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Why You Need a COI in Construction

Yancy Lassiter
Published May 14, 2024

Construction projects are high-risk endeavors, with several things that can go wrong at every turn. As a contractor, it’s a given that you need good insurance to protect yourself, but you’ll need more than your policy number to prove that you’re worthy to join the job site. 

On every job you’re brought on to, you’ll likely need a certificate of insurance (COI) to document that you have the right coverages. Just like your experience, reputation, and skill level, a COI is something a project owner or general contractor will take into account before they decide to work with you. Once you’re brought on, the owner or GC will need this document.

Below we’ll break down exactly what a COI is, and why you need one if you work in construction.

Key Takeaways

  • A certificate of insurance (COI) is a must-have document that proves you have insurance as a contractor.
  • COIs are usually a requirement on every construction project. If you’re hiring subcontractors, you should always require them to submit their own COI so you’re protected against liability.
  • Even if a COI has expired, you should still hang onto them, especially if they’re related to ongoing jobs that haven’t been completed. 

What Is a COI in Construction?

Because the construction industry is inherently financially risky, owners don’t want to bring just anyone onto a project. That’s why most contracts have insurance requirements you’ll need to meet. Once your bid is selected and you’re awarded a contract, you’ll need to show proof of insurance coverage. To do this, you’ll need a specific document called a certificate of insurance, or COI. COIs show project stakeholders exactly what level of coverage a construction company currently has for types of insurance like:

  • General Liability Insurance
  • Auto Insurance
  • Umbrella/Excess Insurance
  • Workers’ Compensation Insurance
  • Other 

COIs in construction aren’t simply about showing owners you have the right insurance policies; they ultimately demonstrate that your company is professional and reputable. From a project owner or GC’s perspective, requiring certificates of insurance is one of the most important risk mitigation strategies they can use to make sure everyone on a job site can be there. In the event of an accident or injury, the project owner or GC wants to make sure they’re not responsible for covering damages out of their own pocket when they were not the party responsible for the damage.

🔎 Dive Deeper: Risk Management in Construction — It’s Everyone’s Problem

What a COI Includes

A standard certificate of insurance documenting proof of liability coverage will include the following information:

  • Your company name and address
  • The name of your insurance provider
  • Your insurance agent’s contact information, including their NAIC #
  • Valid effective dates and expiration dates
  • Policy numbers
  • Types of coverage and description
  • Coverage limits

If you’re receiving a COI from a subcontractor, make sure to double check that:

  • The certificate holder’s name listed on the policy is the same one you’re contracted with.
  • The certificate holder (usually the property owner or GC) is listed correctly.
  • The description of operations does list any exclusions necessary for the project. This may require you to ask to look at the policy.

You may also want to ask for endorsements of additional insured to be listed on a COI. This could include the project owner, bank, and/or any other entity providing financing. Additionally, a COI could also include a waiver of subrogation, which basically asks your insurance provider to pay a claim while relinquishing their ability to recover damages from a third party person/company responsible. 

If you ever have a question about a certificate of insurance you receive, talk with your insurance broker. They’ll be able to confirm whether or not a subcontractor meets the insurance requirements you’re after. As well, you should take some time to become familiar with some of the specific forms you see on the CGL policy over and over. 

When Will You Be Required to Provide a COI?

You can pretty much expect a COI to always be one of the contractual obligations you’ll have to meet to work on a construction project. It’s in an owner or general contractor’s best interest to require all contractors to submit one. If you’re a subcontractor working under a GC, the GC will be the one to review and collect your proof of insurance coverage. 

You may also be asked to submit a COI in other situations, like leasing a storage unit. In cases like these, the business owner or supplier will want to make sure they’re protected from liability as well.

Should You Get Rid of Expired COIs?

The short answer is no. You should absolutely hold onto construction COIs even after they expire, because a claim could be made months (or even years) after an incident happens. Keeping track of all your insurance documents, including COIs, will ensure you have proof of coverage regardless of when a potential claim is made. A good rule of thumb is to maintain the COIs related to ongoing jobs until they’ve been completed plus the warranty period. Or, if you want to give yourself an extra layer of protection, keep these records for as long as your business is operating. Many states have specific rules regarding the length of time you could have a claim filed against you. If you held your COIs this long, it would provide the protection you need.

We should also explain “claims made” vs “occurrence” here. If you look at a typical COI in construction, you’ll notice that general liability insurance can either be a claims made policy, or an occurrence policy. 

Claims Made: This type of policy covers claims made during the policy period. Let’s say you buy a policy for January 1st, 2024 - January 1st, 2025. Someone gets injured on the job in December, 2024 but a claim isn’t made till February, 2025. 

If you’ve renewed your policy, you’ll be covered in this event. If you didn’t renew your policy, you’d be liable. 

Occurrence: An occurrence policy simply means that any claims made for incidents that happened within the policy period are covered - no matter when the claim was actually filed, even if it was several years later. Going back to the example above, if you had an occurrence policy at the time the injury happened, you’d still be covered even if you canceled your policy after January 1st, 2025. Most insurance policies will be this type, and these would be the type you would want someone working for you to have.

All this to say, hold onto your COIs just in case - and always know what type of policy you or the subcontractors below you hold.

Do You Need COIs From Subcontractors?

If you’re looking to hire subcontractors, you should always require COIs. This is your best bet in making sure everyone is compliant on the job. If someone doesn’t want to provide a certificate of insurance, don’t work with them. This could be a red flag for other issues - like their business not being legally registered. 

You’ll also want your project manager (or your project accounting team if you’re operating at a larger scale) to get updated COIs from subcontractors as they expire. This kind of COI management can be tricky to put into practice simply because different policies may expire at different times. For example, someone’s general liability policy may expire in January, but their worker’s comp policy may expire in June. This is where a tracking software can come in handy to make sure you’re getting those COIs on a rolling basis as needed. 

If you’re able to afford it though, finding a COI compliance expert/service to handle COI tracking for you can make your life much easier. This is going to become much more important as you grow. At the end of the day, if you’re a general contractor and you mess COI compliance up, you could very easily wreck your entire business. 

One last note here: If you can hire a lawyer to review your insurance requirements in conjunction with your insurance provider, it will be worth the money. Each different type of construction carries different risks, all of which these two professionals should be familiar with. Following their recommendations on exactly which policies and coverage amounts you should hold and/or require from subcontractors will ensure you’re protected as best as possible. 

Last Thoughts

While it may be a hassle, insurance is all about peace of mind, and a COI is no different. Having a COI ensures the general contractors and project owners you work with feel good about doing business with you. And, if you’re hiring your own subcontractors, understanding how this document works will help your business stay protected as well. There are a lot of nuances and weeds you can get into here, but as long as you’re familiar with the basics, you’ll be set. 

If you’re unsure what insurance policies you need as a contractor, give this guide a read.

Yancy Lassiter

Yancy Lassiter, a CPA with a degree from the University of Texas, has 12 years under his belt as a Controller and CFO in the construction industry; he’s your go-to guy for finance in the building industry.

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