Should I Sign This? - Understanding Contractual Insurance Requirements

What You’re Agreeing To — and What to Look Out For

Whether you're a contractor signing on to a new project, a business leasing a premises, or a supplier entering into a service agreement — chances are your contract includes insurance requirements you’re expected to meet.

If you don’t read the fine print closely, or if your policies don’t align with the terms, you could be:

• In breach of contract

• Exposed to uninsured liability

• Or worse — have a claim denied or be dropped from a project

Let’s look at what contractual insurance requirements are, why they matter, and what to watch out for before signing on the dotted line.

What Are Contractual Insurance Requirements?

These are clauses in a contract that specify what insurance policies, limits, and evidence of cover a party must carry to participate in the arrangement.

They usually appear in contracts for:

• Construction, trades, or service works

• Commercial property leases

• Supplier/contractor agreements with councils, corporates, or schools

• Event bookings at venues

• Head contractor / subcontractor arrangements

These clauses are used to ensure financial risk is covered — especially where one party relies on another’s actions. It’s also a way for larger entities to shift liability down the chain.

Common Contractual Insurance Requirements Include:

• Public & Products Liability Insurance: Typically required at $10M or $20M

• Professional Indemnity Insurance: For consultants, designers, engineers, etc.

• Workers’ Compensation: Mandatory if you’re employing staff or subcontractors

• Motor Vehicle Insurance: Required if vehicles are used onsite or for service delivery

• Contract Works Insurance: For contractors involved in building or renovation

You may also encounter:

• Principal- or landlord-naming requirements on your policy

• Specifications for insurers (e.g. "must be APRA-authorised")

• Specific limits of indemnity or minimum sub-limits (e.g. for property damage, injury, or environmental liability)

• Waivers of subrogation, indemnity clauses, or cross-liability terms

What to Watch Out For

1. Mismatched or Insufficient Cover

Your current insurance may not automatically comply with the contract requirements. For example:

• You might have $10M liability cover, but the contract demands $20M

• Your PI policy might cover $1M, but the head contractor asks for $5M

• You’re required to note the other party as an interested party or principal, but it’s not added

Not meeting these can delay project starts or even result in financial penalties and uninsured risk.

2. Broad Indemnity Clauses

Beware of unlimited indemnity wording, where your business agrees to “indemnify and hold harmless” the other party — even for losses outside of your control.

These can extend beyond your insurance scope, leaving you exposed to liabilities your policy won’t cover.

3. Waivers of Subrogation

Some contracts require you to waive your insurer’s rights to recover costs from the other party. Not all insurers allow this — and it must be agreed in writing on the policy.

4. Late Insurance Checks

Many businesses take on a contract and only check the insurance clauses after signing — or worse, after work begins. Always review clauses before signing, and get your broker to assess whether your current policies comply.

How a Broker Helps You Navigate This

As your insurance broker, we can:

✅ Review the contract’s insurance sections

✅ Identify clauses that may contradict your current cover

✅ Negotiate terms with insurers (like adding principals or increasing limits)

✅ Help you upgrade cover before work starts, so you're not left exposed

✅ Issue Certificates of Currency or tailored endorsements to prove compliance

We’re also happy to discuss the requirements with your lawyer or contract manager to ensure the insurance lines up with your legal obligations.

In Summary...

Step	What to Do
Review all insurance clauses	Before signing, not after
Check limits and policy types	Match them to your current insurance policies
Get a broker to review requirements	We’ll advise if your cover is sufficient
Don’t ignore indemnities & waivers	Legal words can have financial consequences
Request any compliance docs early	Certificates, endorsements, or updated schedules

Need help with a contract you're about to sign? Send it through and we'll review the insurance requirements for you — free of charge as part of your client service.

⚠️ Important Note:

While we can assist with reviewing insurance-related clauses in your contract, we are not authorised to provide legal advice. We strongly recommend you speak to a qualified solicitor or contract lawyer before signing any agreement to ensure all terms, including indemnity, waivers, and liability clauses, are properly understood and negotiated.