How to Write Insurance Requirements into a Contract

"Vendor shall maintain adequate insurance" is not an insurance requirement. It's a vague obligation with no measurable standard, no enforcement mechanism, and no protection when an incident occurs.

Effective contract insurance requirements are specific, complete, and enforceable. Here's how to write them.

The Core Components of a Contract Insurance Requirement

1. Coverage types (which policies are required)

List each type of insurance the vendor, contractor, or tenant must maintain. Standard requirements:

• Commercial General Liability (CGL)
• Workers' Compensation and Employers Liability
• Commercial Auto Liability
• Umbrella/Excess Liability

Depending on the nature of the relationship, also consider:

• Professional Liability / Errors & Omissions
• Pollution/Environmental Liability
• Cyber Liability
• Liquor Liability (for food/beverage vendors)

2. Minimum limits for each coverage type

Never specify "adequate" or "sufficient" limits - specify numbers. Example:

"Commercial General Liability: not less than $2,000,000 per occurrence and $4,000,000 in the annual aggregate, including products and completed operations coverage."

Limits should reflect the risk profile of the relationship. A maintenance vendor's limits may differ from a construction contractor's. A single insurance consultant review to establish appropriate limits for your standard relationships is a worthwhile investment.

3. Endorsement requirements

This is where most contract insurance clauses fail. The endorsement requirements are as important as the limits, and they must be stated explicitly:

"The [owner/landlord/client entity] shall be named as an Additional Insured on the Commercial General Liability policy on a primary and non-contributory basis, on ISO form CG 20 10 (ongoing operations) and CG 20 37 (completed operations), or equivalent."

"All policies required herein shall contain a waiver of subrogation in favor of [owner/landlord/client entity]."

"The [owner/landlord/client entity] shall receive not less than thirty (30) days' prior written notice of cancellation, non-renewal, or material change in coverage."

4. Who the additional insured is

Specify the exact legal entity names that must be named as additional insured. If your organization has complex entity structure, list all required entities:

"Additional Insured parties shall include: ABC Property Holdings LLC, ABC Property Management Inc., and [Lender Name], its successors and assigns."

5. Carrier quality requirements

"All insurers shall be licensed to do business in [State] and shall have an A.M. Best rating of no less than A-, Class VII."

6. Duration

Specify when coverage must begin and when the obligation ends:

"Coverage required herein shall be in effect no later than [commencement date] and shall be maintained throughout the term of this Agreement and for a period of [X] years following completion or termination."

The tail period (coverage after contract end) is particularly important for construction contracts with completed operations exposure.

7. Proof of coverage obligation

"[Vendor] shall, prior to commencement of work and at each policy renewal thereafter, provide certificates of insurance and endorsements evidencing the coverage required herein. Acceptance of such certificates shall not constitute a waiver of any requirement herein."

The last sentence is important: collecting a COI that doesn't fully comply should not be construed as acceptance of non-compliance.

8. Breach and remedy language

"Failure by [Vendor] to maintain the insurance required herein shall constitute a material breach of this Agreement, entitling [Owner] to immediately terminate this Agreement and/or suspend [Vendor's] work until compliant evidence of insurance is provided."

Without this, your remedy options when a vendor fails to maintain coverage are less clear.

Contract Insurance Requirement Checklist:

• Every required coverage type is listed explicitly
• Minimum limits are stated as numbers, not "adequate" or "sufficient"
• Additional insured requirement specifies entity names AND endorsement basis (primary/non-contributory)
• Endorsement form numbers are specified or "equivalent" language is included
• Waiver of subrogation is required on all applicable policies
• Cancellation notice period is specified (30 days recommended)
• Carrier quality standards (AM Best rating) are included
• Duration and tail coverage requirements are explicit
• COI production requirement is stated
• Breach and remedy language is clear

Common Mistakes in Contract Insurance Language

"Vendor shall maintain insurance as required by law." This is a compliance floor, not a risk management provision. It doesn't specify limits, endorsements, or requirements beyond statutory minimums.

Missing product liability for vendors who manufacture or serve products. CGL by default covers operations; product liability must often be explicitly included.

No completed operations tail for construction. If a construction contractor's work causes damage discovered two years after completion, you need their completed operations coverage - and their contract needs to require it.

Additional insured listed by trade name, not legal entity. Insurance claims are paid to legal entities. Trade names create disputes.

No remedy language. Without an explicit breach and remedy clause, your options when a vendor fails to maintain coverage are limited by general contract law, which may require notice and cure periods before termination is permissible.

Related Resources

• What Insurance Does a Contractor Need
• Difference Between Insured and Additional Insured
• Does My Tenant Need to Name Me as Additional Insured
• How Do I Verify a Contractor's Insurance

Bramble reads your contract insurance requirements and verifies that every submitted COI actually satisfies them - so the work you put into drafting strong requirements actually gets enforced. Book a demo at getbramble.com.