Walk into any commercial real estate deal, and you’ll quickly notice that insurance is never an afterthought. Tenants, landlords, and property managers all want protection from risks that can cause financial headaches. That’s where a Certificate of Insurance (COI) comes into play. It may look like a simple one-page document, but in leasing management and property management, it carries serious weight.
Let’s break down what a COI is, why it matters, and how it fits into the bigger picture of commercial real estate.
What is a Certificate of Insurance (COI)?
A Certificate of Insurance is a snapshot of coverage. Think of it as an ID card for insurance. Instead of digging through dozens of pages of a policy, a COI provides quick proof that coverage exists.
It usually includes:
- Policyholder information – the tenant, contractor, or business that holds the insurance
- Insurance company details – who issued the coverage
- Types of coverage – general liability, workers’ compensation, auto liability, property insurance, etc.
- Policy limits – the maximum the insurer will pay
- Effective and expiration dates – when the policy starts and ends
- Additional insureds – other parties (like landlords or investors) who benefit from the policy
In short, a COI answers the key question: “If something goes wrong, is there insurance in place to handle it?”
Key Components of a COI
Not all certificates are created equal. There are some important details that landlords are aware of. Here’s what you’ll usually find on a commercial real estate COI:
- Named Insured: The business or individual who bought the policy. This must match the tenant on the lease.
- Policy Types: Typical policies listed include:
- General liability
- Commercial property
- Workers’ compensation
- Umbrella or excess liability
- Policy Limits and Deductibles: These show how much coverage exists and how much the insured must pay out-of-pocket first.
- Effective and Expiration Dates: The coverage of certificate of insurance is not for a long term. The COI confirms start and end dates. An expired COI is as good as no COI.
- Additional Insured Endorsements: This is where landlords often focus. An endorsement extends coverage from the tenant’s policy to include the landlord. That way, if a lawsuit drags in the landlord, the tenant’s insurance helps defend and pay.
These boxes and numbers may appear as fine print, but in a dispute, they can determine who pays the bill.
Why It Matters in Commercial Real Estate
Commercial real estate is a complex field with numerous stakeholders, including tenants, property owners, contractors, vendors, and visitors, each of whom is exposed to unique risks. For instance, a tenant could accidentally cause water damage, a contractor might suffer an injury during renovations, or a customer could slip and fall on icy steps.
Without proper insurance coverage in place, even a single incident can quickly escalate into lawsuits and significant repair costs. This is why landlords typically require tenants to maintain insurance and provide proof through a Certificate of Insurance (COI). The goal isn’t to question trust, but to ensure sound risk management for all parties involved.
Consider this scenario: A tenant operates a restaurant with a small kitchen, and a fire in the kitchen ends up damaging the entire building. With insurance, the landlord’s investment is protected, as the insurer will cover the losses. In contrast, without a valid COI, the landlord has no guarantee that the tenant is financially equipped to handle such disasters.
Why Landlords Require a COI
You might wonder why landlords push so hard for these certificates. Three big reasons stand out:
- Shielding from Tenant Liability: If a customer trips inside a tenant’s shop, the tenant’s insurance should pay, not the landlord. A COI proves that shield is in place.
- Lease Compliance: Most commercial leases contain strict insurance clauses. A COI is the quick checkmark that a tenant is following the rules.
- Evidence Without the Paperwork Pile: Full policies can run hundreds of pages. A COI delivers the highlights without overwhelming everyone with binders of legal text.
Common Mistakes and Risks with COIs
COIs serve as proof that a partner has the required insurance to mitigate potential risks. When you establish a process to verify COIs, you don’t just verify that coverage exists; you make sure that it is legitimate coverage. Despite their importance, COIs are often mishandled. Here are the most common mistakes and risks:
- Relying Only on the COI: A COI is proof, but it isn’t the whole story. Without checking endorsements, landlords might miss whether they’re actually listed as additional insured.
- Letting COIs Expire: Insurance policies end. If a tenant forgets to renew coverage, the landlord’s protection vanishes. Too many landlords file the original COI and never follow up.
- Tenants Underinsuring: Some tenants buy bare-minimum coverage or misrepresent what’s included. A COI can look solid at first glance, but still fall short of the lease terms.
If these issues aren’t identified early in your business, your company could be unintentionally exposed to significant risks. You might end up responsible for insurance claims and large financial obligations. That’s why it’s crucial to establish a reliable process for identifying missing, expired, or fraudulent documents to protect your business’s financial well-being.
At STRATAFOLIO, we work with clients to help onboard their portfolios. Of all the documents and spreadsheets we encounter, COIs are the most commonly outdated materials we see. This is due to the difficulty in tracking and receiving updated COIs from their tenants.
Best Practices for Managing Certificate of Insurance (COI)
With solid habits, COIs don’t have to be a headache. Landlords and property managers can keep risk under control by following these best practices:
- Automate Reminders – Use software to flag expiring COIs before coverage lapses. A quick alert beats scrambling after an accident.
- Require Updates at Renewal – Each time a lease renews or a tenant’s operations change, ask for a fresh COI. New risks often mean new coverage needs.
- Compare Against the Lease – Don’t just file the document. Review the limits and endorsements to confirm they meet the lease’s insurance requirements.
- Centralize Records – Keep COIs in one organized system. Hunting through emails in the middle of a claim is a nightmare you don’t need.
These steps aren’t glamorous, but they pay dividends in peace of mind and smooth operations.
Manage Your Certificate of Insurance with STRATAFOLIO
A certificate of insurance may look like a single piece of paper, but in commercial real estate, it’s a cornerstone of risk management. It confirms that tenants carry the right coverage, protects landlords from being dragged into lawsuits, and keeps everyone aligned with lease terms.
Skipping or mishandling COIs is like leaving your front door unlocked in a busy city; it invites trouble. But managing them with best practices turns them into a living compliance tool, not just a box to check.
So whether you’re a landlord reviewing a new lease, a tenant signing one, or a property manager juggling dozens of units, treat COIs with the seriousness they deserve. They aren’t just paperwork; they’re your financial liability.
Tools like STRATAFOLIO can help centralize COI tracking, automate reminders (for both the managers and tenants), and make compliance effortless, giving you peace of mind and more time to focus on growing your portfolio. Schedule a demo!
