While many agencies have well-established contracts with clients, it’s surprising how often subcontractor arrangements are left vague or informal. In some cases, contractors are expected to provide their own terms, or agencies proceed without clear documentation.

To ensure smoother operations and mitigate risk, it’s advisable to formalise all subcontractor engagements with a clear, written agreement, particularly around insurance requirements. But what type of insurance should contractors hold? How much coverage is appropriate? And does it need to reflect your client contracts?

Type Of Policy

The type of insurance stated within a terms of engagement varies and is dictated by the activities an agency undertakes. Common policies relate to:

• Professional Indemnity
• Public/Products Liability
• Cyber & Data

Any contractor offering services for a fee should have Professional Indemnity cover and if they’re delivering a physical product, they’ll need Public Liability too. It’s also wise for them to have this cover if they attend in-person meetings with your agency, in case they accidentally damage something or hurt someone whilst meeting.

As for Cyber & Data liability, it’s increasingly common for this to be at the forefront of contracts. Any freelancer who delivers a product that’s digitally driven, or involves the use of personal data, should have this in place.

Agency Insurance Clauses

Some agency insurance policies require that all subcontractors meet specific insurance thresholds. If this applies to you, those obligations must be mirrored in your subcontractor agreements, usually by stating a minimum indemnity level.

However, such clauses can be difficult to enforce across all third-party partners, especially when terms change. Agencies may want to consider negotiating these requirements with their own insurer, where appropriate.

Balancing Cost and Risk

A client might insist your agency carries a £5 million Professional Indemnity policy, but that doesn’t mean your subcontractors should carry the same. For tasks involving low-value deliverables such as content editing, or design tweaks, requiring such high limits is often disproportionate and may deter contractors due to high premiums.

A more balanced starting point suggestion would be £1 million in cover for lower-risk contributions, with increased requirements only when justified by the scope or nature of the project.

Aligning with Client Contracts

In some cases, client contracts stipulate that subcontractors must match the insurance limits held by the agency. Failing to comply could result in a contractual breach, so it’s vital to review any such requirements during contract negotiations with clients.

Try to consider how these stipulations will impact your ability to work with preferred subcontractors, particularly if they’re independent or freelance professionals.

Special Clauses and Provisions

Contracts often include unique terms, such as requiring a contractor to maintain insurance for several years after the project ends (commonly up to six years). These details should always be flagged to subcontractors to avoid future complications.

Final Thoughts

When working with subcontractors, the key is to clearly define their role and tailor your terms accordingly. Ensuring your agreements are fair, well-documented and aligned with your own policies and those of your clients can save time, money and legal headaches down the line.

Want to Review Your Coverage?

If you want to check you’ve got the right insurance in place for your agency, or you’re looking to take out a new policy, RiskBox can help. Speak to a member of our team today on 0161 533 0411, or fill in our online contact form.

Photo by Amy Hirschi on Unsplash

About RiskBox Ltd

RiskBox are a specialist commercial insurance broker focused on the creative industries, from agencies to tech, media to entertainment. We are truly independent, without any ownership or investment from insurers, therefore our advice is impartial.