3 Questions to Ask When Working with Third Party Contracts
Managing risks when working with third parties can be made even more effective when you’re asking the right questions. But what exactly are the questions you need to be asking? Today, we’ll show you exactly what you need to look out for the moment a Certificate of Insurance (COI) is passed on to you by a third party you’re working with.
What are the risks involved?
When handling COIs, it’s crucial that you’re aware of the risks involved in every step of the way. You need to be informed of anything that might go wrong eventually by considering the factors that are present at the moment or will resurface in the near future. Because of these potential risks, it’s important that you address these concerns to the third party for you to assess if they can cover those concerns. Another benefit of knowing the risks is being able to ask if the third party will cover the costs they might incur. When you evaluate the risks, a majority of the insurance requirements will be mapped out for you, you can already establish a classification system that works for you and you’ll be able to reuse it the next time you encounter a third party company and a COI they’ve given.
How do I decide what to do with different types of risks?
It’s important that your contract includes an indemnification agreement that protects your business from anything that might go wrong from the third party’s activity, product usage, and facility usage. Not only should it be included, but it should be made transparent. The nature of the risks, as well as the level of insurance you can receive, must be stated precisely to avoid any misunderstandings that the risks might present. It should also include the level of protection that the third party can give your business, employees, and other related people in your business. Make it a point that the contract ensures you as broadly as possible and that they favor your terms. It’s also a wise thing to make sure that the third party understands their role, obligations, and the insurances involved during the negotiation. Clear out any questions or concerns that may later arise to enable both parties to have more time to prepare and avoid delays in anything that requires immediate attention later on.
How do I make sure that the third party has obtained the required insurance?
Before you think of anything else, the point of obtaining the COI and checking it over is to make sure that the third party company has gathered the required insurances and that it’s valid throughout the contract. The COI is usually accompanied by information with regard to the insurance policy endorsements provided by the third party’s insurance agent. Keep up to date with the insurances’ expiry dates as well as these are often overlooked, causing more complications that can affect the business in more ways than one. To avoid further unfortunate instances and to manage compliance for all ongoing contracts, a risk transfer procedure must be set between you and the third party company. Once you’ve accomplished this, you’ll be able to manage the insurance risks for future projects.
The answer to ALL 3 questions
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