What Insurance Do Subcontractors Need?
Whether you are a subcontractor or a contractor working with subs, knowing what insurance you need is important. Subcontractor insurance is not a 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 handles the damage. This is time-consuming and expensive for contractors. As a result, 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 sustains an injury or they make a mistake on a project.
We are going to look at some common subcontractor insurance coverage options. Then we will 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 subcontractors work on. Most of the time, contractor general liability insurance will not cover a subcontractor.
General liability insurance does not always extend to third parties. Because of this, employers do not want to hire subcontractors who don’t carry general liability insurance.
One of the most important reasons for subcontractors to carry this coverage is to show potential employers that they are proactive.
When Do I Need Commercial Auto Insurance?
If driving is a regular part of the job or if a subcontractor is using a personal vehicle to do a job for a client, they need commercial auto insurance. If there is an accident while working, the other parties involved can go after the driver and their employers for the damage. To protect both subcontractors and employers from a claim like this, commercial car insurance needs to be in place.
What is Professional Liability Insurance (aka E&O)?
Professional liability insurance protects from mistakes subcontractors make but are unaware of while doing a job. This coverage is not for physical damage but for claims where a client says a subcontractor 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 they did not mean to make a mistake, a client can still sue.
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. Many employers will also ask to see a certificate of insurance (COI) proving that insurance coverage is in place.
What Types of Insurance Do Subcontractors Need?
Most employers will ask to see proof of insurance coverage for subcontractors. The best way for a subcontractor to prove they have coverage is with a COI. A certificate of insurance summarizes coverage terms, conditions, and how long the policy is effective. To learn more about COIs and insurance tracking, check out the SmartCompliance blog.
