Government Contractor Insurance Requirements: A Complete FAR Guide

Insurance may not be the first thing you think about when learning how to win government contracts, but getting it wrong can disqualify your proposal, delay your start date, or create unallowable costs that eat into your margin. The good news: once you understand the framework, the requirements are logical and manageable.

The Federal Acquisition Regulation (FAR) is the master rulebook for federal procurement. FAR Part 28, titled “Bonds and Insurance,” is where the government spells out its insurance and bonding expectations for contractors ^[1]. But here is the key insight that trips up newcomers: there is no universal insurance policy list that applies to every federal contract. Instead, the Contracting Officer (CO) — the government official authorized to enter into and manage the contract — selects specific insurance clauses and inserts them into your contract based on three factors: the contract type (fixed-price versus cost-reimbursement), the place of performance (a government building, your own facility, or overseas), and the nature of the work (IT services, construction, healthcare, hazardous materials handling, and so on).

This means your insurance obligations are always contract-specific. The place to find them is Section I (Contract Clauses) and Section H (Special Contract Requirements) of your solicitation or award document. Read those sections before you call your insurance broker — not after.

The single most common insurance clause small and mid-size contractors encounter is FAR 52.228-5, “Insurance — Work on a Government Installation” ^[2]. If any of your employees will perform work at a federal facility — a military base, a government lab, a VA hospital, a federal office building — the CO will almost certainly include this clause. It requires you to carry, at minimum, three types of coverage:

The minimum dollar limits for each coverage are not fixed in the FAR text itself. Instead, the CO fills in the minimums in the contract Schedule, tailoring them to the agency’s risk profile and the nature of the work. A janitorial contract at a federal office might carry lower CGL limits than a hazardous-waste remediation project at a military depot. Always check your specific contract for the stated minimums — do not assume that last year’s limits apply to this year’s award.

One detail practitioners sometimes overlook: the clause may also require you to name the U.S. Government as an additional insured (a party covered under your policy besides your own company) and to provide a waiver of subrogation (an agreement that your insurer will not try to recover costs from the government after paying a claim). Coordinate these requirements with your broker early, because not every off-the-shelf policy includes them automatically.

When contract performance moves outside the United States — or onto U.S. military installations overseas — a different set of rules kicks in. The Defense Base Act (DBA), codified at 42 U.S.C. §§ 1651–1654, generally requires workers’ compensation coverage for employees working abroad on covered contracts ^[4]. This applies to U.S. citizens, lawful permanent residents, and third-country or local national employees. The implementing clause is FAR 52.228-3, “Workers’ Compensation Insurance (Defense Base Act)” ^[4].

DBA insurance is not the same as your domestic workers’ comp policy. It is a specialized product, often significantly more expensive, and not every carrier writes it. Premiums vary widely based on the country of performance, the occupation of the employees, and the security environment. If you are pursuing overseas contractor insurance opportunities, get DBA quotes during the proposal phase — not after award — because a DBA premium surprise can destroy your pricing.

A related clause, FAR 52.228-4, “Workers’ Compensation and War-Hazard Insurance Overseas,” addresses situations involving the War Hazards Compensation Act (WHCA), which can reimburse certain war-related injury costs ^[5]. These two clauses sometimes appear together in contracts for work in conflict or post-conflict zones.

Can you get a DBA waiver? Yes, but it is not simple. A DBA waiver must be formally issued by the U.S. Department of Labor and recognized by the contracting agency ^[11]. Do not assume that a host-nation insurance policy satisfies the requirement without a written waiver in hand.

If your contract is cost-reimbursement — meaning the government pays your allowable, allocable, and reasonable costs plus a fee, rather than a fixed price — an additional clause enters the picture: FAR 52.228-7, “Insurance — Liability to Third Persons” ^[3]. Under this clause, the government agrees to reimburse certain third-party liabilities and the insurance premiums you pay to cover them, provided those costs meet the FAR’s allowability rules.

This does not mean the government is your insurer. You still must maintain prudent insurance coverage. What it means is that the cost of that coverage — and in some cases, the cost of claims not covered by insurance — can be reimbursed as a contract cost, subject to the allowability criteria in FAR 31.205-19 (more on that below). Practitioners should note that this clause creates a nuanced interplay between your insurance program and your incurred-cost submissions; your accounting system needs to track these premiums and allocate them correctly.

Certain types of work trigger their own insurance clauses beyond the core three:

If you are providing medical staffing or clinical services to a federal agency — such as the Veterans Health Administration or the Defense Health Agency — expect FAR 52.237-7 to appear in your contract. The CO specifies the medical professional liability insurance minimums, which typically must be maintained on a per-occurrence and aggregate basis. Practitioners bidding on healthcare opportunities should verify whether the clause requires occurrence-based or claims-made policies, as the distinction affects both premium cost and tail coverage obligations after the contract ends.

Here is where experienced contractors still get caught. Not every insurance premium you pay is reimbursable or allowable as a contract cost. FAR 31.205-19, “Insurance and Indemnification,” governs which insurance costs the government considers allowable (eligible for reimbursement or inclusion in your indirect rates) ^[8]. The general rule is that reasonable and customary business insurance is allowable. But several categories are unallowable or restricted:

If you work in federal construction, you will encounter the Miller Act (40 U.S.C. §§ 3131–3134), which requires performance bonds and payment bonds for construction contracts above the statutory threshold ^[7]. A performance bond guarantees you will complete the work; a payment bond guarantees you will pay your subcontractors and suppliers. For smaller construction awards below that threshold, the CO may require alternative payment protection instead of a full bond.

Bonds and insurance often live in the same risk-management conversation, and your surety company may even be the same firm that writes your insurance. But they are fundamentally different instruments: insurance transfers risk to an insurer, while a bond is a three-party guarantee (you, the surety, and the government) where the surety expects to recover from you if it has to pay a claim. Understanding the distinction between Miller Act bonds vs insurance is critical for any firm pursuing federal construction insurance requirements.

If you are a prime contractor using subcontractors who will perform on a government installation or overseas, you are responsible for flowing down the applicable insurance requirements to them. The government holds you accountable for your subcontractors’ compliance. This means collecting certificates of insurance (COIs) from your subs, verifying that coverages and limits match the contract requirements, confirming additional insured and waiver-of-subrogation endorsements, and doing all of this before your sub starts work.

Practitioners managing large subcontractor bases should build insurance compliance into their subcontract templates and onboarding checklists. When onboarding a new subcontractor, you can verify their entity information using GovBidLab’s free UEI Lookup tool to confirm their SAM.gov registration status before requesting insurance documentation.

Whether you are learning how to win government contracts for the first time or tightening your existing compliance program, the following steps form a reliable process for risk management for federal contractors:

Even experienced firms make insurance-related errors that create compliance gaps or unnecessary costs. Here are the ones that come up most often in practice.

Mastering these details is part of understanding how to win government contracts sustainably — not just winning awards, but executing them without compliance-driven cost overruns or performance disruptions. A solid federal contract compliance checklist treats insurance as a foundational element, not an afterthought.

Pull up the solicitation or contract you are currently working on and turn to Section I. Identify every insurance clause by its FAR number, note the required coverages and minimum limits, and send that list to your insurance broker with a request for a coverage gap analysis. If you do not yet have a broker experienced in government contractor insurance, ask your local Small Business Development Center (SBDC) or Procurement Technical Assistance Center (PTAC) for a referral. Getting insurance right early is one of the most practical things you can do to protect your company and strengthen your competitive position.