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Navigating Insurance Coverage for Newly Awarded Government Contractors

September 20, 2023

Government contracting offers exciting new opportunities to contractors who provide goods and services to government agencies, ranging from small projects to multi-year contracts.  In fiscal year 2022 alone, the federal government allocated approximately $696 billion toward government contracts, a $3.6 billion increase from FY 2021.

However, working in this space is a labyrinth that requires navigation to succeed. This article is your GPS, listing contractual terms and insurance requirements. Mastering these elements with expert assistance from Sahouri Insurance will help you thrive in your government contracting initiatives.

Understanding Government Contractor Insurance Requirements

It is a complex endeavor to navigate the intricacies of federal government contractor insurance, requiring meticulous attention to detail. Understanding specialized insurance's complexities is imperative if your business is fortunate enough to be among those awarded government contracts. 

A prerequisite for many government contracts is including the respective government agency or associated entity as an "additional insured" on liability insurance policies. It safeguards these entities from potential liabilities arising from the contractor's operations.

Compliance Matters

Maintaining accurate and detailed records of insurance policies and coverages isn't optional. It's a fundamental requirement. This rigorous documentation serves as proof of compliance and a resource in case of any disputes or clarifications.

Essential Insurance Coverages for Government Contractors

Government contractors should be acquainted with various insurance types to ensure full coverage:

  • General liability insurance: Protects against third-party claims such as bodily injury or property damage. It covers legal expenses and settlements, protecting your business from financial losses. It is a vital component of risk management for government contractors.
  • Workers' compensation insurance: For contractors employing a team, this insurance protects against workplace injuries or illnesses. For example, a workers' comp policy can help cover medical expenses and lost wages if an employee suffers a work-related injury or illness.
  • Professional liability insurance: Government contractors must have professional liability insurance, also known as errors and omissions (E&O) insurance, to protect themselves against professional negligence, errors or omissions, or personal injury claims and to safeguard their reputation.
  • Surety bonds: In specific instances, contractors might require a surety bond, guaranteeing contract fulfillment.
  • Cybersecurity insurance: This coverage protects against cyberattacks, data leaks, and financial penalties.
  • Evaluating coverage limits: In specific high-risk scenarios, contractors might need to consider excess and surplus (E&S) lines of insurance to get comprehensive coverage.

The above insurance types protect government contractors, but more coverage exists. Depending on the contract and operations, a contractor may need more niche insurance for full protection from liabilities. 

Government contractors must constantly review and update policies to stay compliant and protected in this complex environment. Working with knowledgeable insurance professionals can help you get the best coverage for every contract.

It is crucial to take adequate time to study the insurance clauses in your contract, confer with your trusted insurance adviser, and secure the right policies. Doing so reduces financial risk and positions you as a contractor who knows their stuff, meets expectations, and plays by the rules.

You Need a DBA Quote Before Bidding for a Government Contract

New government contractors must understand the importance of getting Defense Base Act (DBA) insurance for their employees. The DBA is a specialized workers' compensation insurance program for overseas contractors and employees. It is mandatory for all government contractors; not complying can lead to costly fines, loss of contracts, and expensive legal fees.

Getting a DBA quote before bidding helps contractors assess insurance costs and be competitive. It also helps them understand coverage requirements and avoid surprises. Prioritizing a DBA quote with Sahouri Insurance helps protect employees, ensures compliance, and reduces financial risks for overseas work.

Subcontracting in Government Contracting

Subcontracting is crucial in government contracting, allowing primary contractors to partner with others to meet contract specifics. This strategy offers access to specialized expertise that is not present in-house, thus allowing top-notch results. It also aids in resource and workload allocation and management, letting contractors concentrate on critical areas while meeting all contract stipulations. 

Choosing the right subcontractors, setting clear terms, maintaining open communication, and having thorough documentation are vital for fruitful subcontracting relationships. In essence, subcontracting is a strategic tool in government contracting that bolsters capabilities and promotes success.

Prime contractors (GC) are increasingly shifting risk to subcontractors. You can negotiate with the prime to transfer some liability to the GC. Doing so early in contract negotiations requires accurate broker costs to help negotiate.

How Contractors Brace for a Federal Government Shutdown

In the event of a federal government shutdown, contractors need to protect their finances and keep their operations running smoothly. They must closely monitor a possible shutdown and review their existing contracts to mitigate the financial impact.

Suggested proactive steps include: 

  • Conducting a comprehensive financial and risk analysis to assess potential threats and identify areas necessary to reduce or realign resources. 
  • Finding new opportunities in the private sector and state and local governments.
  • Building relationships with clients and understanding their needs.
  • Setting aside emergency funds for financial challenges during a government shutdown.
  • Updating business continuity plans, identifying essential functions, and minimizing disruptions.

Contractors can prepare for a possible government shutdown by taking the precautions listed here to protect their businesses and best position them to manage a smoother transition if a shutdown does occur.


For government contractors, ensuring appropriate insurance coverage is more than just a checkbox to tick off. It's a strategic maneuver to navigate each unique contract's intricate requirements and potential hazards. 

Ensuring clarity on insurance stipulations, performing meticulous risk assessments, and enhancing policies with tailored endorsements are vital pillars of this process. 

About Sahouri Insurance

At Sahouri Insurance, our depth of experience and expertise ensure that every government contractor meets the necessary criteria and possesses a fortified shield against unexpected liabilities. With our comprehensive approach, contractors can confidently step into their roles, knowing they have a trusted partner to navigate the complexities of the governmental landscape. We will equip your business with the tools and knowledge to land government contractor jobs successfully. Contact Sahouri today for a thorough review of your needs and options. 

As an independent insurance brokerage firm, we guide our Guests through a technology-driven, consulting-based experience that integrates corporate Risk, Health, and Benefits policies through one, centralized Advocacy Team.