Why Obtaining Certificates of Insurance from Subcontractors Is Critical for Your Rates and Risk Management
If your business hires subcontractors, obtaining a Certificate of Insurance (COI) from them isn’t just a box to check — it’s one of the most important risk management steps you can take. Done right, it can protect your loss history, your insurance rates, and even the future of your business.
Yet many contractors either skip this step, collect certificates once and forget about them, or don’t review them carefully. That can be a costly mistake.
Let’s break down why COIs matter and how they directly impact your insurance and your bottom line.
What Is a Certificate of Insurance?
A Certificate of Insurance is a document issued by an insurance agent or carrier that proves a subcontractor has active insurance coverage. It typically shows:
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General liability limits
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Workers’ compensation coverage
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Auto liability (if applicable)
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Policy effective dates
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Named insured information
It does not change coverage, but it verifies that coverage exists at the time the certificate is issued.
Why COIs Matter for Risk Management
1) They Help Prevent Claims from Landing on Your Policy
If a subcontractor causes property damage or bodily injury and they do not have insurance, the claim often rolls uphill to the general contractor.
Without a valid COI:
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You may be treated as the responsible party
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Your policy may have to respond
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Your loss history takes the hit
More claims equal higher premiums and fewer carrier options.
2) They Protect Your Loss Runs and Your Rates
Insurance carriers heavily weigh loss history when pricing policies. Even small claims can impact your Experience Modification Rate (EMR) and general liability pricing.
When uninsured subcontractors cause losses:
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Your policy may pay
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Your loss runs reflect the claim
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Renewal pricing is negatively affected
Collecting COIs helps ensure claims go to the right policy, not yours.
3) They Demonstrate Strong Risk Controls to Underwriters
Underwriters value documented risk management practices. When you can show:
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You require COIs from all subcontractors
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All expiration dates are tracked
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Proper limits are required
You present as a better risk.
Better risks often receive:
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More competitive rates
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Better terms
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Access to stronger carriers
4) They Help Avoid Workers’ Comp Issues
If a subcontractor lacks workers’ compensation coverage, their injuries may be treated as your employees’ injuries in some situations.
This can:
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Increase your workers’ comp premium
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Affect your mod factor
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Trigger audits and disputes
Collecting COIs helps prove they are truly independent and insured.
5) They Support Contractual Risk Transfer
Your contracts may require subcontractors to carry certain limits and name you as:
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Additional Insured
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Waiver of Subrogation
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Primary and Non-Contributory
A COI helps verify these requirements are in place. Without proof, your contract protections may be meaningless.
Common Mistakes to Avoid
Many businesses collect COIs but still leave themselves exposed. Watch out for:
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Expired certificates
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Limits that are too low
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Wrong named insured
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Missing additional insured status
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One-time collection with no follow-up
A certificate is only as good as your process.
Best Practices for Managing COIs
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Require COIs before work begins
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Set minimum acceptable limits
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Track expiration dates
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Request updated certificates annually
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Work with your agent to review requirements
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Keep COIs on file and organized
Some larger contractors even use COI tracking services to stay compliant.
The Bottom Line
Obtaining certificates of insurance from subcontractors is not just paperwork — it’s a direct investment in your company’s financial protection.
Done consistently, it can:
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Reduce claim frequency
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Protect your loss history
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Control premium increases
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Strengthen your risk profile
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Prevent major uninsured losses
In today’s insurance market, proactive risk management is not optional. It is essential.
If you are unsure whether your current COI process is protecting you properly, a quick review with Frost Insurance can make a big difference.