Why Your Vendors Must Have Insurance

Why Your Vendors Must Have Insurance

It’s easy to overlook details like insurance coverage when hiring vendors – but is this lapse putting you at risk?

Key takeaways:

  • Why choosing non-insured vendors puts your community at risk
  • What to look for when choosing insured vendors
  • The importance of making sure your vendors are under contract
  • How VendorSmart can help you manage your third-party vendors

So much time and effort go into keeping managed communities up and running. Most property managers and HOAs stay busy maintaining facilities and grounds, resident compliance, community finances, and more. With so much going on, it can be tempting to gloss over the finer details when it comes to screening vendors for appropriate insurance coverage.  

While it may not seem important when you’re rushing to get the clubhouse plumbing repaired or fielding complaints from frustrated residents over a stalled elevator, checking insurance coverage is one of the most important things you can do to protect your community and yourself. Not having appropriately insured vendors can cost you big-time in the long run. Here’s what you should know.  

Choosing non-insured vendors puts your community at risk

Simply put, anybody that you hire to provide services to your community should provide you with proof of insurance coverage. This includes your regular contracted vendors as well as those called in for one-time projects. 

Why? Because insurance protects the interests of your community. If an accident of any kind were to occur while a vendor is working on your property, your HOA board could end up on the hook legally and financially. 

Aside from obvious potential problems like falling off a ladder or losing a finger to a power saw, insurance can protect your community from wrongful acts such as fraud or negligence on behalf of the vendor. Even if the community property manager or HOA is not directly at fault, an uninsured vendor may land you in legal trouble if things don’t go to plan. 

Therefore, it is vital to do your due diligence and make sure you have your vendor’s insurance documents in hand before letting anyone on the property to do work. 

What to look for when choosing insured vendors

  1. Ensure adequate coverage – we’ve written extensively about what coverage you should be looking for when screening your vendors. Generally speaking, you’ll want to check for general liability, workers comp, equipment or auto liability, and an additional insured endorsement for your HOA. For specific coverage details and amounts, consult your attorney.  
  1. Verification – it’s not enough to take word of mouth as proof of insurance from your vendor. Make sure to get express, written documentation prior to work starting. If you need help monitoring compliance documents, VendorSmart’s software and team of industry professionals guarantee full compliance vetting for every vendor belonging to your management company – at no cost to you or the vendor.

Make sure your vendors are under contract

Finally, you must make sure that all of your vendors are working under a fully executed contract. It’s not enough to have the insurance documents in hand – without a contract, your community is not guaranteed the risk protection that insurance offers. 

It is always a good idea to consult your attorney to draft and review your contracts. Of particular importance is the clarification in the contract that your vendors are not your employees – they are independent contractors who are responsible for maintaining their own insurance coverage for their business. 

Your HOA attorney is the best resource for this documentation. They will be able to create contracts for your vendors with suitable protections for your community. 

VendorSmart is here to help 

If the thought of doing this legwork for screening and approving vendors gives you a headache, you aren’t alone. Many managed communities struggle to keep up with the administrative demands of finding vendors and making sure all of the paperwork is in good order. 

That’s why VendorSmart is a valuable tool for both vendors and communities alike. We connect vendors and community managers in one place. Our team can help you source and vet members, maintain important documentation, help with risk compliance and management, and handle project bidding and proposal requests.  VendorSmart delivers real-time oversight on vital aspects of your business. Visit us today to learn more.