The Different Types Of Insurance That Subcontractors Need

It is common knowledge that you should obtain insurance when hiring an independent contractor for different projects, such as a construction project. Furthermore, many people know that there are different types of contractor insurance and the policy chosen will dependent on the contractor. Unfortunately, not all projects are clear-cut and there are cases where subcontractors will be hired to complete certain tasks. In these situations, it is recommended that you consider the different types of insurance that subcontractors require.

Unlike insurance policies related to contractors, the insurance coverage of subcontractors can be vague or confusing. This area is particularly confusing when operating in the construction industry as contractors and subcontractors fall into a single sector. The first task to complete when identifying insurance for a subcontractor is to distinguish the subcontractor’s status, then take it from there. This article will provide information on the types of insurance that subcontractors need and how to differentiate these professionals. Procom Insurance offers a variety of insurance products for your Miami business. Contact us today to see how we can help:

What Are The Different Types Of Subcontractors?

1. The Labor-Only Subcontractor

A labor-only subcontractor is a professional working directly under the project supervisor. This individual utilizes tools provided by the project management, but they may have their own portable hand tools. The labor-only subcontractor is typically employed for only a short period of time and can be either employed by the organisation or self-employed. When making payments to a labor-only subcontractor, it is important that the insurance agency be contacted and the total number of workers be identified.

2. The Bona-Fide Subcontractor

The bona-fide subcontractor can also be referred to as a supply-and-fix subcontractor. This professional works without any supervision and is responsible for performing duties using their own material or equipment. They will often specialize in certain areas of construction; therefore, they are not considered employees during the project.

What Are The Different Types Of Insurance For A Subcontractor?

1. General Liability Insurance

Most people assume that companies carrying general liability insurance will provide coverage for any property damage or personal injury experienced when using a hired professional; however, this does not extend to subcontractors. In some cases, the damage caused by an independent contractors and subcontractors when representing your company is not covered by the policy. This means that, as you were being represented; your company will be held liable for any damage to client’s products. Visit for more information.

This is why most small businesses do not work with subcontractors until they have obtained general liability insurance. Once this coverage is acquired, it is important that you include it in the subcontractor agreement with a proof of coverage or certificate of insurance. It may be a good idea to include the subcontractor’s name as part of the ‘additionally insured’ parties on general liability insurance to ensure you cannot be held liable for any damages.

2. Workers’ Compensation Insurance

Workers’ compensation insurance is a significant type of coverage that covers all staff member’s medical costs regarding work-related injuries and ailments. In the majority of states, workers’ compensation insurance is mandatory for companies; however, this is not always the case. Even if this type of insurance coverage is not essential for business operation, it is beneficial to purchase this form of coverage for your staff members.

Workers’ compensation insurance is typically held by labor-only subcontractors because they are hired as direct employees of the company. Why? If a subcontractor is not covered by workers’ compensation, you can be held financially liable for any on-the-job injuries or accidents that may occur.

For example, if you hire a subcontractor who experiences a back injury when on a client’s site and the subcontractor is not insured, then he or she can file a claim for damages. This can result in a large financial loss if you lose the claim; in fact, much more than if you pay for workers’ compensation insurance.

As with the general liability insurance coverage, it is recommended that the bona-fide subcontractors who opt for workers’ compensation insurance include this feature in their contractual agreements. Furthermore, you can add the subcontractor to your own policy as additionally insured parties.

3. Professional Liability Or Errors And Omissions Insurance

Most clients in the construction industry require that their contractors carry a professional liability or errors and omissions insurance policy. By having this policy, the client will be protected from any errors regarding financial calculations where they are paying too much for the service. If this ever occurs, the client may require that you compensate them to avoid financial loss regardless of who made the mistake in calculations.

It is important to remember that a client can context financial calculations for months or years after work has been completed; therefore, it is recommended that you maintain professional liability insurance with errors and omissions for as long as possible. Errors and omissions are typically based on claims, but professional liability will remain active for as long as you are operating as a company.