How to Check If a Company Has Insurance Coverage

How confident are you that every business partner you work with has adequate insurance coverage? If the answer isn’t “absolutely,” you could be exposing your company to unnecessary risks.

When you partner with another business—a contractor, vendor, or supplier—their insurance can directly affect your operations. A lapse in their coverage could leave you shouldering financial losses or dealing with legal liabilities that could have been avoided.

This blog tackles a crucial but often overlooked step in risk management: verifying business insurance coverage. Here’s why it matters:

• Uninsured partners can leave you exposed to costly claims if something goes wrong.
• Many industries, such as construction or maritime, have strict regulations requiring proof of insurance.
• Avoid interruptions caused by unexpected incidents that insurance should have covered.

We’ll walk you through everything you need to know—why verifying insurance matters, the steps to do it, and how to overcome common challenges. By the end, you’ll have a clear, actionable approach to safeguarding your business through insurance verification.

Why Verifying Business Insurance Coverage is Essential

Verifying business insurance coverage is a proactive step in safeguarding your operations. Beyond ticking a compliance box, it ensures your business relationships are grounded in accountability, preparedness, and mutual protection. Let’s dive deeper into its significance.

1. Protecting Your Financial Health

• An uninsured or underinsured partner can leave you responsible for hefty payouts in case of accidents or damages.
• For example, a subcontractor’s lapse in coverage in the construction industry could make you liable for workplace injuries or property damage.

2. Ensuring Operational Continuity

• Without verified insurance, a single uncovered incident could disrupt timelines, delay projects, or halt operations altogether.
• For instance, a partner’s lack of marine general liability insurance could expose you to cleanup costs for oil spills or cargo damage in the maritime sector.

3. Identifying Coverage Gaps

• Industry data reveals that fraudulent claims account for approximately 10% of the property and casualty insurance industry’s annual incurred losses and expenses. 
• This highlights how incomplete or misrepresented coverage can significantly impact businesses, especially in the construction, oil & gas, or maritime sectors.

4. Avoiding Fraudulent Coverage Claims

• The Federal Bureau of Investigation (FBI) estimates that non-health insurance fraud costs exceed $40 billion annually. 
• This staggering figure underscores the prevalence of fraudulent activities and the importance of diligent verification to avoid financial pitfalls.

5. Understanding Partner Readiness

• A verified insurance policy isn’t just about compliance—it’s a marker of your partner’s professionalism and financial stability. Businesses with valid, robust insurance demonstrate a commitment to managing risks effectively.

To understand how umbrella insurance can provide additional liability protection, read How Does Commercial Umbrella Insurance Work and Its Coverage.

Understanding the importance is just the first step. Next, let’s explore a detailed, step-by-step process to verify your partners’ insurance coverage effectively.

How to Verify Business Insurance Coverage

A structured approach ensures you accurately assess the validity and adequacy of the coverage provided by your partners. Here's an in-depth guide:

1. Request the Certificate of Insurance (COI)

The Certificate of Insurance (COI) serves as an official document summarizing the insurance policies held by the insured party. It's your primary resource for verification. You should examine key elements such as:

• Issue Date: Check that the COI has been recently issued and is not outdated. Insurers typically renew policies annually, so ensure the certificate reflects the current policy term.
• Named Insured: The insured business's name must precisely match the entity you’re engaging with. Even slight discrepancies can indicate issues or invalidity.
• Certificate Holder Information: Verify that your business is listed correctly to ensure coverage extends to you.

Note: A COI is not legally binding. It is only a summary of coverage and does not guarantee policy terms. Always follow up with the insurance provider for direct confirmation.

2. Validate Policy Details

Review the policy information provided in the COI to ensure it aligns with your requirements. You should cross-check key areas such as:

• Coverage Types: Ensure specific policies like General Liability, Workers’ Compensation, and Inland Marine Insurance are included, depending on your industry needs.
• Policy Limits: Compare the limits to the minimum thresholds required by your industry or project. For example:
  
  • General Liability: Typically $1–$5 million per occurrence.
  • Workers’ Compensation: Meet state-mandated requirements for medical and wage benefits.

• Policy Dates: Confirm that the effective and expiration dates cover the project duration.
• Additional Insured: Check if your company is listed as an additional insured, granting direct protection under the policy.

3. Understand and Navigate the ACORD 25 Structure

Most COIs use the ACORD 25 form, a standardized format recognized across the insurance industry. Familiarity with its structure allows you to spot critical details efficiently. The key sections include:

• Policy Information: Includes policy numbers, coverage types, and insurer details.
• Limits of Liability: Displays the maximum amounts payable under the policy. Always ensure they match the contract requirements.
• Cancellation Clause: Note the notification period for cancellations. Typically, insurers provide a 30-day notice, but shorter periods may require additional precautions.

Note: Relying on the COI alone without understanding the nuances of its limitations. Use it as a starting point, not the final validation.

4. Contact the Insurance Provider Directly

The COI alone cannot verify the authenticity or current status of the policy. Directly contacting the insurance provider adds a layer of reliability. You can follow these steps:

• Call the insurer using the contact information listed on the COI.
• Provide the policy number, insured name, and other details for verification.
• Request confirmation of:
  
  • Policy validity and active status.
  • Limits of coverage and any exclusions.
  • Any pending cancellations or lapses in payment.

Note: Most insurers maintain centralized systems for COI validation, which may include dedicated email addresses or portals for businesses to submit verification requests. Use these tools to speed up the process.

5. Leverage Online Tools and Resources

Incorporating online tools into your verification process can improve efficiency and accuracy, especially for large-scale projects or multiple contractors. You should explore tools such as:

• State Databases: Many states provide online tools to verify an insurer’s license or validate specific policies.
• COI Management Software: Platforms like myCOI and CertFocus automate certificate tracking and renewal alerts.
• Third-Party Verification Services: These services directly liaise with insurers to confirm policy details.
• Assistance from Insurance Experts: Engage an insurance broker like TWFG Khan Insurance to navigate the verification complexities. Our deep industry expertise and direct access to top-rated insurance carriers help ensure your partners’ policies meet industry standards, reducing risk exposure.

While verifying insurance might seem straightforward, certain challenges can complicate the process. Here’s how you can identify and overcome these obstacles.

Common Challenges in Insurance Verification (and How to Overcome Them)

Verifying business insurance is essential, but it’s rarely a straightforward process. While you might feel confident after requesting a Certificate of Insurance (COI), many hidden challenges can still jeopardize your risk management strategy. Let’s explore these and how to overcome them effectively.

1. Non-Standard Policy Structures

Insurance policies are often tailored to specific industries or businesses, making them difficult to interpret if you’re unfamiliar with the jargon. Essential information like exclusions or sub-limits may not be immediately apparent, leading to misunderstandings. You can address this by taking the following steps:

• Engage industry experts or insurance brokers who specialize in your sector. For instance, TWFG Khan Insurance has expertise in the maritime, oil & gas, and construction industries, ensuring no crucial detail goes unnoticed.
• Use policy summaries or industry glossaries to understand complex terms and clauses.

2. Difficulty Tracking Additional Insured Endorsements

When your business is listed as an additional insured on a policy, the specifics of that endorsement are often buried in fine print. Not all additional insured endorsements are created equal. Some only cover specific scenarios or offer secondary protection after the primary insured's limits are exhausted. What should you do in this case?

• Request a copy of the full endorsement rather than relying solely on the COI.
• Verify whether the additional insured status applies to ongoing operations, completed operations, or both.

3. Unforeseen Coverage Gaps in Specialized Policies

Specific industries, such as maritime or oil and gas, require highly specialized coverage, like Pollution Liability or Marine General Liability Insurance. Even when these policies are included, specific exclusions or geographic limitations can result in gaps you might not anticipate. 

For example, a Marine General Liability policy might not cover inland waterway incidents if the policy is limited to oceanic operations. In such cases, you should:

• Cross-check policy descriptions against your project’s scope and geographic location to ensure complete coverage.
• Seek advice from insurance providers with niche expertise, like TWFG Khan Insurance, to address potential blind spots.

4. Dynamic Risk Profiles During Projects

As projects evolve, the risks associated with them often change. For example, a construction project may require different types of coverage at various stages, from equipment transport to on-site hazards and completed operations.

This becomes a challenge because static policies may not adapt to the changing risk environment, leaving parts of the project uncovered. You can mitigate these risks by:

• Consider flexible policies that offer adjustable limits or additional coverage as projects progress.
• Working with brokers who can periodically reassess risk profiles and recommend mid-project policy adjustments.

5. Inconsistent Compliance Across State Lines

For businesses operating in multiple states, varying insurance requirements can complicate compliance. What’s mandatory in Texas may not align with requirements in neighboring states. 

This creates risk because a partner’s insurance policy may meet local standards in their state but fall short of your state’s compliance requirements. Take the following steps to solve them:

• Maintain a checklist of state-specific requirements for your industry.
• Collaborate with brokers like TWFG Khan Insurance, who are well-versed in regional regulations, to ensure multi-state compliance.

To understand how lapses in insurance verification can lead to significant losses, let’s look at a real-world example that underscores its importance.

Case Study: The Importance of Verifying Business Insurance Coverage
The collapse of Greensill Capital highlighted a significant failure in insurance verification. White Oak, a U.S. investment firm, became embroiled in a $143 million lawsuit against Marsh, the world’s largest insurance broker. White Oak alleged that Marsh fraudulently misrepresented insurance on financial products tied to Greensill.

The Issue

Internal communications revealed that Marsh executives had private concerns about Greensill’s main insurer but failed to disclose these risks to White Oak. As a result, White Oak faced significant financial losses when Greensill’s financial stability unraveled, leaving critical insurance gaps.

Key Takeaway

This case underscores the importance of thorough insurance verification. Relying solely on surface-level documentation or incomplete disclosures can expose businesses to massive financial and legal risks.

Ensure your business is protected by verifying insurance coverage with expert guidance from TWFG Khan Insurance.

Learning from others’ mistakes is valuable, but what proactive steps can you take to strengthen your verification process? Here are some tried-and-tested best practices.

Best Practices for Effective Insurance Verification

Ensuring a seamless insurance verification process involves more than just collecting certificates. Here are unique and practical best practices to elevate your verification efforts.

• Standardize your requirements: Create a uniform set of insurance standards across all contracts. This ensures consistency and clarity for everyone involved.
• Stay adaptable: Regularly assess your risk landscape. As your business evolves, so should your insurance needs. It's about staying proactive rather than reactive.
• Develop a robust protocol: Implement a systematic approach to certificate of insurance (COI) verification. A well-defined process helps maintain thoroughness and efficiency.
• Integrate with onboarding: Make insurance verification a seamless part of your vendor onboarding. This approach can significantly reduce delays and potential oversights.
• Conduct periodic audits: Regularly review your verification procedures. It's an excellent way to identify areas for improvement and ensure ongoing effectiveness.
• Keep abreast of regulations: Stay informed about changes in insurance regulations relevant to your industry. This knowledge is crucial for maintaining compliance.

For insights into how insurance policies can safeguard your contracts, read Why D&O Insurance is Necessary for Startups.

Implementing these practices can seem overwhelming, but you don’t have to do it alone. Let’s see how TWFG Khan Insurance can simplify and enhance your approach to insurance verification.

How TWFG Khan Insurance Can Help

TWFG Khan Insurance offers tailored solutions to simplify the insurance verification process:

• Industry Expertise: Specialized knowledge in maritime, oil & gas, and construction industries ensures your unique needs are met.
• Comprehensive Support: From verifying COIs to identifying and addressing coverage gaps, our team provides end-to-end assistance.
• Trusted Partnerships: Direct access to top-rated insurance carriers allows us to help you secure robust coverage and stay compliant.

Get a quote with us today and take the first step toward securing your business with a trusted industry expert.