I’m a subcontractor

Subcontractor insurance requirements

As a subcontractor, you most likely aren’t required by state laws to have your own business insurance policies.

However, you may be asked to get liability insurance and/or workers’ compensation insurance in order to get hired by certain employers. Wonder why?

Contractors and/or employers don’t want to risk being held liable for you when you work for them.

Either way, it’s worth it to get yourself set up right, and your first job will usually pay for the insurance. You have two options:

1. Ask to be added to the hiring party’s insurance policy as an additional insured.
Not many people will request to be an additional insured because they realize the risk involved. It can also be risky if they don’t have sufficient coverage and something happens.

2. Get your own insurance.
That way, when you get hired and they ask to see your Certificate of Insurance (COI), you’ll be prepared. And that could be the difference between winning the job or not.

Keep in mind that many contractors are reluctant to hire an uninsured subcontractor because it means they take on all the risks and responsibility of any potential liabilities.

Also, if the hiring party has workers’ compensation (which they probably do), they will get charged for your payroll at the end of the year on their workers’ compensation policy.

Common subcontractor insurance requirements

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I’m hiring a subcontractor

Do my subcontractors need insurance?

Yes. And if they don’t have their own insurance coverage, you shouldn’t hire them unless you’re willing to cover them yourself.

Most clients (companies or individuals) will specify that all contractors need to have insurance, as well as their subcontractors. That relieves the client from any potential obligation arising from injuries, damages, or shoddy work.

They will usually ask for a Certificate of Insurance (proof of insurance) from everyone who is involved in the project.

What kind of insurance?

It depends on what kind of work the subcontractor will perform and/or what policies are required for the project. Typically, the client will tell you which policies everyone is required to have.

Am I liable for my subcontractors?

Yes – you can be held liable for your subcontractor’s work. Contractors in the construction and tech industry often use subcontractors to contribute their specialized set of skills to complete certain parts of the project.

If one of your subcontractors causes damage to a client’s business or home in some way, you could definitely be held accountable.

That’s why you should make sure that everyone working on your project is covered by a liability policy.

Be sure to get a copy of their Certificate of Insurance before you hire them and have them list you as an additional insured on their policy.

Example: You’re remodeling a kitchen and the client asks for a new pantry unit. You subcontract to a carpenter to build it. If it collapses and hurts someone a month later, you could be held liable for their work.

Should I cover my subcontractors under my insurance policies?

It’s not recommended. Typically, a client will ask to see proof of insurance coverage for yourself and anyone else you hire for the project. If it’s not feasible for your subcontractors to have their own insurance, you can add them to your own liability insurance policy.

If you add another person to your policy, you will be charged, and any losses will count against your insurance. That’s why it’s common practice to require subcontractors to have their own coverage, especially if you want to avoid coverage gaps.

Want to add a subcontractor to your insurance policy?

If you’re looking to add a subcontractor on your general liability policy or workers’ comp policy, you’ll need to talk with your insurance agent. Don’t have an agent yet? Contact us!

Handling subcontractor liability insurance

Require your subs to have their own insurance coverage. If you want to go the extra mile, you can also have them name you as the additional insured on their liability insurance policy.

It will give you coverage for their work under their policy, thus taking away that risk of any potential losses by transferring the risk to their policy.

Liability insurance checklist:

  • Make sure they have their own coverage.
  • Include requirements in your contract that they are to have their own insurance.
  • Ask to be listed as an additional insured on their liability policy for the duration of the policy.
  • Make sure to get a copy of their Certificate of Insurance, or COI, for your records.

Should you ask to see proof of insurance?

Yes – you need to ask to see a COI to be sure their insurance coverage is current. You also may need to give a copy to your client or your insurance provider to prove they’re covered.