Reviewing Coverage Before Signing New Contracts
New contracts can be exciting for a small business. They may bring more revenue, steady work, and stronger relationships with clients. But before signing, it is important to look closely at the insurance requirements included in the agreement.
Many business owners focus on pricing, deadlines, and the scope of work, but insurance language can also create serious obligations. If your policy does not match what the contract requires, your business could face delays, uncovered claims, or out-of-pocket costs.
Why Contracts Affect Insurance Needs
Contracts often include requirements for liability limits, certificates of insurance, additional insured status, and specific policy wording. These details are meant to protect the client, but they also affect what your business must provide before work begins.
A Business Owners Policy can be a helpful foundation for many small businesses because it commonly combines property and liability coverage. However, it still needs to be reviewed against each contract’s requirements.
For example, a client may require higher liability limits than your current policy provides. Another contract may require additional insured wording that must be added through an endorsement. A certificate alone does not change the policy, so the correct coverage must actually be in place.
Review Limits Before Work Starts
Liability limits should be reviewed carefully before agreeing to a contract. A small project may not require major changes, but larger commercial agreements can include stricter coverage requirements.
If the required limits are higher than your current policy, you may need to discuss additional coverage options. It is better to identify that need before signing than to discover the issue after a claim or during the certificate review process.
Check Property and Equipment Exposure
New contracts can also affect business property. A job may require special tools, rented equipment, materials stored off-site, or work performed at a client location. These details can change how coverage applies.
Business owners should review:
Tools and equipment used for the job
Property stored away from the main location
Materials transported to client sites
Any rented or borrowed equipment
Contract terms related to property damage
A policy may include limits or exclusions that affect off-site property, so these details should be discussed before the work begins.
Watch for Additional Insured Requests
Many contracts require the business to add the client as an additional insured. This is common, but it should be handled correctly. The policy endorsement is what matters, not just the certificate.
If your business regularly signs contracts with this requirement, it may help to keep a simple process for reviewing and submitting certificate requests.
Do Not Wait Until Renewal
A common mistake is waiting until renewal to update insurance. If your business signs new contracts throughout the year, your coverage may need to be reviewed sooner.
Working with Garrett Insurance can help business owners compare contract requirements with current coverage and identify gaps before work begins.
New contracts should help your business grow, not create hidden risk. By reviewing insurance early, you can protect your business, meet client requirements, and move forward with more confidence. For help reviewing contract requirements before new work begins, connect with the team through Contact Us.