Insurance Requirements in Commercial Contracts: A Plain-English Guide for Australian Businesses
Australian businesses are increasingly being asked to provide proof of insurance before they can start work. Whether it’s a client agreement, lease, subcontract, or tender document, insurance clauses are now standard — and getting them wrong can delay projects, breach contracts, or leave you uninsured when it matters most.
This guide explains insurance requirements in commercial contracts in clear, practical terms, so you understand what’s being asked, why it matters, and how to make sure your cover actually complies.
Why contracts include insurance requirements
Insurance clauses exist to transfer risk. Clients want confidence that if something goes wrong — financial loss, injury, professional error, or cyber breach — there is insurance in place to respond.
If your insurance doesn’t meet the contract terms:
You may be in breach before work even begins
Claims can be declined
You may be personally liable for losses
Common insurance types required in Australian contracts
Public Liability Insurance
Covers injury or property damage to third parties arising from your business activities.
Common limits: $5M, $10M or $20M.
Often required by:
Landlords
Councils
Construction principals
Event organisers
Professional Indemnity Insurance
Covers claims arising from advice, design, or professional services.
Typically required for:
Consultants
Engineers
IT professionals
Real estate agents
Accountants and advisors
Contracts may specify:
Minimum limit (e.g. $2M or $5M)
Retroactive cover
Run-off cover after project completion
Cyber Insurance
Increasingly required in:
IT contracts
Professional services agreements
Data-heavy industries
Clauses may reference:
Privacy breaches
Network security failures
Data recovery obligations
Management Liability / D&O
Required where directors, partners or board members are exposed to:
Employment disputes
Regulatory investigations
Shareholder claims
The most common contract traps we see
Policy limit mismatches
Your policy may be $2M, but the contract requires $5M.Incorrect insured entity
The contract names a trust or joint venture not listed on the policy.Missing retroactive dates
Critical for PI policies — especially for ongoing services.Uninsured contract assumptions
Not all contractual liability is automatically covered.
What happens if you don’t comply?
Non-compliance can result in:
Delayed payments
Terminated contracts
Uninsured claims
Personal liability for directors
This often only comes to light after a claim, when it’s too late.
How an insurance broker helps
A broker doesn’t just “place a policy”. They:
Review contract clauses
Align policy wording with obligations
Negotiate insurer endorsements
Confirm compliance in writing
At Design Cover Insurance Brokers, we regularly review contracts before they’re signed — saving clients from expensive mistakes.
Final thought
If a contract asks for insurance, don’t assume your current policy is “close enough”. Small wording gaps can have massive consequences.