Working with vendors can be extremely beneficial to your Post. Specialized vendors that handle your Post’s food and beverage, alcohol, cleaning or technical needs can be a big help, boosting efficiency while saving on costs.
But working with vendors also presents some challenges. Partnering with a vendor can expose your Post to added risk, so it’s important to minimize the chance of potential problems.
The right level of insurance protection helps protect both you and your vendors, making sure you both are covered in the event of a claim. Here’s your guide to working with vendors and how to check your insurance coverages for a successful partnership.
What to Look for in a Vendor
Always work with vendors that are properly insured. Expertise, recommendations and performance are important but claims can happen even when you work with pros.
The insurance a vendor carries will vary, depending on the vendor’s industry, nature of business and the business relationship they form with your organization. However, almost all vendors you do business with should have two standard insurance policies.
- General liability insurance: This coverage protects your Post from liability lawsuits and protects the vendor from certain claims and lawsuits. This coverage is a must.
- Worker’s compensation: This coverage protects the vendor’s employees in case of an accident or injury. If your vendor’s employees will be at your property, this coverage is necessary. Check with your state for specific requirements and limits.
What to Know About Your Vendor Relationships
A business relationship with a vendor should not expose the Post to excessive risk. Some vendors may manage their risk exposure effectively with only general liability and worker’s compensation coverage. But for others, additional coverage is needed.
Different vendors often have very different risk exposures, so it’s important to ensure their coverage addresses the risks.
- A food and beverage vendor might carry general liability, worker’s compensation, commercial auto and cyber insurance.
- An alcohol vendor should probably show you proof of their liquor liability coverage, since this coverage is usually excluded from their general liability policy.
- A landscaping vendor needs to carry general liability insurance and a surety bonds guarantee.
- A vendor that handles your banking, software, data or networking services needs has higher risk and may need a number of coverages, which may include: general liability, worker’s compensation, cyber liability, fiduciary liability, financial institution and fidelity bond protection, trucking liability, umbrella liability or other coverage.
What Insurance Terms to Know
Often, a vendor will also need additional coverage protection, such as certain endorsements, clauses and riders, for your Post to be fully protected. Here are explanations for some key terms:
- Subcontractor—A vendor undertaking work on behalf of your Post.
- Hold harmless clause—A typical clause of a general liability policy stating that a subcontractor must defend, indemnify and provide additional insured coverage under their policy for subcontractor work performed on behalf of your organization. Make sure your vendor’s policy has this clause.
- Additional insured endorsement—An endorsement a vendor can obtain through their policy coverage that names your Post as additional insured. Additional insureds are allowed coverage protection under the vendor’s policy, without a responsibility to the policy premium or ability to modify the policy terms. This endorsement is very important.
- Certificate of insurance (COI)—A certificate of insurance is a concise document summarizing the details of an insurance policy. The standard format of COIs lists a policyholder’s name, effective date, type of coverage, limits and any named additionally insureds. Ask for the COI.
- Certificate holder—A certificate holder is the named insured on the certificate of insurance. Ensure that the coverage is noted as primary and non-contributory.
- Insurance rider—An insurance rider adds or amends the terms of a policy. If a specific coverage is required for your vendor relationship but isn’t a part of your vendor’s policy, a rider can be added to ensure both you and the vendor are protected. Check the rider to make sure you’re protected.
Working with vendors can be a great help with the operation of your Post, but make sure to do your due diligence before partnering with a new vendor. Ensuring your vendors are covered by the right insurance policies with the necessary riders and endorsements helps protect both you and your vendors.
If you find the policy terms confusing or aren’t sure if you’re protected, don’t hesitate to reach out to your insurance provider with questions. At Lockton Affinity, we can answer your questions about your existing policy coverage and requirements needed for any vendor relationships.