Evidence of insurance: Overview, definition, and example
What is evidence of insurance?
Evidence of insurance refers to a document, such as a certificate of insurance (COI), that confirms an individual or entity has an active insurance policy and meets the coverage requirements specified in an agreement. This document is often requested by third parties—such as landlords, lenders, or contractors—as proof of compliance with contractual obligations to maintain specific types of insurance coverage.
For example, a tenant may need to provide evidence of insurance to a landlord, showing that they have liability coverage for the leased premises.
Why is evidence of insurance important?
Evidence of insurance is important because it provides assurance to the requesting party that adequate insurance coverage is in place to protect against potential risks or liabilities. For SMBs, providing evidence of insurance builds trust with partners, ensures compliance with contractual requirements, and demonstrates preparedness for unforeseen events.
This documentation is critical in agreements where liability, property damage, or other risks are involved, as it helps mitigate financial exposure for all parties.
Understanding evidence of insurance through an example
Imagine an SMB signs a lease agreement for an office space. The landlord requires the tenant to provide evidence of insurance showing that the tenant has commercial general liability insurance with a specified coverage limit. The tenant provides a certificate of insurance from their insurance provider, confirming compliance with the landlord’s requirements.
In another scenario, a contractor hired for a construction project is required to provide evidence of insurance, including general liability and workers’ compensation coverage. The contractor submits a certificate of insurance to the project owner, ensuring that both the contractor and owner are protected from potential risks during the project.
An example of an evidence of insurance clause
Here’s how an evidence of insurance clause might appear in a contract:
“The Tenant shall provide the Landlord with evidence of insurance in the form of a Certificate of Insurance, issued by an insurer licensed to operate in the jurisdiction, within [Insert Timeframe] of the execution of this Lease. The Certificate of Insurance must confirm coverage for commercial general liability with limits of no less than [Insert Coverage Amount], naming the Landlord as an additional insured. The Tenant agrees to maintain the required coverage throughout the term of this Lease and provide updated evidence of insurance upon policy renewal.”
Conclusion
Evidence of insurance serves as proof that an entity has the required insurance coverage to meet contractual obligations, reducing risks for all parties involved. For SMBs, providing this documentation ensures compliance with agreements, builds trust with partners, and protects against potential liabilities. A well-drafted evidence of insurance clause in contracts ensures transparency, accountability, and effective risk management, fostering secure and reliable business relationships.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.