Brand Story
14 Mar 2023, 06:43 GMT+10
It's a common practice and effective strategy in many cases for contractors to hire subcontractors (sometimes referred to as 1099 workers) to handle certain aspects of projects. The subcontractor typically specializes in the type of work they're being hired for and can complete it efficiently and effectively, allowing the contractor to focus on other tasks.
However, there is a crucial factor that you must pay attention to: Workers you subcontract work out to must have their own subcontractor's liability insurance.
As every contractor knows, even well-run jobsites are places with numerous risks. At any moment, a worker might:
If these or other types of incidents occur, a client may sue. In fact, clients can always file lawsuits that allege wrongdoing. And even if the person or company sued has done nothing wrong, there are costs associated with the necessary legal defense.
The relationship between subcontractors and contractors can be affected by contracts, local laws, etc. In some instances, subcontractors are covered under the contractor's policy, but not always.
Why wouldn't a subcontractor have their own liability insurance? That varies, too. Some may not know they need it. Others may not want to pay for subcontractor liability insurance. And some subcontractors may realize they need it and be willing to pay for it but simply haven't taken the time to purchase it.
Whatever the reason, a subcontractor's lack of adequate insurance can negatively impact the contractor. On the flip side, ensuring subcontractors have their own insurance by getting Certificates of Insurance (more on that below) can potentially lower a contractor's insurance costs and minimize future insurance cost increases. Consequently, as a contractor, you should ensure that a subcontractor has the necessary coverage before you agree to hire them.
Hiring a subcontractor with the understanding that they'll obtain insurance before work starts can be problematic. Imagine that you've arranged for the necessary work permits, coordinated the arrival of materials, and scheduled this project and others to follow, only to learn when a subcontractor arrives at the jobsite that they've failed to buy insurance.
That scenario puts you in a bind: Do you allow them to begin working without insurance? Temporarily pause the project until they can get coverage? Fire them and hire another subcontractor? None of those outcomes is desirable, and allowing a subcontractor to work without insurance is a significant financial risk that you shouldn't take.
When considering the issue of liability insurance for a subcontractor, some contractors might think, "What are the odds that something will happen in the few days until they get around to buying insurance?" And it's true that the subcontractor might conceivably work for days, weeks, or longer without incident. Or, they might cause costly damage with the first swing of their hammer. You just don't know. That's why having coverage before work begins is essential.
Nobody wants to look distrustful, especially of someone with whom they hope to have an effective and mutually beneficial business relationship. However, if a subcontractor says they have the necessary liability insurance, you shouldn't simply take their word for it.
Perhaps they make that statement fully intending to buy insurance later that day but aren't able to for some reason. Or maybe they believe they have the necessary coverage when, in fact, they don't have the type of insurance or insurance limits required to protect themselves and you.
The only way to be sure someone has sufficient subcontractor's liability insurance is to review the Certificates of Insurance they provide. (Their insurance company can tell them how to get a Certificate of Insurance.) This type of document indicates:
If the information on the COI meets your requirements, you can move forward with the project confident that the subcontractor has proper financial protection.
The types of insurance you need and require of your subcontractors will vary, but these policies are commonly purchased in this industry:
Buying insurance for your company is easy. You can get instant, self-service quotes for small business insurance online and then make your purchase. The same is true for your subcontractors. Coverage purchased from biBERK is very affordable and effective almost immediately, so there's really no reason why a subcontractor can't get their own policies before starting a project.
About biBERK Business Insurance
biBERK can help you with all your small business insurance needs, including: commercial auto, general liability, property and liability, umbrella, and workers' compensation. https://www.biberk.com
Media Contact:Rakesh Gupta | 402-408-2870
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