# Insurance Obligation Clause

Source: https://contracko.com/clause-library/insurance-obligation

# Insurance Obligation Clause

Requires a party to hold and maintain specified insurance cover throughout the contract.

## What it is

An insurance obligation clause requires one or both parties to take out and keep in force defined insurance (for example, public and product liability, professional indemnity, or contractors' all-risk cover) at agreed minimum limits.

## Why it matters

A liability or indemnity is only worth as much as the counterparty can pay. Insurance backs those promises with a solvent insurer, so a serious claim does not simply bankrupt the other side and leave the loss unrecovered.

## How to apply it

- Specify the types of cover, minimum limits per claim and in the aggregate.
- Require evidence of cover (a certificate) on signing and on renewal.
- Require notice before cancellation or material reduction of the policy.
- Confirm the insurance does not cap or replace the underlying liability.

## Negotiation tips

- • Set limits proportionate to the realistic exposure, not an arbitrary round number.
- • Ask to be named as additional insured or for a waiver of subrogation where relevant.

## Common pitfalls

- • Requiring cover that the market does not offer or that the party cannot afford.
- • Never checking the certificate, so cover quietly lapses mid-contract.

### How Contracko helps

Contracko stores insurance certificates alongside each contract and sends renewal reminders before cover lapses. Its AI analysis extracts the required policy types and minimum limits, so compliance teams can verify at a glance that the certificate on file matches the contractual obligation without pulling the full agreement each time.

## Legal references

- [BW 6:248 Reasonableness and fairness Dutch law](https://wetten.overheid.nl/BWBR0005289)
- [BW 7:925 Insurance contract law Dutch law](https://wetten.overheid.nl/BWBR0005290)

Unless marked otherwise, references are to Dutch law (Burgerlijk Wetboek, the Dutch Civil Code); EU instruments such as the GDPR apply across the EU. This is general information, not legal advice. Other jurisdictions treat these concepts differently. Verify the current text and your situation with a qualified lawyer.

## Relevant for

[Construction](https://contracko.com/industries/construction-industry)[Engineering & Architecture](https://contracko.com/industries/engineering)[Logistics & Distribution](https://contracko.com/industries/logistics)[Healthcare](https://contracko.com/industries/healthcare)[Event Management](https://contracko.com/industries/event-management)

## Related clauses

- [Indemnification Clause](https://contracko.com/clause-library/indemnification)
- [Limitation of Liability Clause](https://contracko.com/clause-library/limitation-of-liability)
- [Warranties Clause](https://contracko.com/clause-library/warranties)
- [Supply Chain Liability](https://contracko.com/clause-library/supply-chain-liability)

## Related terms

- [Liability](https://contracko.com/glossary/liability)
- [Indemnity](https://contracko.com/glossary/indemnity)
- [Warranty](https://contracko.com/glossary/warranty)

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- Risks and obligations are surfaced automatically
- Reminders help you act before dates slip

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## Frequently asked questions

Common questions about this clause.

- **Q:** Does insurance reduce the contractual liability cap?
  **A:** Not unless stated; insurance and the liability cap are separate, though the cap is often set near the available cover.

- **Q:** What if the other party lets its policy lapse?
  **A:** A well-drafted clause makes lapse a breach and may allow you to take out cover at their cost or to terminate.

- **Q:** What types of insurance are most commonly required in commercial contracts?
  **A:** Public and product liability, professional indemnity (for service providers), employers' liability, and in construction contexts all-risks and contractors' liability. The right types depend on the risk profile of the work.

- **Q:** Does a subcontractor need to maintain its own insurance?
  **A:** Yes. A main contractor's policy does not automatically cover subcontractors. The subcontract should require the subcontractor to carry appropriate cover for its own scope of work.

- **Q:** What is a waiver of subrogation and when should you ask for one?
  **A:** A waiver of subrogation prevents the insurer from suing the other contracting party after paying a claim. It is valuable where both parties share risk on the same project and want to avoid cross-claims.

## Never miss a risky clause again

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