Government Contractor Insurance: Coverage Essentials Before Bidding on Federal Projects

Securing a federal contract is no small feat. The application process alone is rigorous, and if your business isn’t properly insured, you will not be chosen. Insurance for government contractors — especially international policies tailored to global operations — is a foundational part of eligibility. It offers proof that your company can handle the financial and operational risks of fulfilling government work. Furthermore, having the right coverage can elevate your credibility in an increasingly complicated and changing process.

Understanding Government Contractor Insurance Requirements

Federal government contractors operate under a microscope. From contract award to project closeout, expectations are governed by the Federal Acquisition Regulation (FAR), which sets strict standards around compliance, including insurance. Many agencies require contractors to show proof of specific coverages before awarding a contract, and others require ongoing documentation throughout the project lifecycle.

Insurance requirements vary by contract size, type of work, agency guidelines, and whether the work occurs on U.S. soil or abroad. Domestic general liability alone often doesn’t cut it. If you’re bidding on a project involving overseas operations, for example, global policies like international general liability, global auto, and global property coverage become mandatory.

Must-Have Insurance Policies Before You Bid

Even the most experienced contractors can miss critical coverage gaps. Work with a broker who has experience with the government contracting process and requirements. Here’s what you need in place before submitting a proposal.

General Liability

This coverage is the backbone of most government contractor insurance programs. It covers third-party bodily injury, property damage, and related legal costs. In the context of federal work, it demonstrates fiscal responsibility and readiness for onsite operations, especially in public facilities or government-controlled environments. 

However, many contractors overlook a key factor: global casualty coverage. If you’re deploying teams or subcontractors internationally, standard general liability won’t follow you. You’ll need a global policy that addresses jurisdictional differences and non-domestic claims.

Professional Liability

Also known as errors and omissions insurance, this coverage is essential for firms offering consulting, IT, engineering, or program management services. It protects against claims of negligence, misinformation, or failure to perform services as promised. 

If your team’s advice or design results in cost overruns or operational failures, the financial implications can be severe. Professional liability helps absorb those risks so they don’t derail your contract or your business.

Defense Base Act Coverage

For contracts involving work outside the United States with government or military connections, Defense Base Act (DBA) insurance is often mandatory. It provides workers’ compensation benefits to employees working on overseas U.S. government projects and is governed by federal law. Failure to carry mandatory coverages like DBA insurance can jeopardize contract eligibility or lead to disqualification, depending on the agency’s enforcement policies.

Global Property and Auto

If your government contract involves transporting goods, managing equipment, or operating vehicles overseas, domestic insurance may not be enough. U.S.-based policies often exclude or limit foreign exposures and may not meet local legal requirements.

International risks are typically covered through a foreign package policy, which can include global property coverage for equipment and mobile assets, foreign general liability, international auto liability, foreign voluntary workers’ compensation, and inland marine. These policies address jurisdiction-specific regulations and provide in-country defense and claims handling — critical protections when working across borders.

Cyber Liability and Other Specialized Coverages

With federal contracts often involving sensitive data, cyber liability insurance is quickly becoming a baseline expectation. From phishing attacks to data leaks, a cyber event could not only compromise your contract but also result in penalties for failing to meet federal data security standards.

Other valuable policies include workers’ compensation, commercial auto, and umbrella coverage, which provide additional layers of financial protection and meet agency-specific requirements.

Risk Management as a Competitive Advantage

Insurance compliance doesn’t just keep your business eligible; it makes you more attractive to federal buyers. Agencies look for contractors who demonstrate active risk-management processes, professionalism, reliability, and foresight. Carrying a comprehensive, proactive risk-management portfolio — including tailored government contractor insurance — shows that you’re serious about the contract and capable of handling its demands. In close bids, this level of preparedness can set you apart.

Ready To Bid? Make Sure You’re Covered

Bidding on federal contracts without the proper coverage is a costly risk. Some federal solicitations require certificates of insurance or proof of insurability as part of the bid package itself. Working with an experienced broker early in the request for proposal process ensures you meet submission criteria without delay.

Moody Insurance Worldwide specializes in helping contractors navigate complex coverage requirements domestically and internationally. From Defense Base Act to cyber liability, Moody understands the nuances of federal compliance and the insurance solutions that make your business more competitive.

Contact Moody Insurance Worldwide for a personalized coverage review and quote tailored to your upcoming bid. We’ll assess contract insurance requirements, identify potential gaps, and recommend compliant solutions.

About Moody Insurance Worldwide

We are a specialized, independent insurance agency that provides all types of business insurance for the life sciences and medical technology industries. In addition to essential Property, Liability, and Benefits insurance, we have expertise in Professional Liability, Product Liability, Director & Officer Liability, and International insurance coverage.