Small businesses are the engines that drive much of the economic growth and job creation in the U.S. economy. With so much personal investment, sweat equity, and long work weeks, it’s easy to see why business owners want to protect themselves from risk and liability. If you’ve ever contracted with a third party for anything, you know how important it is to verify insurance coverage with a valid Certificate of Insurance to protect your business. Here are some tips for ensuring you’re doing this effectively, letting you relax and return to running your business, full-steam ahead.
- Be Proactive in Communication
The most accurate way to ensure your third party relationships are up-to-date and insured is to communicate directly with their insurance agent to confirm that the information presented on the Certificate of Insurance that you have on file is valid. You’ll want to ask and confirm that each policy is still effective and in force to the limits you require. The insurance certificates that you presently have on file are only good the day they are issued. Thus, you’ll want to periodically confirm that each policy is currently active at the levels that are required by your contract with each third party relationship. Notifying your vendors that you are auditing their insurance policies is another effective and proactive approach. Not only does this show that you’re on top of your business, but it also may prompt them to pay their premiums, ensuring that coverage is continuous. Being upfront about monitoring the insurance coverage that is required by contract is essential to minimizing your risk.
- Make Sure Everyone’s Covered
Just because someone is affiliated with the third party you’re doing business with, doesn’t necessarily mean they are covered by the policy. For example, often a business owner will visit a job-site to make sure everything is running smoothly. Instead of assuming the owner is covered, you’ll want to check the specific policy for confirmation.If you discover that someone plans to be on-site without coverage, you’ll want to either change the policy, or ask them to file a clearance or waiver. This will ensure that they can’t file suit against your small businesses for damages that may occur that could potentially hurt or financially devastate your company from an injury or claim.
- Don’t Count on Cancellation Notices
Counting on cancellation notices is a risky bet not worth taking. Don’t assume that cancellation notices for every policy will be sent to you. In fact, many agencies and insurance carriers don’t require that cancellation notices be sent to anyone other than the primary “named insured“. The best way to ensure that coverage is active and current is to confirm it periodically with an agent. Waiting until the last minute is a mistake because a policy could be cancelled or modified at any time without you being notified, thereby increasing your exposure to risk and liability.
Following these procedures can be a lot of extra work, but remember that the success and existence of your business may depend on your ability to evidence that insurance is in force with a third party if/when a claim does arise. Being proactive and taking steps to consistently and accurately ensure that all of the third party contracts you have are compliant with the insurance coverage you require is the best way to mitigate this risk.
myCOI’s insurance management and tracking technology can manage your Certificate of Insurance requests, verifications, follow-ups, and renewals so that you can concentrate on doing what you do best—running your business.