Does general liability insurance cover subcontractors? If work done by a subcontractor on your company's behalf - beware - claims for bodily injury and property damage done by the sub may not be covered.
Does General Liability Insurance Cover Subcontractors?
Most business opt to have general liability insurance. Even in jurisdictions where this is not a legal requirement, it is always a good idea to have this type of coverage in the event of accident, injury, or property damage. Insurance like this can save you hundreds if not thousands of dollars should something go wrong. Companies often shop around, looking for the best coverage at the most affordable rates, spending a lot of time making sure they find the best general liability plan for them.
Once you find the perfect plan, your insurance needs may still be incomplete. One very important question you should ask whenever shopping around is "does general liability insurance cover subcontractors?" While there are some policies that do offer subcontractor coverage as part of or an add-on to general liability plans, not all do. In fact, most insurance companies specifically exclude subcontractors from general liability coverage.
While individual plans vary, most general liability insurance coverage extends to you and your employees alone. This means that anyone not on your payroll is not covered by your policy. As a result, you are fully liable for any damage done or injuries sustained by subcontractors while on the job. Defending yourself from a lawsuit can be incredibly costly. When these funds must all come from your own pocket, it can put your business and your own personal finances at risk. Some companies rely on subcontractors to sustain their business, making it especially important to find a solution to those liability concerns.
Potential Solution To Subcontractor Insurance Issues
There are two ways companies tend to deal with the insurance issues surrounding subcontractors. The first is to seek out Contractor's Liability Insurance, or find another way to add your subcontractors to your existing insurance plan. Does general liability insurance cover subcontractors? - some companies offer add-on packages that give you the chance to include regular subcontractors. Others have separate insurance plans you can purchase on top of your general liability coverage. You only need to pay the increased premiums for the duration of time the subcontractor is working for you, and you are not liable for their work on any other jobsite.
While this approach is much easier for your subcontractor, the downside is that it does cost you a lot more money out of pocket immediately. Some companies that opt to go this route pay their subcontractors a reduced fee in exchange for providing insurance on the subcontractor's behalf. Depending on the type of company you run, the frequency with which you use a regular subcontractor, and your subcontractor's own insurance situation, this may be the best approach.
For example, a subcontractor just starting out may not have had time to complete all the insurance paperwork required. They may also be the best subcontractor for the job in your area. In situations like these, it might be worth it to you to offer them coverage.
A much better solution for most companies is to simply require all subcontractors you work with to have their own insurance policies. This is typically not an issue for most reputable and established companies. You do not need to worry about adding and removing companies from your plan, nor do you have to pay increased premiums.
Does general liability insurance cover subcontractors? When you are searching for a subcontractor, make sure you include that insurance is not provided, and always ask for proof of coverage before you sign any contracts and that your are also named as an 'additional insured'. Being named an AI is very important as you will be notified if the sub cancels their policy.
In most states, the type of proof you should request is called a "Certificate of Liability Insurance" (Acord 25). The subcontractor's certificate should name you additional insured, have an expiration date and confirmation that the policy is currently in effect. This protects you and your assets in the event the subcontractor is lying or does not have adequate coverage.
Does General Liability Insurance Cover Subcontractors? - The Bottom Line
We hope this article on does general liability insurance cover subcontractors? has been informative. Figuring out complicated insurance issues such as subcontractor coverage can be challenging for many company owners, especially those just starting out with their own businesses. Instead of trying to compare multiple rates, types of coverage, and premiums on your own, you should contact a licensed insurance agent in your area. They can help you sort through the complicated issues surrounding liability and subcontractor insurance, giving you advice on how to move forward in a way that protects you, your customers, and your business.