If you have a specialized talent or skill, particularly one that’s in demand, making a living as a subcontractor can be a great option. You don’t have to worry about running a business or overseeing every detail of a project. Instead, you can play a critical part in many different, larger projects. Of course, if most or all of your income is generated by being a subcontractor, it may be best to have proper subcontractor insurance coverage.
Typically, there are no subcontractor insurance requirements, other than those of your general contractor or employer. In most cases, you won’t be legally required to have general liability insurance
or any other kind of coverage. But that doesn’t mean that a subcontractor shouldn’t at least consider having subcontractor insurance, not least of all since your employer could ask for it.
Do Subcontractors Need Insurance?
Technically, you may not need insurance, at least depending on your particular area of expertise. However, if you injure someone else, accidentally commit a minor legal infraction while working, or make any kind of mistake that harms one of your clients, having construction insurance
can come in handy.
It’s also worth noting that many companies or primary contractors may hesitate to work with you
if you’re not adequately covered. In fact, it’s common for clients to require subcontractors show proof of insurance. A subcontractor who isn’t insured can leave the primary contractor vulnerable to lawsuits and other expenses, and most of the time, they aren’t willing to take that kind of risk. As a result, it’s important for subcontractors to consider several types of insurance coverage. These can include:
Subcontractor Liability Insurance
It can be useful to have subcontractor general liability insurance. This insurance policy can cover situations including property damage or injuries, which can happen regardless of your specific job. There is a good chance the general liability insurance of whoever hired you will not extend to a subcontractor.
As mentioned, potential clients may be reluctant to work with you unless you have your own subcontractor liability insurance. This is typically true when you work with smaller companies or independent contractors who want to use your skills for a specific task.
Errors & Omissions/Professional Liability
Errors & Omissions (E&O) insurance
, if you don’t know, provides coverage in the event that you make a mistake or oversight while doing your job. It doesn’t usually relate to physical injury, but rather a client claiming that you performed your job improperly in a way that caused them to lose money. It's also often referred to as professional liability insurance
. This kind of insurance can cover the cost of hiring a lawyer to either defend or settle a lawsuit against you, as well as the cost of paying consequential damages or a settlement. Most subcontractors won’t have the means to defend themselves against a lawsuit, even a frivolous one. With E&O insurance, some or all of your legal fees and settlement money may be covered by insurance. Even if you didn’t mean to make a mistake
, a client could still file a lawsuit against you, making E&O insurance important.
Commercial Auto Insurance
As a subcontractor, if you use your personal vehicle to perform work for a client, you may need commercial auto insurance
. If you get into an accident with another driver while performing work, that driver could potentially sue both you and the entity that hired you. To avoid being put in such a position, your potential employer may ask you to provide proof of auto insurance before hiring you. Driving to and from a work site is one thing, but if driving is a regular part of the job, it may be necessary to have commercial auto insurance in case you get into an accident on the road.
is a common type of insurance that helps to cover both medical and disability costs if a work-related injury prevents someone from being able to work. Laws regarding workers compensation tend to vary from state to state. Most states require companies to have it for full-time workers. However, a primary contractor’s insurance
may not necessarily extend to subcontractors. As a result, it’s often up to subcontractors to have their own workers' compensation insurance. Before hiring you, it’s common for companies or primary contractors to ask for certificates of insurance for subcontractors as proof that you have proper workers compensation insurance. That way, they don’t have to worry about being responsible if you are injured on the job.
Workers Compensation Waiver
In some cases, it’s possible to receive a subcontractor liability waiver as it relates to workers compensation. As mentioned, workers compensation regulations differ by state
. However, smaller businesses can sometimes become exempt from having to pay workers compensation for contract workers. For instance, owners of an LLC or contractors who are sole proprietors are commonly exempt. Waivers also tend to be common in the construction industry