The Insurance-Contract Link
In construction, insurance and contracts are inseparable.
To be properly insured, you need more than just an active policy—you need a contract that defines, supports, and reflects your insurance obligations. A construction contract often contains specific clauses that transfer risk, set insurance limits, and define who carries coverage.
Failing to align contract documentation with your actual policies can result in:
- Denied claims
- Uncovered liability
- Breach of contract disputes
Whether you’re a general contractor, subcontractor, or owner, this guide outlines the essential contract documentation needed to meet construction insurance requirements and protect all parties involved.
Key Insurance Clauses in Construction Contracts
Several contractual clauses directly impact your insurance obligations. Here are the most important:
✅ 1. Insurance Requirements Clause
Specifies:
- Required coverage types (e.g., general liability, workers’ comp, builder’s risk)
- Minimum policy limits (e.g., $2M general liability, $5M umbrella)
- Duration of coverage
- Specific insurers (sometimes required by the owner)
🛠 Example: If your contract requires $5M umbrella coverage and your policy only carries $1M, you’ll need to buy additional insurance—or you’ll be out of compliance.
✅ 2. Indemnity / Hold Harmless Clause
Outlines who is responsible for damages or injuries. If you agree to indemnify the owner, you are assuming financial responsibility. Your insurance policy must align with this clause—or you may be left paying out of pocket.
✅ 3. Additional Insured Requirement
Mandates that the owner, GC, or another party be added to your policy as an additional insured. You must secure this via a formal endorsement from your insurer and provide documentation.
These clauses are not optional—they’re enforceable legal conditions. Always review them carefully and coordinate with your insurance provider before signing.
Documents to Gather and Retain
To meet insurance-related contract obligations, maintain the following documents in your project records:
- Signed Contracts and Amendments – Including insurance exhibits or riders
- Certificates of Insurance (COIs) – Proving active coverage and correct limits
- Endorsements – Especially:
- Additional Insured endorsements (ISO CG 20 10, CG 20 37, or equivalent)
- Waiver of Subrogation
- Primary and Non-Contributory wording
- Policy Declaration Pages – Showing named insured, limits, and effective dates
- Subcontractor COIs and Endorsements – To prove “flow-down” compliance
- Correspondence – Any emails or letters clarifying insurance terms with the other party or insurer
These documents must be kept on file, ideally in both digital and hard-copy formats, for the life of the project and beyond.
Subcontract Agreements and Flow-Down Requirements
If you’re a general contractor, your obligations don’t end with your own coverage.
Here’s what you need:
- Subcontracts that mirror the prime contract’s insurance language
- COIs from all subcontractors that match the required limits
- Endorsements naming the GC and owner as additional insureds
- Contractual indemnity clauses protecting the GC from subcontractor negligence
📌 Why this matters: If a subcontractor causes damage and doesn’t have compliant insurance, the claim could land on your policy—or be denied altogether.
Flow-down clauses shift liability back to the sub who performed the work, but only if properly documented.
Certificates and Proof of Endorsements
Too many construction professionals make the mistake of accepting a COI as proof of coverage—but COIs alone aren’t enough.
Best Practices:
- Always request and retain the actual endorsement pages—not just the certificate.
- Check that endorsements:
- Match the contract language
- Are signed and issued by the insurer—not the agent
- List all required parties as additional insureds
Why it matters:
If your contract requires “Additional Insured” status and your policy lacks the endorsement, your insurer may not cover a third-party claim—leaving you exposed.
Contract Administration for Insurance Compliance
To stay compliant throughout the project lifecycle, implement an insurance tracking system.
Suggested Steps:
- Create a Contract Insurance Checklist
- Match each insurance requirement with documentation
- Track coverage expirations vs. project duration
- Renew Expired Policies Promptly
- If a project spans multiple years, require updated COIs
- Review Contract Changes or Change Orders
- Scope changes or adding work types (e.g., roofing) may require higher or different coverage
Use project management software or dedicated insurance tracking tools like MyCOI or Certificial to streamline this process.
Conclusion – Don’t Sign Without Insurance in Place
Meeting construction insurance requirements isn’t just about purchasing a policy—it’s about ensuring the policy matches your contract.
Before signing any agreement or starting work:
- Review insurance clauses
- Secure the proper endorsements
- Collect and organize all documentation
Good contract documentation prevents bad surprises.
By aligning your coverage with your contract terms, you protect your business, limit liability, and keep projects running smoothly—even when issues arise.