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What's an Insurance Certificate and Who Needs One?

Insurance certificates come in different forms and serve different purposes. Like any CERTIFICATE, it is some sort of piece of paper that CERTIFIES something to be authentic or true. The art and collectible world calls for a certificate of authenticity proving you own the real thing and not a fake. Of course either can be forged but the idea is that some object accompanied by a certificate has a greater chance of being legitimate.

Take a birth certificate or wedding certificate for example. Those kinds of certificates have witness signatures that you were actually born or married. A certificate of completion or occupancy gives someone moving into a home or building peace of mind that it is fairly safe to occupy the new space. I'm sure you can think of lots of examples of certificates you've received over your life time.

In the insurance world a certificate can prove you have insurance to a government agency. Like an SR22 certificate. It is a piece of paper signed by a company official or agent sent to the Oregon DMV stating that a particular insured has met the requirement of the Oregon State law of minimum liability auto insurance. The State of Oregon DMV will then lift or block a suspension of the driving privileges of the driver as long as that SR22 certificate remains valid and is not replace by an SR26 certificate. An SR26 certificate is just the opposite of an SR22. It certifies that insured is no longer in compliance with the law and gives legal notice of such to the Oregon DMV. It is then up to the DMV to take action to suspend the driving privileges of the insured or some other punishment. Another name for the SR22 certificate is a Financial Responsibility filing or certificate.

Commercial insurance often involves an insurance certificate. If you are a contractor, for example, and have secured a contract to perform some action, the other party may want proof that you have the proper type and limit of insurance to cover the damage or injury you may cause will performing the responsibilities of the contract. You might then instruct your agent or company to issue a certificate of insurance on your behalf to the other party. What the certificate acknowledges is that the insurance company will pay claims caused by the insured to the other party and indicates limits of coverage and the period of time coverage will be available to complete the job. The "other party" is known as the certificate holder and is promised to be notified if any of the conditions of coverage outlined in the certificate change (such as if the policy is cancelled) then the certificate holder will be notified.

Rather than sending the entire contract to certain other parties, insurance companies prefer to send a synopsis of the the policy. Partially, the reason is the company doesn't want to waste the paper and the certificate holder doesn't want to sit and read the entire contract. A summary in the form of a certificate usually is enough to satisfy the certificate holder that the insured has complied with the contractual requirements to maintain proper insurance to cover the activity, event or job.