How Much Insurance Should You Require From Vendors? Limits by Vendor Type

Last updated July 2026.

Most US businesses require vendors to carry at least $1 million per occurrence and $2 million aggregate in commercial general liability, $1 million in commercial auto, and workers compensation at statutory limits with $1 million employers liability. Higher-risk vendors and larger contracts push those numbers up, often with a $1 million to $5 million umbrella on top. The right limit is driven by the vendor's risk and the size of the loss they could cause you, not by a single default number.

Setting insurance requirements too low leaves you exposed when a vendor causes a claim that blows past their limit; setting them too high knocks out small vendors who cannot meet them and slows onboarding for no added protection. This guide gives the standard baselines, how to adjust them by vendor type, and the endorsements that matter as much as the dollar figure.

How much insurance should you require from a vendor?

At a minimum, require commercial general liability of $1 million per occurrence and $2 million aggregate, which is the near-universal baseline across US contracts. Add commercial auto at $1 million combined single limit if the vendor drives to your site or transports anything for you, and workers compensation at statutory limits with employers liability of $500,000 to $1 million for any vendor with employees. Whether you need more comes down to one question: how large a loss could this vendor realistically cause, and can their limit absorb it. A janitorial crew and a crane operator should not carry the same requirement.

What are standard vendor insurance requirements by vendor type?

The baseline holds for most low-hazard vendors, then scales with risk. The table below shows typical US requirements. Treat them as starting points, then match the limit to the specific exposure and the value of the contract.

How much general liability insurance should a contractor have?

A general contractor should carry commercial general liability of at least $1 million per occurrence and $2 million aggregate, and most owners and developers require a $2 million to $5 million umbrella on top for larger projects. On construction work the aggregate matters as much as the per-occurrence figure, because several claims on one busy year can erode a shared aggregate. That is why many contracts also require a per project aggregate endorsement, so one job's claims do not eat the limit protecting yours. The limit alone is never enough for construction; the additional insured and waiver of subrogation endorsements are what actually route the protection to you.

Should you require a vendor to name you as additional insured?

Yes, for almost any vendor performing work for you, require additional insured status on their general liability policy, and for construction require it for both ongoing and completed operations. Additional insured status extends the vendor's coverage to defend and indemnify you for claims arising from their work, which a certificate holder line alone does not do. Pair it with a waiver of subrogation so the vendor's insurer cannot recover against you after paying a claim. These two endorsements decide whether the vendor's high limit actually protects you or just protects them.

What insurance limits should you require from a small vendor?

For a small, low-risk vendor, the standard $1 million per occurrence and $2 million aggregate general liability is usually the right floor, and dropping below it rarely saves the vendor meaningful money while leaving you underprotected. Where you can be flexible is the umbrella and the auto requirement: a solo consultant who never drives to your site does not need $5 million in coverage or a commercial auto policy. The mistake is applying a heavy contractor requirement to a small service vendor, which stalls onboarding without adding real protection. Set the requirement to the exposure.

Do vendor insurance requirements change by state?

The liability limits you require are set by contract and do not change by state, but workers compensation rules do. Every state sets its own workers compensation requirements, a few restrict or prohibit waivers of subrogation on comp, and some exempt very small employers from carrying comp at all. Set your general liability, auto and umbrella requirements uniformly, then handle workers compensation according to where the vendor operates. When a vendor is genuinely exempt from carrying comp, get that in writing rather than waiving the requirement informally.

Put the requirement in the contract, then verify it

A limit only protects you if it is written into the contract and confirmed on the actual policy. Set your required coverages, limits and endorsements once, put them in the vendor agreement, and then check every incoming certificate against them rather than filing it. When you onboard a new vendor and set them up for payment, the insurance check belongs in the same step as collecting their W-9 and banking details, right alongside the tax and payment data your team already gathers before an invoice ever hits the accounts payable workflow. The verification itself is what vendor insurance compliance software automates: it reads each ACORD 25, checks the limits and endorsements against the rule you set for that vendor type, and flags anything short before the vendor is cleared to work. For the full requirement checklist, see vendor insurance requirements, and for the endorsements behind the limits, the CG 20 10 vs CG 20 37 additional insured forms. Teams standardizing this across many vendors run it through COI compliance software so every requirement is scored pass or flag automatically.