As a board member, it’s important to understand the aspects that go into keeping your HOA afloat. Running an HOA requires being familiar with various concepts, from legal requirements to finances to insurance. One such concept is a certificate of insurance.
What Is a Certificate of Insurance?
A COI, or certificate of insurance, is a brief, standardized document that provides a summarized proof of insurance coverage with the following elements:
- Policy holder and insurance company’s information (name, address, etc.)
- Policy effective and expiration dates
- Type(s) of coverage and limits
- Additional insured and other endorsements
HOAs predominately deal with COIs for hiring contracts with vendors. COIs provide verification of insurance and can assert that risk transfers to the party’s insurance that furnishes the COI. They are strictly informational and the party that receives a copy of the certificate can’t alter the policy. Also, additional insured parties must be added to the original policy through an endorsement, not just added to the certificate itself.
The standard template for COIs is the ACORD (Association for Cooperative Operations Research and Development) form. There are different forms for different types of insurance policies, but the ACORD 25 form is most common format for liability COIs and must be issued by the insurance company that provides coverage for party presenting the COI.
However, certificate of insurance is not interchangeable with evidence of insurance, which you can learn more about here.
What Is the Significance of a COI?
COIs mitigate liability concerns by covering vulnerabilities and transferring loss to the third party. They document, track, and manage vendor or third-party insurance in a convenient and accessible way.
COIs offer the four P’s:
- Prove insurance status
- Provide quick access to information
- Protect your HOA when outsourcing labor
- Prevent liability complications
COIs are necessary to have or provide BEFORE beginning the contracted work. There are generally issued in conjunction with contracts, so if a vendor is hesitant to provide their COI, don’t allow any work to begin until the COI is provided. The certificate should be in writing, not just verbal confirmation.
Furthermore, COIs offer legitimacy, security, and accessibility. Vendors and other third parties that your HOA solicits for bids should furnish COIs to confirm their legitimacy. Their COI will offer security for your HOA by keeping them responsible for liability, and the accessibility of their credentials and coverage that the COI provides will prove them to be a good contender for your project.
When receiving, or providing, a COI, it’s vital that all the necessary elements are included and are accurate. You want to make sure to confirm the description of operations, the waiver of subrogation, the insurance coverage, and that the additional insured status is extended to the right party. It’s important to have someone with the appropriate expertise handle reviewing your issued or received COIs, as they need to be versed in the language and requirements pertinent to contracts, ACORD forms, and insurance policies and endorsements.
How Do You Track a COI and Why?
Tracking COIs is a best practice for risk management, ensuring that your HOA is protected through changing projects and vendors. COIs should be tracked to identify and eliminate lapses in coverage and maintain productivity of your project and the vendors contracted for it. Also, you should keep record of COIs even after they expire in case you need to retroactively access them for any potential disputes down the line. Archiving COIs allows you to protect your HOA from assuming liability that was previously transferred.
Here at Blue Lime, our team of experts has the knowledge and experience to help you with your COI needs. Reach out to us today if you have any questions or to ensure that your HOA is properly insured!