FAQ
Vendor compliance questions, answered
The questions that come up most often about certificates of insurance and the tax forms that go with the same vendor relationships.
Insurance & certificates
- What is a certificate of insurance?
- A certificate of insurance (COI) is a one-page summary issued by an insurer or broker showing that a business carries specific coverage — the policy types, limits, effective dates, and named insured. It is evidence of insurance, not the policy itself, and it confers no coverage on its own. The standard form in construction is the ACORD 25.
- How do I track vendor COI expiration dates?
- Record each policy’s expiration date per vendor and per coverage type, then request a renewal certificate before it lapses. Tracking one date per vendor is the common mistake — general liability, auto, workers’ compensation, and umbrella policies usually renew on different dates, so a vendor can be compliant on one line and lapsed on another at the same time.
- What is an additional insured endorsement?
- An additional insured endorsement extends a vendor’s liability policy to cover your organisation for claims arising from that vendor’s work. The critical detail is that the endorsement — not the certificate — grants the coverage. A certificate can show an "additional insured" checkbox while the underlying policy contains no such endorsement, which is why the endorsement form itself should be collected.
- What happens if a subcontractor's insurance lapses?
- If a subcontractor’s policy lapses, any claim arising during the gap may fall back on your own insurance, and your carrier can treat the uninsured exposure as your retained risk at audit. Project owners and lenders can also suspend work pending proof of coverage. The exposure runs from the lapse date, not from the date you noticed it.
- What is a waiver of subrogation?
- A waiver of subrogation prevents a vendor’s insurer from suing you to recover what it paid on a claim, even where you were partly at fault. It is added by endorsement to the vendor’s policy and is commonly required alongside additional insured status in construction contracts. Like additional insured, it must exist on the policy — not merely be ticked on a certificate.
- How often should certificates of insurance be verified?
- Verify at onboarding, at every policy renewal, and whenever a vendor’s scope of work changes materially. Because coverage lines renew on different dates, a practical rhythm is a standing check against expiration dates rather than a fixed calendar review — a vendor verified in January can be non-compliant by March if one line renewed in between.
W-9 & 1099 reporting
- What is a W-9 form and who needs to file one?
- Form W-9 is how a business collects a vendor’s legal name, address, tax classification, and taxpayer identification number. You request it from US persons and entities you pay for services; they complete it and return it to you. The W-9 is not filed with the IRS — you keep it on record and use it to issue any required 1099 at year end. IRS — About Form W-9
- What is the difference between a 1099-NEC and a 1099-MISC?
- Form 1099-NEC reports non-employee compensation — payments for services performed by someone who is not your employee. Form 1099-MISC reports other payment types such as rents, prizes, and certain legal settlements. Contractor and vendor service payments generally belong on the 1099-NEC; rent paid to a property owner generally belongs on the 1099-MISC. IRS — About Form 1099-NEC
- What is backup withholding?
- Backup withholding requires a payer to withhold a flat percentage of a payment and remit it to the IRS when a payee fails to provide a taxpayer identification number, provides an incorrect one, or is otherwise flagged. The current backup withholding rate is 24%. Collecting a complete, correct W-9 before the first payment is what avoids it. IRS — Backup Withholding
- Do I need a W-9 from every vendor?
- You need one from any US person or entity you may have to report payments for — which in practice means collecting it from every new vendor at onboarding rather than deciding case by case at year end. Requesting it before the first payment is far easier than chasing it in January, when the vendor has no outstanding invoice and little reason to respond.
- When are 1099 forms due?
- Form 1099-NEC is due to both the recipient and the IRS by January 31. Other 1099 series forms have later IRS deadlines that differ between paper and electronic filing. Because the deadlines vary by form and filing method, confirm the current year’s dates against the IRS general instructions rather than relying on a remembered date. IRS — General Instructions for Certain Information Returns
- What are the penalties for filing a 1099 late?
- Penalties are charged per information return and increase the longer a filing is late, with a higher tier — and no cap — where the IRS finds intentional disregard. Separate penalties apply to returns filed with a missing or incorrect taxpayer identification number. The exact per-return amounts are indexed and change annually, so check the current figures with the IRS. IRS — Information Return Penalties
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