Subcontractors typically aren’t required to obtain their own insurance policies; however, many clients require them to have liability and workers’ compensation coverage as a condition of doing business with them. It may be possible to add them as additional insureds on your general liability policy for specific projects; this option generally only allows for certain coverage levels.
General Liability
Remodeling someone’s home or constructing an office typically involves subcontractors. Contractors insurance typically does not cover subcontractors unless they are employees of your business and listed as insureds in your general liability policy, though you should still require them to carry their own policies with adequate limits.
General liability coverage is an essential part of running any small business, and clients often require that it is in place before considering doing business with you. A policy provides liability protection from lawsuits resulting from third-party bodily injuries, property damages or advertising injuries and is required before accepting new clients. Many companies insist upon it before considering working with your organization.
As a contractor, you may require outside specialists for certain jobs. For instance, when remodeling and discovering toxic mold, hiring outside specialists to remove it might be necessary. Your general liability coverage would provide coverage but might not fully cover their costs without their own policy containing adequate limits.
Since any contractor that you hire must carry liability insurance and list you as an additional insured on their policy if needed, as well as workers’ compensation coverage which covers medical expenses and lost wages should an employee become injured on the job, it is imperative to ask that they purchase their own policy and list you as an additional insured if needed. You should also inquire whether or not they offer workers’ compensation which provides medical expenses coverage and lost wage payments in case an employee gets hurt while working.
Option Two is to require all subcontractors to obtain bonds from surety companies that will pay out in case of an accident, but this solution can be costly as claims take time and require processing before payment can be received.
When hiring subcontractors, you will also need to draft contracts that detail what types of insurance policies they must hold before being brought on board. For instance, you could specify that they possess at least $5 million in general liability and include an “additional insured” endorsement on their policy for the duration of your project together.
Worker’s Compensation
Construction projects present numerous risks that must be managed carefully to avoid mishap. From mistakes resulting in property damage and accidents leading to bodily injury, every step can present its own set of hazards and it is vitally important for contractors to have appropriate coverage against financial loss.
General liability is one of the most frequently carried forms of business insurance, covering expenses such as medical costs and legal fees should anyone become injured as a result of services provided. Furthermore, many companies require subcontractors to carry their own policy before accepting them as subcontractors on any job.
Workers’ compensation insurance is required by law for all employees, including subcontractors. It covers medical costs and lost wages should an injury occur while on the job. If you hire subcontractors without workers’ comp, your responsibility lies with procuring certificates of workers’ comp from them – otherwise penalties and possible criminal prosecution could ensue against your business.
As well as worker’s comp, it may also be worthwhile requiring subcontractors to carry professional liability insurance. This policy covers costs related to lawsuits brought against contractors for negligence or mistakes made on your project; while this type of cover is typically optional for most professionals, it could help to safeguard your business against financial loss.
Some states mandate workers’ compensation coverage if you employ any staff; companies will refuse to work with you without it. But if you’re working as a contract worker rather than employee, workers’ comp usually does not apply. As well, when working on contracts rather than employees they will often require you to obtain their COI; to allow this, add them as an additional insured on your policy for the duration of the project allowing them to file any potential claims directly against it rather than against yours should damage occur due to negligence on your part versus having it directly covered instead.
Errors & Omissions
Contractors have the responsibility of completing projects on time, within budget and to the highest quality possible. However, even the most meticulous contractors may make errors that result in lost profit, an angry client and potential legal trouble. Therefore, small businesses operating within the construction industry should strongly consider purchasing errors and omissions coverage or professional liability insurance as this policy provides crucial protection from lawsuits alleging your work was inaccurate or incomplete.
Errors and Omissions coverage for contractors is frequently required by their clients before signing contracts, and it can also serve as an effective way of building credibility among clients and reassuring them you are committed to producing the best outcome for their project.
A key difference between an E&O policy and general liability policies is coverage for product damage or work in progress, while general liability policies usually only cover bodily injury and property damage claims. Furthermore, general liability policies tend to exclude subcontractors while an E&O policy covers both you and any subcontractors hired as workers.
Imagine this: your plumbing business has been contracted to re-pipe a building in downtown Los Angeles. Due to an error on your part, sewage begins flooding the structure, damaging both it and any costly pipes installed by you. Had contractors errors and omissions insurance been in effect at that point, $20,000 worth of damages would have been covered by their coverage.
Unfortunately, there is no definitive answer to this question; costs associated with contractors errors and omissions coverage depend on numerous variables like your industry, revenue, geographic location, scope of policy coverage limits as well as budget limitations. Therefore, before purchasing this type of protection it is advisable to speak to one of Hitchings Insurance Agency representative about your needs as well as potential costs of such policies.
Errors and Omissions Coverage can seem like a waste of money, but it should actually form part of your risk management program. Litigation against you could easily bankrupt your small business, so it’s vital that you protect yourself. Contact us now for more information about contractors errors and omissions coverage!
Commercial Auto
As a small business, there will come times when you require outside help to complete certain specialized tasks. When this occurs, these individuals are called subcontractors and you are ultimately responsible for them while they work on your projects. Most contractors require their subcontractors to carry general liability insurance to protect against claims resulting from accidents during work. To be extra sure you’re protected should one of your subcontractors experience an accident on the job site, add them as additional insureds or limit their liability with an endorsement clause in your policy.
Most contractors require their subcontractors to carry workers’ compensation insurance, which covers medical expenses incurred due to injuries on the job. It may be required by law in your state; otherwise, some companies may decline working with you if this coverage is lacking. It is also recommended to have commercial auto coverage on company cars to cover damage that occurs as well as accident costs when contractors drive one of your vehicles for work-related purposes.
General property insurance provides protection from theft or damage of company equipment. Landlords often require tenants to secure this form of coverage; additionally it can help meet contract requirements more easily.
Many business owners require subcontractors in order to expand their operations and complete larger jobs. Without careful management, this could put you at risk of litigation arising from injuries caused by subcontractors; such lawsuits are costly so it is imperative that you have adequate coverage in place.
If your small business requires insurance, take a look at NerdWallet’s guide of top business insurers for additional guidance. Here you will find comprehensive reviews that compare insurers based on affordability, customization options, customer experience and more – plus compare quotes from multiple carriers to find what fits best with your needs.