When hiring subcontractors, make sure they’re insured

If you work with subcontractors, check to see that they carry the appropriate insurance. Otherwise, you may be in for some bad news — whether or not an accident occurs.

Let’s say you’re a home builder and you hire out plumbing to a subcontractor. If that plumber doesn’t carry workers’ compensation insurance and gets injured on the job, your insurance provider could be liable to cover that cost.

So technically, your insurance carrier is providing coverage for subcontractors who don’t carry their own. If this happens, the cost of a claim may end up impacting your overall workers’ compensation premium for three years through a higher experience modifier.

That’s why many insurance companies — SECURA included — do an end-of-year audit for workers’ compensation customers. If they don’t find a certificate of insurance on file for each of your subcontractors, your insurance provider may charge you for the added coverage.

What’s more, those charges may be higher than your normal insurance rates, because they’ll be based on your subcontractor’s specific line of work and any risks they may carry with them.

General liability
In addition to workers’ compensation insurance, it’s a good idea to require that subcontractors carry their own general liability coverage. 

If your subcontractor accidentally drops a large metal pipe on your customer’s newly refinished hardwood floors, the customer could go after you for damages. And, if your independent contractor isn’t carrying sufficient insurance, you could be financially responsible.

Proof of coverage
Stipulate insurance requirements in your subcontractor agreements and ask to see proof of coverage.  Before work begins, get a Certificate of Insurance from each subcontractor, showing coverage in force at the time of work.

And, if you do business with the same subcontractors year after year, get in the habit of asking for current certificates of insurance on an annual basis.