How to Set Vendor Insurance Requirements

Start with the risk, not a template

Generic one-size-fits-all insurance schedules create two problems: you over-require low-risk vendors and under-protect high-risk work. Map vendors by what they do on your premises — construction trades, HVAC and electrical maintenance, cleaning crews in a hospital, security guards, IT installers with physical access — and assign tiers with escalating limits.

Coverage types to specify

Most U.S. vendor programs require commercial general liability at minimum. Add automobile liability when vehicles enter your sites. Workers compensation is mandatory in most states for employers; require it even when your contract is with a sole proprietor where permitted. Umbrella or excess liability bridges gaps for catastrophic claims. Professional liability applies when vendors give design, engineering, or consulting advice.

• Commercial general liability — per occurrence and general aggregate
• Automobile liability — owned, hired, and non-owned if applicable
• Workers compensation and employers liability
• Umbrella or excess — often $1M–$5M+ for construction and healthcare
• Professional / E&O — for design-build and IT services

Contract language beyond limits

Limits alone do not protect you. Standard U.S. construction and property contracts also require additional insured status, primary and non-contributory wording where applicable, waiver of subrogation on workers comp and general liability, and 30-day notice of cancellation. Spell these out in the agreement so reviewers know what to verify on the certificate and endorsements.

Build a review checklist from your contract

Turn contract insurance exhibits into a repeatable intake checklist: named insured match, each policy expiration, limit comparison by line, endorsement references, certificate holder address, and description of operations. Operations teams should not re-interpret the contract on every certificate — the checklist encodes the decision.

Communicate requirements before work starts

Send insurance requirements with the vendor packet at onboarding — alongside W-9 and banking details. Include sample endorsement language and your certificate holder address. Vendors who understand requirements upfront renew faster; vendors surprised at the job trailer often delay projects.

Review requirements annually

Limits that made sense three years ago may not match current project values, lease requirements, or customer audit standards. Healthcare systems responding to payer audits and general contractors managing owner-controlled insurance programs should revisit tiers when contracts renew or when you enter new states.