Subcontractors and independent contractors may be required to carry insurance on occasion to comply with state legislation and license requirements. Subcontractors may also require insurance to be qualified for contracts and protect themselves from financial damages.
Every project a contractor undertakes has different requirements and resource problems to do the necessary work. Insurance often excludes unlisted subcontractors, making it easy for contractors in need of assistance to disregard policy conditions.
Why Do Subcontractors Need Insurance
For several reasons, a subcontractor may be sued if he or she does not have insurance. Let’s begin with the fundamentals. First and foremost, knowing why you want general liability insurance for subcontractors is the first step toward appreciating its significance.
For example, this insurance policy covers costs in a lawsuit involving a client’s injury due to subpar work or a hazardous construction zone. Lawsuits brought about by inadequate insurance coverage have the potential to devastate a business. For this reason, it is crucial to ensure that you and all your subcontractors have general liability insurance throughout the project.
For example, if a subcontractor is sued without insurance, you may face legal action. This implies that expenses may be borne out of pocket if you do not have coverage. Moreover, a claim against your coverage will result in higher premiums.
What is Subcontractors Insurance
Subcontractor insurance refers to a broad category of policies intended to financially shield subcontractors from lawsuits alleging property damage and injury to third parties. Although they are frequently connected to building projects, subcontractors in other industries, such as technology, media, and advertising, are also covered by this kind of coverage. Certain regulations, depending on the business, are mandated by law. Others are frequently stipulated in a business contract.
Types of Subcontractor Insurance Coverage
Subcontractors can access a range of policies with differing levels of security. Here are a few popular subcontractor insurance plan categories to consider.
General liability
For every subcontractor, a general liability insurance policy is essential. It includes coverage for both physical harm (to a non-employee) and property damage you inflict at the workplace. Subcontractors should also have coverage for finished operations and goods under their general liability policy.
This adds claims that arise after the service is completed to your property damage or bodily injury coverage. General liability insurance has average rates ranging from $40 to $55 per month to $480 to $660 per year. A deck that collapsed a year ago and injured people is considered a completed operations claim.
Property/contractors equipment
You most certainly use heavy machinery or specialized tools in your work as a subcontractor. Furthermore, you may have an office space where you store purchased equipment or replacement components for clients or those awaiting installation. The cost of these devices varies, but removing them from a building site is an expense you never want to incur. An insurance policy for large machinery or property may cover this kind of property.
Workers’ compensation
Construction sites are often the scene of employee accidents. Smaller injuries could be covered out of pocket, but a serious injury might put your business insolvent. Additionally, this coverage is required by law in the majority of states. Depending on your state, you may also be held liable for the injuries sustained by your independent contractors.
Workers’ compensation covers the medical expenditures incurred as a result of an employee’s injury while on the job. Employers should obtain employers’ liability and workers’ compensation insurance to protect their company from the costs of accidents.
Commercial auto
If your company operates automobiles, it’s critical to have them insured by commercial auto coverage for contractors. This coverage will cover any liabilities resulting from on-the-job incidents as well as damage to business cars.
Bonding
If you’re bidding on a large-scale construction project with public money, you’ll need to have coverage through a subcontractor default insurance program or a surety bond.
These policies are intended to cover the loss of your business or project due to financial challenges. Furthermore, this ensures that they can choose a different subcontractor to perform work that they have already paid for.
Does Contractor Insurance Cover Subcontractors
Subcontractors are usually not protected by general contractor insurance. A subcontractor’s insurance coverage is limited to the person’s name mentioned in an extra-insured endorsement maintained by the contractor’s insurance provider.
Contractors and subcontractors may be covered as extra insureds on insurance certificates. Long-term subcontractors are often required to prove coverage. A contractor may demand their subcontractors to include them as supplementary insureds on their insurance policy.
How to Get a Certificate of Insurance for Subcontractors
You must provide proof of insurance to clients, partners, and contractors after a subcontractor acquires liability insurance, otherwise, they will not engage you. That is the purpose of a proof of insurance document, sometimes known as a certificate of insurance (COI). The document is a one-page document that provides a summary and confirmation of your insurance coverage to anyone who requests it. After you buy subcontractor liability insurance coverage from us, a broker may email you a COI right away.
Final Thoughts
Subcontractor insurance offers protection for your company and assets in one of the riskiest sectors of the market. Understanding your policy’s coverage and enlisting an industry-specific insurance expert to navigate it is crucial.