What It Does
An insurance requirements clause turns a promise to be responsible into a funded one. A vendor can agree to indemnify you for everything, but if it is thinly capitalized, that indemnity is worth little when a real claim lands. Required insurance, with you named as an additional insured, gives you a direct route to an insurer's balance sheet rather than the vendor's. For in-house counsel, the clause is the backbone of risk allocation, and the details decide whether it works. A practical test: if your vendor contract has a strong indemnity but no insurance requirement, or requires additional-insured status that never shows up as an endorsement, the indemnity may be unenforceable in practice against a judgment-proof counterparty.
Requires defined coverage types at defined per-occurrence and aggregate limits
Often requires additional-insured status, a waiver of subrogation, and primary coverage
Backs up the indemnity with a solvent insurer
Requires certificates of insurance and endorsements as proof
Should address insurer rating, notice of cancellation, and claims-made tails
The clause works only when the contract language is matched by policy endorsements, which is why proof of coverage matters as much as the requirement.
When You'll See It
Insurance requirements appear in services and vendor agreements, construction contracts, commercial leases, supply and manufacturing agreements, loan and security agreements, and equipment and aircraft leases. It sits near the indemnification and limitation of liability provisions, because it exists to make them collectible. The required coverage shifts with the deal: commercial general liability and professional liability for services, property coverage for leases, and specialized hull and liability coverage for aircraft and equipment.
It matters most where one party could cause large third-party losses the other would otherwise absorb: a contractor on your premises, a vendor handling your data, a tenant in your building. The bigger the potential loss and the thinner the counterparty, the more it is the insurance requirement, rather than the indemnity, that protects you when a claim lands.
Examples
Arcus Biosciences, Inc.
Loan and Security Agreement
Commercial general liability, occurrence form, specified risks
One-Sided
2024
"Borrower shall cause to be carried and maintained commercial general liability insurance covering Borrower and each of its Subsidiaries, on an occurrence form, against risks customarily insured against in Borrower's line of business. Such risks shall include the risks of bodily injury, including death, property damage, personal injury, advertising injury, and contractual liability."
Wheels Up Experience Inc.
Aircraft Financing Agreement
Additional insured naming, worldwide coverage
One-Sided
2024
"...shall name Mortgagee, each Note Holder and Delta as an additional insured (collectively, the 'Additional Insureds'), as its interests may appear; (ii) shall apply worldwide and have no territorial restrictions or limitations (except only in the case of war, hijacking and related perils)."
biote Corp.
Lease Agreement
Landlord property insurance at full replacement cost
One-Sided
2024
"Landlord shall maintain insurance against loss or damage to the Building or the Property with coverage for perils as set forth under the 'Causes of Loss-Special Form' or equivalent property insurance policy in an amount equal to the full insurable replacement cost of the Building."
LL Flooring Holdings, Inc.
Purchase Agreement
Interim property and general liability pending closing
One-Sided
2024
"...Seller shall maintain insurance against loss or damage with respect to the Property in amounts and with deductibles as Seller may determine, and commercial general liability insurance with respect to the Property, in amounts and with deductibles as Seller shall determine."
Negotiate
You want a real backstop
Specify the coverage types and minimum per-occurrence and aggregate limits, rather than leaving amounts to the other side's discretion.
Require an additional-insured endorsement, a waiver of subrogation, and primary and non-contributory coverage, and require the endorsements, not just a certificate.
Require certificates before work begins and on each renewal, a minimum insurer rating, and advance notice of cancellation.
You want achievable terms
Match required limits to coverage you carry and to the real risk, and resist coverage types you do not maintain.
Limit additional-insured status to liability arising from your own acts or omissions, rather than the other party's.
Offer a certificate of insurance as proof rather than agreeing to hand over full policies.
The indemnity gets the attention, but the insurance schedule is what pays the claim, so negotiate the limits, endorsements, and proof with the same care.
Red Flags
A strong indemnity with no matching insurance requirement, leaving you exposed if the indemnitor cannot pay.
Required additional-insured or waiver-of-subrogation language with no endorsement delivered, so the contract promises coverage the policy does not provide.
Limits set too low for the risk, or no aggregate limit specified at all.
Claims-made coverage with no tail or extended reporting requirement, so coverage lapses after the relationship ends.
No certificate-of-insurance or notice-of-cancellation requirement, so you cannot verify the coverage exists or learn when it ends.
FAQs
This content is for informational purposes only and does not constitute legal advice.
