Do I Need Insurance As A Subcontractor? (Yes or No?)

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Do I Need Insurance As A Subcontractor?

Do I Need Insurance As A Subcontractor?

Do I Need Insurance As A Subcontractor? Working as a subcontractor certainly has its perks; you get to choose who you want to work for, you have greater control over the hours you work and to a varying degree you get to be your own boss. From a business owner's and from a subcontractor's point of view, there are risks involved.

Determining who is liable in the event of an accident may seem like a minefield, but there are certain key considerations to keep in mind that can make this easier to determine. Do I need insurance as a subcontractor?

Most likely, yes. The situation for you as a subcontractor varies depending on whether you are a labor only or a bona fide subcontractor. It pays to work out in advance where the boundaries of responsibility lie, especially when it comes to the thorny issue of where the liability lies.

Do I need insurance as a subcontractor? The short answer is yes. Most general contractors will require that you commercial insurance and name them additional insured to be sure you have it.

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Who Is Responsible For The Commercial Insurance?

Being clear regarding what type of subcontractor you are helps to clarify the legal parameters when it comes to the question of do I need insurance as a subcontractor? If you are a labor only subcontractor, your position is very similar to that of an employee, except unlike an employee that is on a permanent contract, yours is transitory.

As a consequence, you will likely be supervised and directed - to a varying degree, your boss will set your hours, and you will use material, equipment and tools provided by your employer. Do I need insurance as a subcontractor? In these circumstances, due to the nature of the responsibility your temporary boss is taking on, it will be up to them to have general liability and workers compensation etc.

The situation is very different if you are working as a bona fide subcontractor. As a true subcontractor you are necessarily more independent: you decide on the hours you work, you issue an invoice for work done, you work without supervision, and you bring everything you need for the job - tools, materials, etc. Do I need insurance as a subcontractor? As you are the one who is in the driving seat, the burden of responsibility rests on your shoulders.

The employer does not need to offer your workers comp or general liability to cover you in the event of an accident. It is your responsibility to take out CGL insurance for yourself and if you have anyone working for you, you need to ensure that they are insured too. As a subcontractor, you should expect an employer to ask for proof that you are licensed and you have general liability and depending on their requirements and what state your are in - workers compensation, and that any of your staff are likewise insured, before they hire you. So the answer to do I need insurance as a subcontractor? is yes.

What Types Of Insurance Do Subcontractors Need?

Do I need insurance as a subcontractor? As a subcontractor you need to factor in all kinds of risks, such as a member of the public falling on your site and suing you, to you damaging someone else's property. There isn't one hat that fits all when it comes to business insurance. Here are some of the coverages your general might contractually require you to carry:

General Liability - If a member of the public sues you for an injury, due to for example being hit by an accidentally dropped tool. This protects you against third party claims of bodily injury or property damage.

Workers Compensation - If as a subcontractor you have employees, workers comp in mandatory in most states. It can cover you against a compensation claim if an employee suffers a work related injury or illness.

Business Auto - To cover bodily injury and property damage you do while in your vehicle on the job. The general could also require you to have hired an no-owned coverage as well.

Commercial Umbrella - If you are working for a sophisticated general contractor, or the job is very large - you might be required to purchase an umbrella policy. This is an excess liability coverage that sits on top of the underlying polices.

Tool Coverage - In case your hand-tools or power-tools are damaged or stolen on the job.

How Do I Clarify With The General Contractor Where The Liability Lies?

It is worth getting a written agreement with your general, so that both parties know where they stand in the event of an accident. This clarifies who is responsible in the event of a dispute.

A contract will make clear if you are an independent operator or not. It will specify the work you have agreed to, any milestones and the deadline. It will specify any extra costs, in terms of materials, transport and others, that the employer has agreed on. It will indicate when the contract will terminate and the grounds on which it may terminate, if different to expectations.

A non-complete clause is to be expected; it prevents you going to work directly for your employer's client instead. A dispute clause is useful for both parties as it sets out how disagreements will be handled.

Do I Need Subcontractor Insurance?

Do I need insurance as a subcontractor? While all of this may seem legalistic, it makes for a smoother working relationship in the long run and can save you a lot of headaches and financial risk.

More Helpful Commercial Insurance Articles

Read other informative articles on small business commercial insurance including costs and coverages.

Small Business Insurance Articles

Get useful tips and information about how much commercial insurance costs, small business risks and exposures, how insurance regulations effect your businesses' and detailed descriptions of coverages and exclusions and more. Most small businesses need to buy the following four types of insurance at a minimum to cover their operations from every day risks:

Property Insurance: This policy covers a business if the property used in the business is damaged or stolen as the result of common perils like fire or theft. Commercial property insurance covers the buildings, structures and also business personal property - which includes furniture, inventory, raw materials, machinery, computers and other items.

Liability Insurance: Any company can be sued. Slip-and fall lawsuits are very common and be costly. Customers can claim you injured them or damaged their property - and lawsuits are very expensive. Commercial liability insurance pays damages and can include attorney's fees and other legal expenses. It also ca pay for the medical bills of injured third parties

Commercial Auto Insurance: For vehicles owned by the business. Commercial auto insurance pays bodily injury or property damage costs for which the business is found liable - up the the policy limits for liability and property damage.

Workers Compensation Insurance: In almost every state employers must provide workers comp when there are W2 employees. Workers compensation pays for the medical care of employees and can replace a portion of lost wages - regardless of who was at fault for the injuries.

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