We see how much effort you put into making your business successful—late nights, early mornings, and endless problem-solving. You’ve probably even gotten your insurance sorted out, but have you considered your partners' insurance coverage? Even if your policies are rock solid, an inadequately insured third-party vendor can expose your business to unexpected risks.
Third-party insurance requirements can be confusing, and we are here to simplify them for you. Here’s everything you need to know about your third-party insurance contract requirements.
Getting to know third-party small business insurance can feel overwhelming with all the terms and policies involved. General liability insurance, business owner’s policy (BOP), and workers’ compensation insurance apply to all industries. At the same time, specific policies are tailored for particular fields. So, where should you begin?
Let’s break down the essential third-party insurance contract requirements your vendors must have in place.
Accidents and property damage can happen if you work with contracting or service-oriented vendor partners. When they do, they can cause unexpected headaches and expenses. General liability insurance helps protect both their business and yours from financial losses if someone claims they were injured or their property was damaged by the vendor or their employees.
Average Premium of General Liability Insurance by Industry via Insurance Business Magazine
The cost of general liability insurance can really differ depending on the industry your third-party vendors are in. For instance, if your vendors are in high-risk fields like construction, installation services, or lawn care, their premiums will be higher. On the other hand, vendors in low-risk industries will typically pay less.
If you need help determining what coverage your vendor partners need, talking to a licensed insurance advisor is always a good idea. They can help ensure your vendors have the proper protection, which keeps your business safe from the risks associated with underinsured partners.
Workers’ compensation insurance is required in almost every state. It covers medical expenses, part of lost wages, and potential legal fees if employees get injured or sick on the job.
Suppose your third-party vendor’s employee gets injured while delivering on your premises. Workers' compensation insurance can cover their medical expenses and lost wages while keeping you away from potential legal implications.
If your business depends on third-party services like financial advising, legal counsel, architectural design, or IT support, have them secure professional liability insurance. This type of insurance protects your business from financial or reputational damage if someone claims that the vendors’ advice or services caused them harm.
When you partner with third-party vendors, it's almost certain they'll be using cars, vans, or trucks for their services. As they need car insurance, they should protect their company vehicles and your business from unpredictable events.
Commercial auto insurance covers your third-party vendors for property damage, medical expenses, and legal fees associated with using your vehicle in their business operations.
Working on construction projects means that you have more to consider than just the quality of the work and the safety of the employees. Their equipment matters as well. If their tools or materials get stolen, it can be a huge expense and cause delays.
Builders' risk insurance protects their building materials, tools, and equipment during the project. Make sure your vendors have this coverage to avoid costly setbacks and keep your project on track.
If you rely on third-party technology services and products, it's really important to check if they're properly insured. Even small mistakes on their part can lead to big problems for you. For example, if a vendor's software glitch causes your website to crash constantly, that could mean lost sales and a damaged reputation on your part.
One way to protect yourself from these risks is to require your vendors to have technology errors and omissions (tech E&O) insurance. This type of insurance covers financial losses if their tech solutions fail or cause harm. It helps cover legal fees, settlements, and damages from professional errors.
Aside from glitches, relying on third-party technology services means your business is at risk of cyberattacks and data breaches. That's why ensuring your partners have cyber liability insurance is crucial. This type of insurance covers legal fees, the cost of notifying affected customers, and PR efforts to manage the aftermath.
Did you know that a record-breaking 5.5 million new business applications were filed in 2023 alone? With so many small businesses out there, how many are insured? Is your third-party vendor one of them? If yes, are they really adequately protected?
Endorsements are an excellent way to tailor your third-party vendors' insurance to meet their specific needs where standard policies may fall short.
Aside from these endorsements, it's really important to stay updated on changes in insurance regulations as your business grows. Make sure your third-party partners regularly update their coverage to meet project requirements. This way, you can avoid expensive out-of-pocket costs if there's a claim. Keeping up with these practices helps maintain a safe and smooth business partnership.
When it comes to working with third-party vendors, insurance is a detail you can't afford to miss.
Seeing a third-party insurance contract for the first time can be understandably overwhelming. But the good news is you don’t have to do it alone! A licensed insurance expert, like CoverHound, can guide you and your third-party vendors in selecting the right third-party insurance.
Connect with CoverHound or have them take this five-minute insurance checkup to get started!
Insurance shopping simplified
Insurance shopping simplified
