As a subcontractor, you have a unique set of insurance challenges and requirements that workers in no other industry face.
You need a flexible insurance broker on your side who can accommodate the strict requirements you might have from your general contractors or project owners. Why? Because unlike most businesses, your insurance must fulfill your needs and the needs of the people hiring you, or else you won't get paid for your work.
Here are the typical subcontractor insurance requirements we see from our clients. (If you want to know more about contractor coverage, you can view our guide to contractor's insurance.)
Common Subcontractor Insurance Requirements
Certificates Of Insurance
A certificate of insurance is a legal document that proves you're insured. Yet problems frequently arise because the general contractor or project owner wants specific wording within the certificate of insurance detailing coverage. Some requests for certificates can even require an insurance declarations page, in order to review exclusions more closely.
The majority of these requests are for listing additional details, such as additional insured endorsements and waivers of subrogation. But sometimes the requestor wants specific wording on the certificate saying you're covered for things that either aren't possible to insure—such as "all roof work"—or you aren't actually covered for. No subcontractor insurance policy covers everything and this is why you need the help of an experienced insurance broker to get an adequate certificate that will satisfy the general contractor.
Additional Insured Endorsements
Most general contractors and project owners want to be listed as an additional insured on your insurance policy. In fact, their insurance usually requires it as a condition for coverage.
But what is an additional insured?
Adding an additional insured on a policy allows that person or business to be covered under your existing subcontractor insurance if they get listed in a lawsuit arising out of your operations or the work you completed. It pays their costs if you involve them in a lawsuit or a claim.
Per Project Aggregate
If you're a subcontractor who takes multiple jobs per month or week, you might have 20+ additional insureds listed on your policy at the end of the year. It's not uncommon to exhaust your insurance limits and leave your general contractor or project owner with no recourse for recouping damages.
The per-project limit assigns a dedicated limit of additional insureds to a specific project. This assures your project owner that if a claim were to arise, they would be able to collect from the full policy limits of your subcontractor insurance.
Although rarer than the above terms, it is becoming more commonplace to require subcontractors to purchase contractors pollution liability. This policy covers the risk of a pollution event on a job site. For example, a pollution claim could arise from the spilling of a material or even hitting an underground pipe. It is any pollution arising out from your operations.
Pollution claims are usually substantial and involve the EPA, which is why general contractors and project owners are trying to distribute the risk among subcontractors.
Subcontractor & Independent Contractor Coverage
Your policy must include coverage for subcontractors and independent contractors. It is becoming common for insurance carriers to exclude liability (and defense costs) arising from independent contractor or subcontractor use.
You don't want to be in a situation where an independent contractor names you in a lawsuit and you're without coverage. There is a reason why insurance carriers are adding these exclusions—a LOT of claims arise from subcontractor and independent contractor use.
Contact us to review your contractor insurance coverage for subcontractor and independent contractor exclusions.
Why Do General Contractors & Project Owners Require These Coverages?
General contractors and project owners require that subcontractors have this coverage for the same reason you purchase insurance: to protect themselves.
When running a large or complex job site, the single most significant risk is a subcontractor injury or accident. In addition to protecting themselves, general contractors and project owners have an obligation to safeguard their clients from litigation, too. An uncovered claim could significantly and negatively affect your reputation as a subcontractor and that of the prime contractor.
Subcontractor insurance requires a specialty insurance broker who has experience in complying with your job's insurance requirements. Mishandling these endorsements can not only cause you to lose job bids, but result in not getting paid after the work has been completed.