Do insurance requirements protect my business or the other party?

How does this protection work in practice?

If you carry insurance, it can cover claims, damages, or injuries related to your work. This helps protect your business by reducing out-of-pocket costs.

At the same time, the other party may also be protected—especially if they are named as an "additional insured" on your policy. In that case, your insurance may also cover claims made against them.

Why do contracts require one party to carry insurance?

These clauses are used to manage risk. They ensure that if something happens, there is a financial resource (insurance) to cover losses.

Often, this works alongside indemnity clauses. The contract may say you are responsible for certain risks, and the insurance ensures you have the ability to cover them.

What to do next...

1. Check who must carry the insurance and who is covered.
2. Look for "additional insured" requirements.
3. Review what types of claims the policy covers.
4. Confirm your policy matches the contract terms.

What to consider in your specific situation

While insurance can protect both sides, how it works depends on your contract and coverage details.

• Who is required to carry the insurance.
• Whether the other party is added as an insured.
• The types and limits of coverage required.
• The risks tied to the work being performed.
• How indemnity clauses interact with insurance.
• The potential cost of claims or disputes.

Understanding how insurance is structured in your contract can help you see who is really protected—and where your risks remain. Since every situation is different, consider more information through Rocket Copilot, a Legal Pro, or a legal document review to move forward with confidence.