When working under a general contractor or larger business, you will need to address your subcontractor insurance needs. Do not assume that the general contractor’s policy will automatically cover your own liabilities for damages or injury. Here’s a look at the important insurance protection you need to operate as an independent subcontractor.
When Does a Subcontractor Need Insurance?
Having your own subcontractor insurance makes sense when
- You need financial protection against the many liability risks you face while working as an independent contractor, including potential customer lawsuits
- You want protection in the event of on-the-job accidents and the loss of your equipment
- You need liability insurance to improve your chances of getting contract work
Requirements to be Fulfilled
Your state’s law and your specialty determine whether or not you need to get insurance to be licensed as a contractor. However, many general contractors prefer to work with subcontractors who have their own insurance.
Therefore, even where there’s no mandatory requirement, you might need specific coverages to remain competitive before potential employers. A general contractor will typically require you to produce a certificate proving that you have general liability insurance as a precondition for hiring you. In some cases, you may also need to name the potential employer as an additional insured on your policy.
What Are the Basic Types of Subcontractor Insurance?
There are different types of insurance policies that an independent contractor should consider carrying, including:
- Errors and omissions insurance (E&O)-This can protect you when a client sues you for a professional mistake in your work or when you fail to meet a contractual obligation.
- General liability insurance– You’ll need this protection when a third party, such as a client or visitor, sues you for bodily injury or property damage.
- Business owner’s policy (BOP)– This option bundles general liability and commercial property insurance, usually at a more affordable cost than buying the coverage separately.
- Workers’ compensation insurance– A general contractor may need you to have this coverage for protection in the event of workplace accidents. Alternatively, they may add you to their policy, provided you bear the extra coverage cost.
What Are the Benefits of Subcontractor Insurance Coverage?
Benefits may vary based on your line of work. Generally, your independent contractor insurance can pay for liability lawsuit costs, including attorney fees, personal injury settlements, and court judgments against your business. It can also cover your own property, such as physical tools of trade, against damage, and employees against on-the-job injuries.
Here are some specific coverage examples:
- General liability insurance pays to replace or repair a client’s business equipment that you’re accused of damaging while working under a general contractor
- General liability insurance pays for the medical bills of a customer or visitor injured at your job site
- Worker’s comp insurance pays the medical bills of your employees who are injured while performing work-related duties
- Professional Liability also referred as E &O insurance pays to settle data breach losses that a client claims to have resulted from a poorly designed IT security solution, which you recommended as their IT consultant
- Business owner’s policy pays to replace the contents of your office, including expensive equipment, after a theft, fire damage, or any other covered hazard.
Carrying the basic types of subcontractor insurance protects you from financial loss in case you are liable for damages. To get affordable small business insurance, contact the team at Modab Insurance Services today. We can help customize your coverage based on your budget and needs.
