Importance of certificate of insurance (COI)

Dear Friends,

As you are aware that an Insurance Certificate describes insurance coverage to the insured. It contains details of insured, his name, address, contact details , property insured, type of insurance, the nature and the name of risk insured and of course main thing the total Sum Insured (i.e. maximum sum payable in case of happening of insured peril to the insured).

A certificate of insurance (COI) is issued by an insurance company or broker. The COI verifies the existence of an insurance policy and summarises the key aspects and conditions of the policy.

We can further say that an Insurance Certificate is a document used so that coverage is provided to cover loss or damage to cargo while in transit when insurance is placed against an open marine cargo policy. In some cases a shipper may issue a document that certifies that a shipment has been insured under a given open policy, and that the certificate represents and takes the place of such open policy, the provisions of which are controlling. Because of the objections that an instrument of this kind did not constitute a "policy" within the requirements of letters of credit, it has become the practice to use an insurance certificate. Also called cargo insurance certificate and special cargo policy.

We know that it is mandatory to have a third party insurance coverage for every two/four wheeler motor vehicle according to the provisions of the Motor Vehicles Act, 1988. You must have a Third-Party Insurance or Comprehensive /Package Insurance coverage , while plying your vehicles on public places. The Central Motor Vehicles Rules,1989 mandates to insurance company to issue Certificate of Insurance to the insured. A Certificate of Insurance is nothing but a summary document issued by the insurance company, which contains details about the vehicle, policyholder and insurance policy itself.

As per the rule 141 prescribed under The Central Motor Vehicles Rules ,1989, every insurance company should issue an Insurance Certificate to the policyholder along with other policy documents. The Insurance Certificate is issued during the purchase or renewal of the motor insurance policy.

The Insurance Policy Certificate should be issued in the format stated in Form 51, which contains all the vital details about the vehicle, policyholder and motor insurance policy.

PLEASE NOTE THAT

A Certificate of Insurance is a legal document, and the insurance company should issue the certificate without fail.

THE CENTRAL MOTOR VEHICLES RULES,1989

RULE 141 Certificate of insurance.- An authorised insurer shall issue to every holder of a policy of insurance, a certificate of insurance in Form 51 in respect of each such vehicle.

RULE 142 Cover notes.-

(1) Every cover note issued by an authorised insurer shall be in Form 52.
(2) A cover note referred to in sub-rule (1) shall be valid for a period of sixty-days from the date of its issue and the insurer shall issue a policy of insurance before the date of expiry of the cover note.

RULE 143 Issue of certificates and cover notes.- Every certificate of insurance or cover note issued by an insurer in compliance with the provisions of this Chapter shall be duly authenticated by such person as may be authorised by the insurer.

RULE 144 Transfer of certificate of insurance.- When the ownership of a motor vehicle covered by a valid insurance certificate is transferred to another person together with the policy of insurance relating thereto the policy of insurance of such vehicle shall automatically stand transferred to that other person from the date of transfer of ownership of the vehicle and the said person shall within fourteen days of the date of transfer intimate to the authorised insurer who has insured the vehicle, the details of the registration of the vehicle, the date of transfer of the vehicle, the previous owner of the vehicle and the number and date of the insurance policy so that the authorised insurer may make the necessary changes in his record.

RULE 145 Exclusion of advertising matter.- No certificate of the insurance or cover note issued in pursuance of Chapter XI of the Act and of this Chapter shall contain any advertising matter either on the face or on the back thereof.

SECTION 156 of the MVA,1988 lays down that when an insur has issued a Certificate of Insurance in respect of contract of insurance between the insurers and the insured person, then-

(a) If and so long as the policy described in the certificate has not been issued by the insurer to he insured, the insurer shall , as between himself and any other person except the insured , be deemed to have issued to the insured person a policy of insurance confirming in all respects with the description and particulars stated in such certificate ; and

(b) If the insurer has issued to the insured the policy described in the certificate but the actual terms of the policy are less favourable to persons claiming under or by virtue of the policy against the insurer either directly or through the insured than the particulars of the policy as stated in the Certificate of Insurance, the policy shall a between the insurer and other person except the insured, be deemed to be in terms confirming in all respects with particulars state in the said Certificate of Insurance.

TRANSFER OF CERTIFICATE OF INSURANCE

SECTION 157 OF MVA,1988 - Transfer of certificate of insurance

(i) Where a person in whose favour the certificate of insurance has been issued in accordance with the provisions of this Chapter transfers to another person the ownership of the motor vehicle in respect of which such insurance was taken together with the policy of insurance relating thereto, the certificate of insurance and the policy described in the certificate shall be deemed to have been transferred in favour of the person to whom the motor vehicle is transferred with effect from the date of its transfer.

Explanation.- For the removal of doubts, it is hereby declared that such deemed transfer shall include the transfer of rights and liabilities of the said certificate of insurance and policy of insurance.

(ii) The transferee shall apply within fourteen days from the date of transfer in the prescribed form to the insurer for making necessary changes in regard to the fact of transfer in the certificate of insurance and the policy described in the certificate in his favour and the insurer shall make the necessary changes in the certificate and the policy of insurance in regard to the transfer of insurance.
Please note that: an insured ho holds a certificate of insurance in respect of the vehicle insured by him and intends to transfer the ownership of the insured vehicle to another person Amy transfer the certificate to the purchaser with the consent of the insurance company.

The provisions of Section 157(1) provides that if a person having the certificate of insurance and policy documents against the insurance of motor vehicle and wants to transfer ownership of the vehicle to another person, then with the transfer of ownership, the certificate of insurance as well as policy are also deemed to be transferred in favour of purchaser. The purchaser for giving the effect of the above transfer has to apply with the insurer within a period of 14 days from the date of transfer.

As insurance company not bound to give the effect of the above transfer, it may refuse to transfer on the basis of various facts and in this case insurer is required to return the period paid for an unexpired period to the insured.

SOME IMPORTANT USES OF CERTIFICATE OF INSURANCE

Section 158 in Motor Vehicles Act- Production of certain certificates licence and permit in certain cases;

(1) Any person driving a motor vehicle in any public place shall, on being so required by a police officer in uniform authorised in this behalf by the State Government, produce-
(a) the certificate of insurance;
(b) the certificate of registration;
(c) the driving licence; and
(d) in the case of a transport vehicle, also the certificate of fitness referred to in section 56 and the permit, relating to the use of the vehicle.

(2) If, where owing to the presence of a motor vehicle in a public place an accident occurs involving death or bodily injury to another person, the driver of the vehicle does not at the time produce the certificates, driving licence and permit referred to in sub-section (1) to a police officer, he shall produce the said certificates, licence and permit at the police station at which he makes the report required by section 134.

(3) No person shall be liable to conviction under sub-section (1) or sub-section (2) by reason only of the failure to produce the certificate of insurance if, within seven days from the date on which its production was required under sub-section (1), or as the case may be, from the date of occurrence of the accident, he produces the certificate at such police station as may have been specified by him to the police officer who required its production or, as the case may be, to the police officer at the site of the accident or to the officer in charge of the police station at which he reported the accident: Provided that except to such extent and with such modifications as may be prescribed, the provisions of this sub-section shall not apply to the driver of a transport vehicle.

(4) The owner of a motor vehicle shall give such information as he may be required by or on behalf of a police officer empowered in this behalf by the State Government to give for the purpose of determining whether the vehicle was or was not being driven in contravention of section 146 and on any occasion when the driver was required under this section to produce his certificate of insurance.

(5) In this section, the expression "produce his certificate of insurance" means produce for examination the relevant certificate of insurance or such other evidence as may be prescribed that the vehicle was not being driven in contravention of section 146.

(6) As soon as any information regarding any accident involving death or bodily injury to any person is recorded or report under this section is completed by a police officer, the officer incharge of the police station shall forward a copy of the same within thirty days from the date of recording of information or, as the case may be, on completion of such report to the Claims Tribunal having jurisdiction and a copy thereof to the concerned insurer, and where a copy is made available to the owner, he shall also within thirty days of receipt of such report, forward the same to such Claims Tribunal and Insurer.

Section 159 in Motor Vehicles Act- Production of certificate of Insurance on the application for authority to use vehicle;

A State Government may make rules requiring the owner of any motor vehicle when applying whether by payment of a tax or otherwise for authority to use the vehicle in a public place to produce such evidence as may be prescribed by those rules to the effect that either-

(a) on the date when the authority to use the vehicle comes into operation there will be in force the necessary policy of insurance in relation to the use of the vehicle by the applicant or by other persons on his order or with his permission, or

(b) the vehicle is a vehicle to which section 146 does not apply.

CONCLUSION

From the above discussion it is clear that a Certificate of Insurance is an important documents in case of Motor Insurance and mandatorily required to be issued along with the policy of insurance. A certificate of insurance is a legal document and can be produced as evidence in legal case. A COI contains all necessary details of insured and the risk insured by the insurer. Please note that the details of a COI should not be less favourable than what is written in the insurance policy. In case of difference in COI and the policy of insurance , then terms and conditions of COI will prevails over insurance policy for third parties and not for the insured and the insurance company.

DISCLAIMER: the article produced here is only for information and knowledge of readers. The views expressed here are the personal views of the author and same will not be considered as professional advise. In case of necessity do consult with insurance professionals for more clarity and understanding of subject matter.