Whether you’re a business hiring a 1099 contractor or a freelancer signing your next agreement, there’s one clause in nearly every contract that too often gets overlooked—the indemnification clause.

Don’t let the legal jargon fool you. This single clause could have serious financial consequences—especially if you don’t have the right insurance in place.

At Bunker, we help businesses and independent contractors navigate the world of risk and coverage every day. Here’s what you need to know about indemnification clauses—and how to protect yourself from potential pitfalls.

⚖️ What Is an Indemnification Clause?

An indemnification clause is a section in a contract that assigns responsibility if something goes wrong.

In simple terms, it says:

“If you (the contractor) do something that causes damage or harm, and we (the hiring company) get sued because of it, you agree to cover the costs.”

It’s a legal way of saying, “You break it, you bought it.”

🛡️ Why It Matters in the World of Insurance

An indemnification clause often goes hand-in-hand with liability insurance requirements in contracts. That’s because most companies don’t want to assume legal or financial responsibility for someone else’s work.

Here’s the kicker:

If you’re required to indemnify a client and don’t have insurance, you may be on the hook personally for legal fees, damages, and settlements.

But if you do have the right insurance, like General Liability or Professional Liability (E&O), your policy may help cover those costs.

That’s why understanding indemnification clauses isn’t just a legal issue—it’s an insurance issue, too.

🧠 Real-World Example: A Costly Oversight

Let’s say you’re a freelance software developer. You build a product for a client, but a bug causes a major data breach. The client gets sued by their customers.

If your contract includes an indemnification clause—and most do—you could be legally obligated to:

Pay for legal defense costs
Cover damages awarded in court
Reimburse the client for their financial losses

Without proper coverage (like cyber or professional liability insurance), you could face tens of thousands of dollars in out-of-pocket expenses.

With coverage?
Your insurance carrier may step in to defend you and pay damages, depending on your policy terms.

✅ What to Look For in an Indemnification Clause

As a freelancer or hiring manager, here are key things to watch for:

Scope of Indemnity: Does it cover just your own negligence, or does it include any third-party claims?
Mutual Indemnity: Does the hiring company also agree to indemnify you in certain situations? (This is ideal.)
Insurance Language: Does the clause specifically require that you carry insurance to support the indemnity?

🔍 Pro Tip: Bunker helps match your insurance to contract terms, so you’re covered where it matters most.

🔐 How Bunker Helps You Stay Compliant—and Protected

At BuildBunker.com, we work with both companies and contractors to simplify the risk management process. Here’s how we help:

Automated COIs: Instantly provide proof of coverage tied to contract language
Policy Matching: Get insurance tailored to the indemnity and liability needs of your project
Expert Support: We speak both legal and insurance fluently—so you don’t have to

💼 Final Thought: Don’t Sign Blindly

Indemnification clauses may seem like small print, but they come with big consequences. Before signing any contract:

Read the indemnification language carefully
Check if your insurance covers the risks it outlines
Use Bunker to fill any coverage gaps—quickly and affordably

When in doubt, consult a legal or insurance professional. It’s better to ask now than pay later. If you’re interested in learning more please visit buildbunker.com or contact us at support@buildbunker.com!