Contractual Risk Transfer

What is contractual risk transfer? This is when you transfer the legal and financial responsibility for a loss from one individual or organization to another. This can be as simple as taking a taxi to work on a day that the roads are extremely hazardous. Business will often transfer part of their financial exposure on a risk under a lease or other contracts. The lease or contract will hold you responsible to provide the property and/or liability protection.

Do you need this?
You need to check your lease or contract over carefully for Hold Harmless and Indemnity Agreements. An example is references to your needing certain business interruption coverage which could be very difficult to fulfill.

The insurance answer
You can choose to depend on insurance provided by someone else to protect your interest. You cannot control this and need to consider this option carefully. An example is operating as a sub-contractor on a construction site. Often you can choose a contract that has a percentage charge for insurance. This can exceed what you would pay for your own policy.

Your own policy can have much wider coverage then what you will gain as an Additional Insured. Another example is purchasing cargo coverage provided by a moving company vs having your own comprehensive homeowner policy with some coverage while goods are in transit. Talk to your broker or agent about your particular situation.