Construction projects are almost a minefield of possible risks and liabilities. Managing risk and, eventually, shifting liability exposure to other firms is everyone’s goal throughout the construction process.
Most of the time, they attempt to direct the spotlight onto YOU, the subcontractor.
There are methods of self-protection. You may improve your odds of survival by being familiar with and making good use of your construction insurance program and acquiring coverage for your risks.
Making a livelihood as a subcontractor can be a fantastic alternative if you possess a specific expertise or skill, especially one in high demand. You won’t be responsible for managing a company or checking in on a project’s progress at every stage.
You may instead take center stage in several more extensive initiatives. Naturally, getting enough subcontractor insurance is a good idea if being a subcontractor is your primary income source. Except for the general contractor’s or employer’s insurance, subcontractors are usually not required to carry any coverage.
In most instances, no kind of insurance, including general liability, will be mandated by law. Getting subcontractor insurance is still a good idea, especially since your employer could request it.
What is subcontractor insurance?
The word “subcontractor insurance” refers to policies that attempt to financially shield subcontractors against claims of harm or property damage caused by third parties. Although subcontractors are most often linked with building projects, this coverage applies to those working in advertising, media, and technology.
Depending on the field, some regulations may be mandated by law. Other times, they are stipulated in a commercial deal.
Why do subcontractors need insurance?
There are many grounds for suing a subcontractor. They risk a costly legal struggle regardless of if they are not at fault. Having the correct insurance coverage might shield you from this kind of danger. Insurance may be required to obtain specific contracts when working with government bodies.
IImportant Coverages for Your Subcontractors
General Liability
Every subcontractor needs a solid general liability insurance policy. Damages to property and injuries to non-employees caused by you on the job are covered.
Products and finished operations coverage should also be included in standard liability insurance for subcontractors. This broadens the scope of your insurance to cover claims arising from injuries or property damage even after the project is complete. If a deck you constructed a year ago were to collapse, injuring people, it would be an example of a claim for finished operations.
Property/Contractors Equipment
Working with heavy machinery or specialized tools is commonplace for subcontractors. On the other hand, you may own an office facility where you store the equipment and replacement parts that your clients have bought or are awaiting installation.
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The theft of any equipment from a construction site may seriously dent your budget. A property or heavy machinery insurance policy might cover this kind of property.
Workers’ Compensation
Construction sites are notorious for the high rate of employee injuries. A little injury may be manageable to pay for, but a major one might put your business out of business. This coverage is also mandated by law in the majority of states. Furthermore, you may be held liable for any accidents sustained by your independent contractors, but this varies by state.
If one of your employees suffers a work-related injury, workers’ compensation will pay for their medical bills. Your company must have workers’ compensation and employers’ liability insurance to safeguard itself from the financial burden of these injuries.
Commercial Auto
Contractors should have commercial car insurance if your company utilizes their vehicles for work. This insurance will cover any damages to business cars and any liabilities resulting from incidents on the job.
Bonding
A surety bond or subcontractor default insurance policy will protect you if you’re submitting a bid on a publically financed or large-scale construction project.
If your business goes out of business or your finances become too tight, these plans will cover your commitment to complete the job. This not only reassures the general contractor or owner of the project that they may employ another subcontractor to complete the job for which they have already paid, but it also provides them peace of mind.
Excess Liability
Getting liability coverage that will safeguard your company from lawsuits is crucial since court awards can sometimes reach millions. Increases to your general liability, employer’s liability, and commercial car coverage are often possible with an excess insurance policy.
Environmental
Being held responsible for an accident that leads to a claim related to the environment might have far-reaching effects. The United States Environmental Protection Agency (EPA) may occasionally demand payment for cleaning expenses, penalties, and more. Ifd out of pocket, may pollution claims put people out of business.
Environmental or pollution insurance will pay for the damages and penalties if you produce pollution on the work site (or while transporting someone).
Errors And Omissions (E&O)
Your general liability coverage does not cover specific claims. Other than claims involving physical harm or property damage, there are some scenarios in which you will want coverage. Here, E&O insurance for contractors might be a lifesaver, providing coverage for disputes or accusations involving failure to deliver promised services, carelessness in rendering expert advice, lack of effort, mistakes, missing details, discrepancies, and errors.
What Are The Benefits Of Subcontractor Insurance?
In most states, subcontractors are exempt from insurance requirements. There are two approaches you may use to ensure your risks are covered.
The first thing you may do is request that the contractor’s insurance coverage include you as an extra insured. Most contractors would rather not deal with someone who does not have insurance. Thus, it’s rather doubtful that they would. Why? Because then you’d have to own up to any risks and responsibilities that may arise. Plus, you have no idea if their insurance provides enough coverage, even if they agree to this arrangement.
To be sure, getting the correct subcontractor insurance plans is your best bet; doing so will provide you with the following advantages.
Protect Yourself From The Specific Dangers You Experience As A Subcontractor With The Help Of Insurance
There is a unique set of dangers associated with every industry and job. For that reason, it is essential to get the appropriate mix of subcontractor insurance plans. Your company will be shielded from the specific dangers it encounters.
You may tailor your insurance to your area of expertise by purchasing policies covering professional liability, tools, and equipment. It is possible to get business vehicle insurance if you use your vehicle for commuting to and from work.
You May Meet The Criteria Of The Contract With The Help Of Subcontract Insurance
While it is not mandated by law, it is common practice for contractors to demand subcontractors to have workers’ compensation and general liability insurance before they would work with them. That way, they won’t take unnecessary chances. It is common practice for contractors to request evidence of this insurance and enough coverage before signing any paperwork.
You May Enhance Your Trust By Obtaining Subcontractor Insurance
Proper insurance coverage demonstrates that you are willing to shoulder the risks associated with your activities. Doing so further reflects your dedication to your work. You may improve your standing in the business with subcontractor insurance.
Final Note
With subcontractor insurance, you can protect your company and investments in one of the most high-risk sectors. Contact an insurance expert familiar with your industry and ensure you understand your policy’s coverages.
