THE SHORT ANSWER
An insurance clause makes insurance rights and obligations part of the agreement.
It may require either party to carry coverage, maintain a stated limit, extend a protection, provide evidence or give notice. The clause does not itself create an insurance policy, prove that coverage applies, or decide whether the requirement is reasonable.
First, make sure you mean the right kind of clause
Insurance requirement
Tells one or both contracting parties what insurance obligations apply to the engagement. This is the main focus of InsureClause.
Insuring clause
States the insurer's core promise within an insurance policy, subject to the policy's terms, conditions and exclusions.
Other insurance clause
Addresses how a policy may respond when more than one policy could apply to the same loss. It is not the same as a contract insurance requirement.
Five useful words before you read the clause
What kind of loss is being addressed?
Commercial general liability, often shortened to CGL, is one common category. Professional, cyber, auto, property and other coverages address different loss pathways.
How much insurance is being requested?
The amount may apply per occurrence, per claim, in total across the policy period, or on another basis. The amount and its basis both matter.
Is a policy change being requested?
An endorsement amends policy terms. A certificate may list information, but it is not automatically a substitute for a required endorsement.
What event and timing trigger applies?
Occurrence policies and claims made policies use different timing triggers. Claims made requirements may also raise retroactive date and reporting questions after the contract ends.
How will the promise be checked?
A certificate can show listed facts, an endorsement can establish policy wording, and a broker may confirm an administrative fact or placement status. None guarantees a future claim outcome.
Need more help with a term? Use the Learning Centre or search Resources.
The ABCs of a contract insurance clause
- A. Assign the obligation.Name the party that must carry the insurance and the party meant to receive protection or evidence.
- B. Build the requirement.Identify the relevant coverage, limit and basis, policy form or continuity point, and any requested mechanics such as additional insured status.
- C. Confirm how it operates.State when the obligation starts and ends, what evidence is due, whether subcontractors are addressed, and who resolves an exception.
A clause can look complete and still be poorly matched to the work. The useful question is not simply “Is there insurance wording?” It is “Does each part address a real exposure, assign it to the right party, and create an obligation that can be supported?”
A sample clause, broken into parts
This fictional wording is an educational example, not a template ready for signature. Brackets show facts that must be decided for the actual engagement.
The Service Provider will maintain commercial general liability insurance with limits of at least [amount and currency] for each occurrence and [amount and currency] in the aggregate. To the extent available and appropriate for the Services, the policy will include the Customer as an additional insured for liability arising from the Service Provider's work. The insurance will be maintained during the Services and for [appropriate period] afterward. Before work begins and on reasonable request, the Service Provider will provide a current certificate of insurance and any specifically required endorsement evidence. Any unavailable or materially different requirement will be identified promptly for review by the parties' authorized insurance or legal contacts.
WhoWho must act?
The clause identifies the Service Provider as the party responsible for the insurance promise. The actual agreement must make the responsible party unambiguous.
CoverageWhat kind of insurance is named?
The example names commercial general liability. A real requirement should connect each coverage to the work and exposure instead of copying a broad list.
Limit and basisHow much, in which currency, and on what basis?
The amount alone is incomplete. Check the currency and whether the limit applies per occurrence, per claim, in the aggregate or on another stated basis.
MechanicWhat policy treatment is requested?
Additional insured status is one policy mechanic. Its party, policy, scope and availability need to be clear and should not be inferred from a certificate alone.
TimingWhen must the obligation apply?
Check the start, end and any period after the work. Claims made coverage can also raise continuity, retroactive date and reporting questions.
EvidenceHow will the promise be checked?
Name the proportionate document or confirmation needed. A certificate reports listed facts; it does not itself amend coverage or guarantee a claim outcome.
ExceptionWhat happens if an item is unavailable or different?
Create a route for timely review by an authorized person. The example does not approve an exception or tell either party what it must accept.
How insurance clauses can look in different contracts
PROFESSIONAL SERVICES
Advice or design work
While providing the Services and for [reviewed period] afterward, the Consultant will maintain professional liability insurance appropriate to the professional services described in this Agreement, with a limit of [amount and currency] per claim. If the policy is written on a claims made basis, the Consultant will identify any material interruption in continuity relevant to this requirement.
What it is trying to address: financial loss caused by an alleged error in professional judgment or deliverables. The service, claims made structure, continuity period and limit all need review.
TECHNOLOGY SERVICES
Systems or data work
The Provider will maintain technology errors and omissions and cyber liability insurance appropriate to the hosted services, system access and data handled under this Agreement. On reasonable request, the Provider will supply evidence showing the identified insured, policy period and agreed limits.
What it is trying to address: technology failure and data or security loss pathways. The two coverages should not be treated as automatically interchangeable.
MUTUAL REQUIREMENT
Each party protects its own activities
Each party will maintain insurance reasonably appropriate to its own operations and obligations under this Agreement. A party requesting evidence will identify the specific coverage or contractual requirement it needs to verify.
What it is trying to address: a mutual allocation where both parties have meaningful operations. Mutual wording does not necessarily mean identical policies or limits.
The contract type changes the questions
| Situation | Start with | Questions that may follow |
|---|---|---|
| Construction or renovation | Work, site, project property and subcontractor chain | Course of construction, completed operations, design, pollution, equipment and auto |
| Professional or clinical services | Advice, judgment, credentials and potential patient or client harm | Professional liability, occurrence or claims made form, continuity and evidence |
| Technology or shared data | System role, data, access and service dependency | Technology E&O, cyber, privacy events, subcontractors and reporting after termination |
| Lease, facility rental or concession | Who controls the premises, property and activities | CGL, property, tenant liability, alcohol, equipment and additional insured mechanics |
| Road, utility or maintenance work | Vehicles, mobile equipment, public access and completed work | Auto, vehicles not owned by the organization, attached machinery, environmental and subcontractor exposure |
| Event, instruction or youth program | Participants, supervision, venue, alcohol and activities with greater risk | Participant injury, abuse or misconduct, medical, cancellation and special hazards |
| Placement, staffing or mutual aid | Employer, supervision, professional responsibility and control | Workers' compensation, professional liability, auto, reciprocal obligations and evidence |
These are review prompts. They do not establish a mandatory coverage or limit for every contract in the category.
How the clause fits into a commercial negotiation
The insurance paragraph is one part of the deal. Read it with the scope of work, indemnity, limitation of liability, confidentiality, security, subcontracting and termination terms. Insurance can support an agreed risk allocation, but it should not silently expand the work, replace the indemnity analysis or become an automatic liability cap.
| If you see | Why it needs attention | Safer next move |
|---|---|---|
| Coverage unrelated to the work | It may have come from a broad template. | Ask which activity or loss it is intended to address. |
| A limit outside the organization's approved position | The promise may be unsupported or disproportionate. | Compare the exposure and approved position, propose an amount your organization can offer and route any exception. |
| An exact endorsement or notice promise | The requested wording may depend on the insurer or policy form. | Do not promise it until availability is confirmed. Offer qualified wording or targeted evidence. |
| Broad wording such as all necessary insurance | The obligation may have no defined coverage, amount or endpoint. | Name the relevant policies, limits, timing and evidence. |
| Deletion of every insurance requirement | A real exposure may be left without a financial backstop. | First test the remaining exposure and alternative controls. If insurance still fits, propose a proportionate clause; otherwise record an authorized exception. |
| A conflict with indemnity or the liability cap | The documents may allocate the same risk in different ways. | Route the connected provisions for legal, risk and commercial review. |
See the complete negotiation sequence and an original example response.
Share enough to verify the promise, not the whole insurance program
Keep three things separate: the contract promise, the evidence needed to check it and information that remains private. Start with the least sensitive evidence that answers the specific question.
Proportionate evidence
A certificate can show listed facts, an endorsement can establish policy wording, and a broker may confirm an administrative fact or placement status. A broker statement does not amend the policy or guarantee coverage.
Insurance program detail
Do not routinely disclose full policies, schedules, premiums, deductibles, self insured retentions, total limits, claims history or underwriting submissions.
Security and incident detail
Security architecture, vulnerability findings, incident records, personal information and access credentials need a defined purpose, authorized recipient and secure process. Credentials should never be supplied as insurance evidence.
First confirm the contractual purpose, the exact material needed, who is authorized to approve and receive it, how it will be transferred and how long it will be retained. A request for more information is not by itself proof that the information should be shared.
What to check before accepting or requesting a clause
- Which party must act, and is the responsibility clear?
- What work, property, people, systems or data create the exposure?
- Does each requested coverage connect to a plausible loss scenario?
- Are the limit, currency, deductible or retention issue, and limit basis stated clearly?
- Does the wording account for occurrence coverage or claims made timing where relevant?
- Are additional insured, priority, waiver and notice requests tied to the right policy and party?
- Is the evidence request specific, proportionate and limited to an authorized purpose?
- Are subcontractors, locations and the period after completion addressed only where relevant?
- Does the clause align with the scope, indemnity, liability cap, confidentiality and security terms?
- Who can approve a change, exception, sensitive disclosure or unsupported promise?
What InsureClause helps you do
InsureClause helps identify the parts of the requirement, connect them to the engagement, surface missing facts, compare a requested position with available information, and prepare a decision or redline for the right person to review. It does not confirm policy coverage. It does not provide legal advice. It does not place insurance. It does not approve the agreement.
Try the workflow