I check the website of the California Department of Insurance (DOI) frequently. I like to see what the DOI shares with the public. Recently, the DOI has posted several news releases talking about the criminal prosecution of insurance agents who commit fraud and embezzlement by pocketing the insurance premiums paid by clients and not getting the clients the requested insurance coverage.
Well, how can an insurance agent pull off such crimes? In many instances, an insurance agent will provide the client with a certificate of insurance representing that is "proof" of insurance. A client who is not familiar with how insurance works or is never told that the insurance company issuing the policy is required to send (now often make it available online) the client or insured a full copy of the policy.
It is important for homeowners or any person purchasing insurance to know that a certificate of insurance is not an insurance policy and does not amend, extend or alter coverage afforded by the policy. In fact, words to this effect are required in most cases to be stated in the certificate.1 The certificate of insurance does not create coverage or any legal obligations between the insurer and the one holding the certificate.2 In other words, a certificate of insurance is not a substitute for the insurance policy itself.
So, when working with an agent in obtaining an insurance policy, it is important to always make sure that you receive a copy of the policy (along with the policy declarations which set forth the coverage limits) directly from the insurance company. If a policy is not provided shortly after the premium is paid, then one should insist on getting a copy. Having the actual policy in hand is the best way to confirm coverage. Also, as I have repeated often, it is important to review the policy and make sure the requested coverage is in place and that the named insured, description of the property, etc. are all accurate.
1 Cal. Ins. Code section 384.
2 Couch on Insurance, 3rd Ed., section 40:30.