Subcontractors are specialists in their respective fields hired to handle aspects of a construction or renovation project that call for their expertise. For example, a general contractor responsible for transforming a residential customer’s unfinished basement into a comfortable living space may hire an electrician as a subcontractor to tackle the electrical needs of the room.

While subcontractors work within a larger project or build framework, they have a degree of autonomy over their specific tasks. But they’re also responsible for covering their liability risks.

That’s why subcontractor liability insurance matters. Insurance is vital for risk management, and each subcontractor working on a project is responsible for their own liabilities. It also reduces the risk of disputes and complications with other contractors or customers if accidents or third-party damages occur.

A subcontractor on a worksite

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Are Subcontractors Covered Under Contractors Insurance?

A general contractor overseeing a construction project with contractor liability insurance can use their policy to cover their full-time employees. It’s uncommon for their policy to include coverage for subcontractors. However, a contractor can add a subcontractor to their policy as an additional insured if they wish.

Nevertheless, every subcontractor should have a liability insurance policy, even if their employer’s policy provides them with coverage, since the amount of that coverage may be inadequate in the face of an expensive claim. Moreover, carrying your own coverage allows subcontractors to work on multiple projects at different job sites.

What Happens If a Subcontractor Does Not Have Insurance?

A subcontractor without insurance can face various legal, financial, and professional consequences.

For starters, it will prove difficult for a subcontractor to get hired for a project by a general contractor, or they’re likely to be disqualified from bidding on future contracts without coverage.

But there are more serious issues that could affect a subcontractor who does work without insurance, including:

  • Financial liability. If facing a third-party bodily injury or property damage claim, a subcontractor could be held liable in court for the costs associated with such a claim, and their assets could be seized to cover the expenses if they have no insurance.
  • Legal expenses. If a subcontractor is sued and needs to hire a lawyer to defend them, their legal fees and a settlement can run into thousands of dollars, possibly forcing them into bankruptcy without insurance backing them up.
  • Breach of contract risks. The contracts or agreements subcontractors sign typically include insurance requirements. Not having liability insurance can lead to a breach of contract claim, which exposes a subcontractor to legal action or financial penalties.
  • Reputational damage. A subcontractor who’s uninsured and involved in an accident or named in a lawsuit can also suffer reputational damage. A loss of trust from customers and other contractors can have a lasting impact. 
  • Difficulty securing a loan. Getting a loan or agreeable credit terms from a bank or financial institution will be tough for an uninsured subcontractor. Financial institutions may consider you a high risk, making getting a loan or credit to fund your business difficult.

How to Get a Certificate of Insurance for Subcontractors

After any subcontractor purchases liability insurance, you need to be able to prove to your customers, partners, and contractors you’re insured, or they won’t hire you. 

That’s what a certificate of insurance (COI) or proof of insurance document does. It’s a one-page document that summarizes and verifies your insurance coverage you can show to anyone requesting to see it.

A Zensurance broker can email you a COI immediately after you purchase a subcontractor liability insurance policy from us.

Get Low-Cost Subcontractor Insurance Fast

A significant risk for any general contractor or subcontractor is vandalism or theft of their transportable tools and equipment from a job site or vehicle. Tools and equipment insurance covers tools and equipment damaged by fire, water, a natural disaster, and theft or vandalism.

However, subcontractors face other liability risks that can cost thousands of dollars, including third-party bodily injuries, damage to a client’s property or neighbouring property, allegations of professional negligence, and environmental-related liabilities. 

A customized contractor liability insurance policy covers various liabilities contractors, subcontractors, and skilled trade workers face.

Fill out our online application for a free quote. Let our knowledgeable brokers shop our partner network of over 50 insurance providers to find a low-cost policy and tailor it to suit your specific requirements.

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About the Author: Yassin Elsayed

Yassin Elsayed is a Team Lead, Contractors at Zensurance.