Subcontractors can make work easier and help a project go faster, so they’re often hired for large-scale projects. Unfortunately, subcontractors may not always be covered under your basic contractors insurance policy. A contractors insurance policy typically only covers you and your full time employees in case of an accident or claim.
There are two ways to avoid this: you can either extend your contractor’s insurance policy to cover subcontractors or you can require each subcontractor you hire to carry their own insurance.
Adding subcontractors to your insurance usually means higher premiums, since you would be extending the coverage. When you require subcontractors to have their own liability insurance, any accident or mistake they have will be handled by their insurance instead of yours.
Contractors may also require subcontractors to carry Owners and Contractors Protective Liability Coverage (OCP). This protects the contractor from mistakes the subcontractor may make while working for them.
What Does General Contractors Insurance Usually Cover?
This covers the physical property of the business. Yet, property coverage doesn’t always cover equipment. While property insurance covers the work building and its assets, floater coverages help pay for equipment that is lost or damaged due to a covered incident. An equipment floater is crucial for contractors, as it can also cover items in transit. Covered incident include fire, wind damage, theft and vandalism.
Liability insurance steps in if you or a subcontractor accidentally cause injury or property damage to someone else during the workday. Keep in mind that here are different types of liability insurance, though. For example, general liability insurance can be useful, but it will only stretch so far. Professional liability insurance will step in if claims arise due to negligent acts on behalf of the business. In other words, if you or one of your full-time contractors makes a mistake that causes property damage and the client sues, professional liability will step in to help pay for damages and legal fees.
To summarize, important liability coverage for you to consider as a contractor include:
Professional Liability covers claims of professional negligence that may cause a client to lose money.
Umbrella Liability fills in the gaps left by your other liability insurance coverages in case they reach their limits. If your general liability insurance policy covers $1 million for a claim and a lawsuit ends up costing $2.5 million, umbrella liability insurance can step in to help pay for the remaining $1.5 million.
Contractors travel a great deal in the course of a workday. Work vehicles require commercial auto insurance. Personal auto insurance typically won’t cut it when it comes to work-related accidents or accidents that occur to a company-owned vehicle. Commercial auto policies contain the same coverages as personal auto policies, including comprehensive, collision, uninsured/underinsured motorist, personal injury protection and liability. If you have hired vehicles, you can also add non-owned vehicle coverage. Even personal vehicles being used for work should be covered beneath commercial auto insurance rather than a personal policy.
Nearly every business that operates in the United States is required to have workers compensation coverage. Laws and regulations vary per state, however. This insurance helps when an employee is injured on the job.
Do Contractors Need Workers Compensation for Subcontractors?
This depends on the work of the subcontractor and state regulations on who is considered an employee. Employees must be provided with workers compensation insurance, but subcontractors don’t have this requirement. Still, in most states, you are generally expected to carry workers compensation for subcontractors if the subcontractor does not already carry it. This is another reason that, as a general contractor, you may consider requiring subcontractors to carry their own insurance.
How Much Does General Contractors Insurance Cost?
Contractors insurance costs a median of about $580 a month. This varies depending on the size of the business, the number of employees, claims history, location and the amount or types of insurance. The median cost of general liability for contractors is around $90 per month. You may pay around $265 a month for workers compensation coverage. It also depends on the types of projects you are working on. Contractors that work on expensive or “high risk” projects may pay more for general contractors insurance. Speak with an insurance agent about ways you can save money on contractors insurance while covering subcontractors working for you and your business.