certificate of insurance?

[tom kroto]

I was offered contract work but I was told I needed a Certificate of insurance? So what is this and where can I get it. I am not incorporated, just sole proprietor Sch C tax return. This is New York State.

Thanks for any information.

[Joe Byrne]

Originally Posted by tom kroto

I was offered contract work but I was told I needed a Certificate of insurance? So what is this and where can I get it. I am not incorporated, just sole proprietor Sch C tax return. This is New York State.

Thanks for any information.

That all depends on what they want you insured against! Could be Workman's Comp, could be liability, could be just about anything. Most places set rules and standards for larger businesses and don't think about the 1-5 man shop where certain state regulations might not apply. You need to find out specifically what they are looking for, and then find out if its a state regulation or not. You may very well be exempt in which case the contractor has the option to insist on it or wave the requirement.

I personally carry a 1 million dollar liability umbrella policy that protects me from many things that can happen. If you own a home, you might want to ask your insurance agent about it. My umbrella policy is part of my homeowners policy and costs me a whopping $46 a year.

[Bob Zale]

Tom --

A certificate of insurance is a document provided by your insurance company to an interested third party, like a landlord, contractor, lender, mortgagor, etc. who may have an insurable interest in your property or your actions, including negligence on your part.

The document guarantees to the third party that the insurance company is providing you a specific form of insurance coverage up to a specific limit of liability for a specific length of time. It further guarantees to the third party that if the insurance is altered or canceled, they will receive an advance written notice (typically at least ten days).

Of course, none of this does you a bit of good if you aren't carrying the requested insurance coverage, because some major corporations routinely require professional liability policies in the $10 million limit range or more. This is virtually unavailable at any price to the small shop. Luckily, it's all negotiable, because they're just trying to use your certificate of insurance to limit their own exposure for damages, and thus reduce their own costs. It all boils down to precisely what insurance they are requesting, and what insurance is actually a "deal-breaker" on their part. Negotiate. Negotiate. Negotiate.

Whatever you do, don't be lulled into a sense of security with a personal umbrella policy, thinking that it offers any protection at all for any sort of business pursuit. It does not. Zero. While valuable, it simply provides increased limits of liability for personal policies like auto, boat, home, etc. And even then, it's subject to specified named perils, so you must read it carefully. Yes, all the fine print.

Best regards,

Bob Zale
PowerBASIC Inc.

[Michael Mattias]

If you are doing any work at their site, they almost certainly want assurance that you have Workman's comp Insurance.

But like Mr. Zale says, negotiate. I had one client who wanted the Workman's comp certification, but here in Wisconsin I am allowed to opt out of Workman's Comp .. and have done so. Client was perfectly happy when I suggested we change the contract terms to read that I guarantee my Workman's Comp status is in total compliance with all applicable state law.

[Mark Strickland]

Explore the possibility of setting up an LLC (Limited Liability Corp). It may be too late for this deal but it can provide better protection in the future. If the LLC does business with all of your clients your personal property is protected MUCH better. It is even possible to put some assets in a personal trust LLC and have your main company "rent" them from the secondary LLC. To get past the LLC most lawyers will tell you that you must have gross negligence or criminal conduct.

When lawyers come looking to file suit if the assets are protected and they cannot easily attach them then they are not as motivated to build a case.

In KY setting up an LLC is a one time fee of $45. It costs about $15 per year to submit an annual report. To set it up does not require a lawyer in most cases unless you have some complex structure. If you are the only employee then it is simple.

It can (depending on your tax situation) possibly save you some taxes because the LLC can pay you some of your income as a dividend and not real income. Dividends are not subject to SSI taxes under some conditions.

I suggest a conversation with a good lawyer might be a good investment.

You will likely still need the Certificate of Insurance but your personal assets are protected much better if something happens. You might also be able to get a much smaller policy for the LLC as a first line of defense since much less is at stake.

Food for thought.

[tom kroto]

Thank you for valuable advice.

[Joseph Cote]

Originally Posted by Michael Mattias

If you are doing any work at their site, they almost certainly want assurance that you have Workman's comp Insurance.

But like Mr. Zale says, negotiate. I had one client who wanted the Workman's comp certification, but here in Wisconsin I am allowed to opt out of Workman's Comp .. and have done so. Client was perfectly happy when I suggested we change the contract terms to read that I guarantee my Workman's Comp status is in total compliance with all applicable state law.

This is about what I was going to say. Calif Worker's Comp law is a bit different. There's no complete opt-out, but you can get a minimum coverage policy for what amounts to a paperwork fee. This will get you Cert of Insurance when needed too.