Employing subcontractors is a necessary part of conducting business, no matter how small or big your company is. There are many areas of your business where your existing employees might not be able to fill in the shoes, and you may need to hire a qualified subcontractor who is right for the job.

However, employing a subcontractor also puts you at serious risk if you don't get proof of insurance. Ideally, your subcontractors should have their own insurance to protect themselves from any accidents, errors, and mistakes. But in case they don't have their own coverage, are subcontractors covered under your business insurance? Let's find out!

Are Subcontractors Covered Under Your Business Insurance?

Usually, subcontractors are not covered under their employer's business insurance. They usually have their own small business insurance, which includes general liability insurance, workers' compensation insurance, and professional liability insurance. 

Before a business hires a subcontractor, it should ask for proof of insurance from the subcontractor. If you don't get proof of insurance and your subcontractor does not have any insurance policy, the employer will be on the hook in case something goes wrong. They will be held liable even if the mistake was made on the subcontractor's part. Therefore, one of the most important risk management steps that they can take is to ask for proof of insurance.

If a subcontractor doesn't have insurance, you can either choose not to hire them or get a tailored insurance policy made to cover your subcontractors, as your business insurance does not usually cover them. A contractor's insurance policy covers the business owner and the full-time employees in case of a lawsuit or an accident. 

However, do note that the employer is not required to provide coverage for subcontractors. But if you do want to, you can add subcontractors to your business insurance by contacting an insurance provider. 

Liability Insurance

If your uninsured subcontractor ends up damaging your client’s property or causing them an injury, you will be held liable if they don't have liability insurance. You will be held responsible as you hired them without asking for proof of insurance. Therefore, you should ensure that they either have their own liability insurance or are covered under your policy.

Check with your insurance provider to determine if your liability insurance covers your subcontractors. You will not need to worry if your subcontractor has its own liability insurance. However, you can still extend your coverage to cover a certain project. Reach out to your insurance provider to see who is covered and to add your subcontractor to the policy. 

Workers Compensation Insurance

Are you looking to get workers’ compensation insurance for your subcontractors if they get sick or injured on the job? Subcontractors who are independent contractors do not generally need workers’ compensation insurance. 

However, different states have different definitions for an employee and an independent contractor. Make sure you know your state’s definition for each of these to ensure that your subcontractor is not considered an employee and you are safe from any workers’ compensation lawsuits thrown your way.

That said, if your subcontractor has hired their own employees for the job, they should have their own workers’ compensation insurance. Make sure you ask them for proof of insurance so that you are not liable in case of an accident on their part.

Commercial Auto Insurance

If your subcontractors also drive your company vehicles and are involved in an accident, are they covered? Your subcontractors should ideally have their own vehicles for work and their own commercial auto insurance. But if they don't, you can extend your commercial auto insurance to cover your subcontractors too. Make sure you check their insurance policies before you bring them on board to help your business. 

Tools and Equipment Insurance

Tools and equipment insurance is also known as inland marine insurance. This type of insurance offers coverage for your valuable tools and equipment in case of theft, vandalism, fire, flood, and other damage. 

If your subcontractor has to use certain tools and equipment for the job, they should have their equipment and insurance to cover them. But if they don't, it is your responsibility as an employer to ask for proof and extend your policies to cover them if they don't have their insurance. 

Builders’ Risk Insurance

The builders' risk insurance policy offers coverage for you and your subcontractors for any losses or injuries due to damage to buildings in construction. This temporary insurance policy can also cover your subcontractors if you have them listed in the policy by your insurance provider.

Read your builders' risk insurance policy carefully and check that all the involved parties are mentioned as "insureds" or "additional insureds."

Which Insurance Do Subcontractors Have?

Subcontractors usually have small business insurance, also known as commercial insurance. Small business insurance protects their assets, income, and property against damages, injuries, and claims. 

The most common type of policy included in this insurance is the business owners' policy (BOP). A BOP offers all-inclusive coverage, including general liability coverage, business property coverage, and business interruption coverage. Subcontractors can also purchase additional protection customized according to the nature of their business and their needs.

The Bottom Line

Most insurance policies do not cover subcontractors that you may hire during your business. Before you hire a subcontractor, make sure you ask for proof of insurance. You should also read your own insurance policies thoroughly to see who is covered and not. If you want to extend your policies to cover your subcontractors, reach out to Elemental Risk Management for a reliable and tailored solution.