What Insurance Do Subcontractors Need?
Whether you are a subcontractor or a contractor working with subs, knowing what insurance for subcontractors you need is important for your business. Subcontractor insurance is not a state or federal requirement, but a contractor can stipulate a subcontractor carries certain coverage. Sometimes, employers may refuse to hire a subcontractor without the right insurance coverage.
If a subcontractor does not have insurance coverage and an accident occurs, the general contractor or employer is responsible for the damages. This is time-consuming and expensive for contractors, so subcontractors need to have insurance to avoid delays and added costs to a project. It is also important for subcontractors to have insurance when somebody else is injured or you make a mistake on a project.
We are going to look at some common subcontractor insurance coverage options and explain what each is, what it covers, and why it is important.
Do You Need Subcontractor Liability Insurance?
Subcontractor General Liability Insurance covers accidents, injuries, and damages for jobs you are working on. Most of the time, contractor general liability insurance or the insurance your employer carries will not cover a subcontractor.
Because general liability insurance does not always extend to third parties, employers do not want to hire subcontractors who do not carry their own general liability insurance.
One of the most important reasons to carry this coverage is to show potential employers that you are proactive. Not only do you have coverage for losses that may occur, but you are looking out for your well-being as well as your employers and customers.
When do I Need Commercial Auto Insurance?
If driving is a regular part of your job or if you are using a personal vehicle to do a job for a client, you need commercial auto insurance. If you are in an accident while working, the other parties involved can go after you and your employers for the damages. To protect both yourself and your employer from a claim like this you need commercial car insurance.
If you are using your vehicle to commute to and from a job site, you do not need this coverage.
What is Professional Liability Insurance (aka E&O)?
Professional liability insurance protects you from mistakes you make but are unaware of while doing a job. This coverage is not for physical damages but instead for claims where a client says you did not perform up to standards. According to Progressive, “professional liability insurance is protection for your business from claims of negligence.” This insurance coverage is important for helping subcontractors cover the cost of legal fees and settlements.
This subcontractor insurance coverage option is important because even if you did not mean to make a mistake, a client can still file a lawsuit.
Should I Have Workers’ Compensation Insurance?
Workers’ Compensation Insurance requirements vary from state to state, but most states require this coverage for full-time employees. For example, the California Department of Industrial Relations requires employers “by law to have workers’ compensation insurance, even if they have only one employee.”
Because subcontractors are not full-time employees, a general contractor may not have to provide this coverage. To combat this, many subcontractors carry their own workers’ compensation insurance. A lot of employers will also ask to see a certificate of insurance (COI) proving that you have this coverage.
What Types of Insurance Do Subcontractors Need?
As a subcontractor, your employers will ask to see proof of insurance coverage. The best way to prove you have coverage is with a COI. A certificate of insurance summarizes your coverage terms, conditions, and how long the policy is effective. To learn more about COIs and insurance tracking check out the SmartCompliance blog.
Additionally, make sure you have the following coverage:
- Subcontractor Liability Insurance.
- Commercial Auto Insurance.
- Professional Liability Insurance.
- Workers’ Compensation Insurance.