Leveraging a vendor’s or service provider’s insurance policy can reduce exposure to loss and the costs associated with it, transferring the risk to the other businesses. For example, groundskeeping contractors might assume the property owner’s liability when working on the home, Multi-Housing News notes, reducing financial risks so that underwriters can assess lower premiums.
This is typically done with automobile insurance policies, workers’ compensation coverage and general or employer’s liability, among other types. The vendor or other business generally must include the owner as an additional insured on their policy for this to prove successful. That step allows losses to be tendered directly to the insurance provider, the news source notes.
To perform such a risk transfer, the insurance requirements must be consistent and specific indemnification wording should be incorporated into contracts. Minimum coverage levels, maximum deductibles and the insurer’s financial rating should be evaluated beforehand, MHN indicates.