that workers’ comp benefits are not available unless the workers have worked at the company for a certain length of time. This is considered fraud because it misrepresents the policy benefits to the employee.
Why CompSource Mutual
CompSource Mutual has provided Oklahoma businesses with workers’ compensation for more than 85 years. Our team offers top-notch expertise in the businesses that support the Sooner State’s economy. Get the Oklahoma insurance coverage and insight that you need from our experienced team. Get a quote.
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What is a certificate of coverage?
A certificate of coverage is an official form issued by an insurance company to certify that the person or business named on the policy has an active policy with the insurance company. If the date is current, a certificate of coverage proves that the policyholder has an active insurance policy.
Is a certificate of coverage different from a certificate of compliance?
Yes, it is. A certificate of compliance may mean different things in different industries, but typically it refers to a document that certifies that a product meets a certain standard. In contrast, a certificate of coverage is a document that states that the person or business listed on the document has an active insurance policy with that insurance company. It is a document specific to the insurance industry.
Does getting a certificate of insurance cost anything?
No, obtaining a certificate of insurance should not cost anything. If a person or business has a policy in place, the insurance agent should be able to provide a certificate of insurance, or “COI,” without an extra charge. In fact, most states do not allow agencies to charge a fee for COIs.
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PAT SMITH
OKLAHOMA CITY, OK
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