Certificates of Insurance: What is a Certificate Holder?
- Jonathan Zschau
In commercial insurance, various parties may have different rights and responsibilities under a policy, depending on their relationship to it. Among these parties are the named insured, additional insureds, and certificate holders. Each plays a distinct role, and understanding these differences is key to navigating insurance requirements and risk management.
Certificate Holder
A certificate holder is a third party that receives proof of insurance coverage in the form of a Certificate of Insurance (COI). The certificate confirms that a particular insurance policy exists, outlines key coverage details (e.g., policy limits, effective dates, and types of coverage), and assures the certificate holder that the named insured has appropriate coverage in place.
However, being a certificate holder does not grant any rights under the insurance policy. Certificate holders are not entitled to make claims or receive any benefits directly under the policy. Their primary purpose is to ensure that a company or individual has adequate coverage, often as part of a contractual requirement (e.g., a property manager verifying a tenant’s liability insurance).
Named Insured
The named insured is the primary policyholder and the party responsible for purchasing and maintaining the policy. Named insureds enjoy the broadest rights and responsibilities under the policy. These include the ability to make claims, modify policy terms, and receive any payouts from the insurer. They are also responsible for paying premiums and complying with policy conditions.
For example, a business that purchases a general liability policy to protect against third-party claims is the named insured on that policy.
Additional Insured
An additional insured is a party that is added to an insurance policy via an endorsement, giving them coverage under specific provisions of the policy. Unlike certificate holders, additional insureds have actual rights under the policy, typically related to liability protection. This status is often required when one party wants to share another party’s coverage, such as a contractor requiring a subcontractor to name them as an additional insured on the subcontractor’s general liability policy.
For instance, if a subcontractor’s work causes damage at a job site, the contractor (as an additional insured) could be protected under the subcontractor’s policy.
Key Differences
Party | Rights Under the Policy | Purpose |
|---|---|---|
Certificate Holder | No direct rights under the policy | Proof of coverage for verification purposes |
Named Insured | Full rights and responsibilities | Primary policyholder, has the broadest scope of coverage |
Additional Insured | Limited rights related to specific liability risks | Shares coverage to mitigate exposure related to the named insured's actions |
Practical Implications
If you are a certificate holder, ensure that the policyholder maintains the coverage throughout the contract period. A certificate of insurance does not guarantee continued coverage, as policies can be canceled or lapse without the certificate holder’s knowledge.
If you are an additional insured, verify the terms of your inclusion through the policy endorsement. This ensures you understand the scope of your protection.
In summary, the distinctions between certificate holders, named insureds, and additional insureds revolve around their rights and responsibilities. While a certificate holder only verifies coverage, named insureds and additional insureds enjoy broader protections under the policy. Understanding these roles can help businesses meet contractual requirements while managing their risks effectively.
Disclaimer
This article is for informational purposes only and is not intended to stand alone as insurance or legal advice. Individual circumstances may vary, so when in doubt, contact Partridge-Zschau directly to discuss your specific needs.