FAR 28.301—Policy.
Plain-English Summary
FAR 28.301 states the Government’s basic policy on when contractors must carry insurance and when the Government may limit, approve, or waive certain coverage. It covers contractors subject to CAS 416, mandatory insurance required by law or regulation, insurance needed to protect Government property or interests, the Government’s right to disapprove insurance that is not in its interest, how insurance costs are evaluated for allowability under FAR 31.205-19, special treatment for contracts performed outside the United States and its outlying areas, coordination among multiple agencies reviewing a contractor’s insurance program, and a special rule for nonpersonal services contracts for health care services requiring medical liability insurance and indemnification. In practice, this section tells contractors what coverage they must maintain and tells contracting officers and agency reviewers when they can require, reduce, or reject coverage. It is important because insurance affects contract risk allocation, pricing, compliance, and the Government’s ability to recover for loss, damage, or liability. The section also links directly to other FAR provisions and external legal requirements, so it is not a stand-alone rule but part of a broader risk-management framework.
Key Rules
CAS 416 insurance requirement
For contractors subject to CAS 416, the Government requires insurance, whether purchased or self-insured, for the perils to which the contractor is exposed. This requirement applies unless the contract lawfully provides Government indemnification under specified circumstances or expressly relieves the contractor of liability for loss of or damage to Government property.
Government may disapprove coverage
The Government reserves the right to reject insurance coverage that is not in its interest. This means the contractor cannot assume that any proposed policy, deductible structure, or self-insurance arrangement will be accepted simply because it is commercially available.
Insurance cost must be allowable
Even when insurance is required or permitted, the cost of the insurance program must be tested for allowability under FAR 31.205-19. Contractors must therefore ensure the coverage, premiums, and related costs meet the cost principles before charging them to the contract.
Mandatory insurance by law or necessity
All contractors, whether or not subject to CAS 416, must carry insurance when required by law or regulation, such as workers’ compensation. Insurance is also mandatory when commingling of property, the type of operation, ownership circumstances, or contract conditions make coverage necessary to protect the Government.
Overseas minimums may be reduced
The minimum insurance amounts required elsewhere in the FAR may be reduced for contracts performed outside the United States and its outlying areas. This recognizes that local market conditions, legal regimes, and operational realities may make standard domestic minimums impractical or unnecessary.
Multi-agency coordination required
When more than one agency is involved, the agency responsible for reviewing and approving the contractor’s insurance program must coordinate with other interested agencies before taking significant action. This helps avoid conflicting requirements and ensures a consistent Government position.
Health care services special rule
Contractors performing nonpersonal services contracts for health care services must maintain medical liability insurance and indemnify the Government for liability-producing acts or omissions by the contractor, its employees, and agents. This is a specific risk-allocation rule tied to health care performance.
Responsibilities
Contractor
Maintain required insurance coverage, including purchased insurance or self-coverage where applicable; obtain legally required coverage such as workers’ compensation; ensure coverage is sufficient to protect Government interests when property is commingled or contract conditions create risk; comply with any special medical liability insurance and indemnification requirements for health care services; and make sure insurance costs charged to the contract are allowable.
Contracting Officer
Determine when insurance is required under the contract and ensure the solicitation and contract include appropriate insurance requirements, exceptions, or indemnification language; evaluate whether proposed coverage is in the Government’s interest; and coordinate with other agencies when significant insurance matters affect multiple stakeholders.
Agency Reviewing/Approving Official
Review and approve the contractor’s insurance program where assigned responsibility exists; coordinate with other interested agencies before acting on significant insurance matters; and consider whether coverage levels, exclusions, deductibles, or self-insurance arrangements adequately protect the Government.
Government
Provide indemnification only when authorized by law and included in the contract under specified circumstances; reserve the right to disapprove insurance coverage not in its interest; and apply the proper cost allowability rules when insurance costs are proposed or billed.
Contractor Performing Health Care Services
Maintain medical liability insurance and indemnify the Government for liability-producing acts or omissions by the contractor, its employees, and agents, as required for nonpersonal services health care contracts.
Practical Implications
Contractors should not treat insurance as a generic overhead item; the required coverage depends on the contract type, the risks involved, and whether CAS 416 applies.
A common pitfall is assuming self-insurance is automatically acceptable. The Government may require coverage, may disapprove certain arrangements, and will still test cost allowability.
Contractors working overseas should check whether minimum insurance amounts can be reduced, but they should not assume lower limits are automatic; the contract and agency review matter.
When multiple agencies have an interest, insurance approvals can take longer because coordination is required before significant decisions are made.
Health care service contractors need to pay special attention to medical malpractice/liability coverage and indemnification language, because this requirement is explicit and can create major financial exposure if overlooked.
Official Regulatory Text
Contractors shall carry insurance under the following circumstances: (a) (1) The Government requires any contractor subject to Cost Accounting Standard (CAS) 416 (48 CFR 9004.416) to obtain insurance, by purchase or self-coverage, for the perils to which the contractor is exposed, except when- (i) The Government, by providing in the contract in accordance with law, agrees to indemnify the contractor under specified circumstances; or (ii) The contract specifically relieves the contractor of liability for loss of or damage to Government property. (2) The Government reserves the right to disapprove the purchase of any insurance coverage not in the Government’s interest. (3) Allowability of the insurance program’s cost shall be determined in accordance with the criteria in 31.205-19 . (b) Contractors, whether or not their contracts are subject to CAS 416, are required by law and this regulation to provide insurance for certain types of perils ( e.g., workers’ compensation). Insurance is mandatory also when commingling of property, type of operation, circumstances of ownership, or condition of the contract make it necessary for the protection of the Government. The minimum amounts of insurance required by this regulation (see 28.307-2 ) may be reduced when a contract is to be performed outside the United States and its outlying areas. When more than one agency is involved, the agency responsible for review and approval of a contractor’s insurance program shall coordinate with other interested agencies before acting on significant insurance matters. (c) Contractors awarded nonpersonal services contracts for health care services are required to maintain medical liability insurance and indemnify the Government for liability producing acts or omissions by the contractor, its employees and agents (see 37.400 ).