Hiring a contractor without insurance limits your ability to remedy the damage caused by accidental damage or faulty construction, such as water damage or fire. We suggest the following guidelines before unknowingly hiring a subcontractor without insurance:
Contract Work is an Important, but Risky Business
Construction is dangerous by nature, but absolutely necessary to build up a thriving economy and maintain healthy communities. Protecting the workers' lives and the businesses they carry out is obviously important, even more so than getting the job done. A general contractor is responsible for the work performed on their behalf through a subcontractor. Unfortunately, a general contractor cannot effectively transfer their protection to a subcontractor if an incident should occur. This means a good contractor will ensure that the subcontractors they hire are all properly insured as a measure of protection.
What Insurance Should a Subcontractor Have in Place?
The following are the types of insurance that every subcontractor should have in place:
- Workers Comp: This is the most important type of insurance that a subcontractor should have. Without this, you, as the contractor, will be responsible for paying medical bills indefinitely if someone is injured on the job.
- General Liability: This type of coverage protects against damage due to a subcontractor's mistake. An example of this would include a subcontractor getting paint on a nearby property when painting. A liability policy would cover the cost of the repair. This is just one example of the many errors that can occur. Obviously, there are more costly mistakes that subcontractors can make through the construction process. Without insurance coverage, the contractor would be out of pocket for the damages.
- Auto Insurance: It’s also important for any subcontractor to have sufficient auto insurance coverage as well, especially if they have a fleet of vehicles that are used to do the particular task at hand. Make sure that coverage includes protection for the loading and unloading process as well. It’s a smart choice to make sure it covers anything to do with autos, vehicles or their operation on a job site or to and from a job site.
How to Verify a Subcontractors Insurance Protection
All contractors should be sure that their subcontractors are properly insured. Do this by researching the company before beginning a working partnership. The subcontractor should prove they have coverage at the beginning of the process by producing their contractor’s certificate of insurance. The contractor’s broker should also be able to verify the coverage that’s in place as well as coverage limits on each category. Also, make sure that the certificate shows a date that ensures the contractor’s coverage is still active.
Recognize The Following Sign of Uninsured Contractor
There are a few signs that subcontractors do not have the insurance coverage they should have. One big indication that they are not adequately insured is that their bid for their job is way less than other bids from their competitors. It is nearly impossible for a contractor who is fully insured and has all the quality protective gear and measures in place, in terms of training and other methods, to compete against contractors who cut corners in this area. If as a contractor you take a bid that is low from a subcontractor, verify that they are insured before you agree to work with them or allow them to begin any work.
Bottom Line: Think Twice Before You Hire an Uninsured Subcontractor
Hiring a subcontractor that is fully insured protects you from lawsuits arising out of their actions. It also prevents you from suffering financially. As a contractor, if something happened on-site and the subcontractor was found at fault, but they were not adequately insured, the cost of that mistake comes back on you. Therefore, either you make sure that all your subcontractors are adequately insured or be prepared to face the consequences of their lack of coverage. Our team at Arnold Insurance hopes that this information has been helpful to you, and if you would like more content like this delivered directly to your inbox weekly, subscribe to our blog today!
