Types of Insurance for a Subcontractor

When a contractor wants to speed up the completion of a project or do simultaneous jobs at the same time, getting the services of a subcontractor is the logical thing to do.

Unlike the people who work for the company of the contractor, subcontractors are not considered employees. More often than not, subcontractors are freelancers who work on projects for the short-term. The work relationship between a contractor and subcontractor is often temporary and ends once the project is complete.

Generally, subcontractors aren’t legally required to carry insurance unless the contract’s deal with the client stipulates it. However, it is still wise for contractors to hire only insured subcontractors. After all, they can be sued for any error or mishap caused by a subcontractor.

Also, the insurance that contractors carry rarely cover subcontractors. Most contractor insurance policies specifically exclude any damage or injury caused by parties other than the contractor, unless otherwise specified. It has become common practice among contractors to hire only subcontractors with insurance, which makes a lot of business sense.

If you’re a subcontractor, the types of insurance that you may need to protect yourself and your contractor include:

General Liability Insurance

Of all contractor policies available, general liability insurance is the most common. Depending on your needs, general liability insurance usually covers property damage, personal injury, medical payments, and advertising injury right up to the limit of your policy.

When getting general liability insurance, you need to have it customized just for what you need, because such policies typically cover many other things that are specific to general contractors but not subcontractors.

Worker’s Compensation Insurance

Worker’s compensation insurance is required in many industries, more so in construction, where almost all jobs carry higher-than-usual risks.  And since subcontractors are not employees and therefore not entitled to the worker’s comp insurance that contractors are required to provide, you must have your own worker’s comp policy to protect yourself in case of a mishap at work that leads to an injury. If you have your own crew, then you must get them all worker’s comp insurance as well.

In case you get injured on the job, your workers compensation insurance policy should cover your medical treatment, disability income, rehabilitation costs, and lost wages. Of courage, the amount of coverage depends on the limit of your policy, and that’s why it’s generally wise to get more than you need to meet the bare minimum.

Automobile liability insurance

When you’re a subcontractor with your own employees, it’s likely that you have a vehicle that you use for your business, or a truck that you have entrusted to your crew to use for transporting equipment, workers, and materials to the work site.

Accidents do happen, and if any of your vehicles get involved in one that results in bodily injury, property damage, or loss of life, you’d be thankful if you have automobile liability insurance. Fail to get one, and you will likely be paying out of pocket for claims from third parties who suffer any of the above.

Builders risk insurance

A subcontractor can benefit a lot from builders risk insurance, especially if part of their deal is renting out equipment for a construction project. This type of insurance, which is often provided to complement general liability insurance, is designed to protect builders and subcontractors who lose their equipment due to neglect, damage, or theft.

Roofers insurance

If your subcontracting business focuses on roofing, then you are a practitioner of one of the most dangerous professions out there. Because working at such heights is part of the job description, roofers regularly run the risk of falling off or accidentally dropping their tools and injuring people or damaging property on the ground. And when that happens, the roofing subcontractor better have a roofers insurance policy on hand because if it’s the opposite, any third-party claims for personal injury or property damage have to be paid out of pocket.

Surety Bond

A surety bond protects your client in case you are unable to finish a job. Let’s say that you have decided to back out of your contract; your client won’t be left to suffer the consequences of your decision. Whatever the costs the client would need to find a new contractor to finish the work you failed to complete, your surety bond will cover them. Many clients now typically require subcontractor-specific surety bonds, and you can’t really blame them for wanting to protect themselves from subcontractors who abandon their jobs.

We live in a world where anybody can file a case or make claims against just about anyone. Contractors and subcontractors are ripe targets for such legal actions. Thankfully, you can get the right contractors insurance to protect yourself. Insurance may cost you, but knowing you’re protected can give you the peace of mind that makes it all worth it.

About The Author

Rachel Porter is the content specialist for Custom Contractors Insurance, LLC, an Arizona roofing and contractors insurance company. When not writing, she enjoys reading and mountain biking with her friends.