When working with governmental organizations, it may be necessary to obtain insurance in order to ensure specific contracts. This type of uncertainty can be mitigated by obtaining the appropriate insurance coverage. Despite not being at fault, there are various reasons why a subcontractor might still face the possibility of an expensive legal dispute.
Is insurance required for a subcontractor?
While subcontractors are not legally required to have insurance, it is strongly recommended for them to bid on contracts as it provides financial protection and offers them the necessary safeguards.
Many businesses also prefer to hire subcontractors who have their own liability insurance coverage, knowing that you are willing to take accountability for your work and have a certificate of insurance.
The specific insurance coverage you require depends on several factors, which include:
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Are subcontractors covered under the contractor’s insurance?
Subcontractors generally do not obtain coverage under their employer’s insurance policies, or those of independent contractors, and employers are not required to provide it.
If you do not have the employer’s insurance to protect you, you may be exposed to the same liability risks as the employer in case the contractor or the employer you are employed by gets sued.
That’s why small business owners should purchase insurance to protect themselves from property damage, workplace accidents, and unexpected lawsuits caused by subcontractors.
Which insurance policies should a subcontractor consider?
Contractors and employers typically require insurance of specific types in each contract they sign. They may ask for proof of insurance in the form of a certificate of insurance, which may require the company’s name as an additional insured on your liability insurance policy.
General liability insurance
Many companies will not work with subcontractors unless they have this coverage, as it is often the first policy that small business owners buy. General liability insurance offers protection against third-party lawsuits for bodily injuries, property damage, and advertising injury.
If you unintentionally damage someone’s computer or server, your overall liability coverage would assist you financially endure any potential legal actions.
Additionally, your comprehensive liability insurance would provide financial security in the event that you are alleged of defamation or verbal defamation, or if an individual files a lawsuit against you for copyright violation regarding a website you developed.
Errors and omissions insurance (E&O)
Professional liability insurance, also referred to as errors and omissions insurance, provides financial security in situations where a client alleges that you have made a mistake or failed to fulfill contractual obligations. This coverage is often mandatory in numerous contracts, and if you are implicated, it will not shield you from liability if your employer faces a professional liability lawsuit.
Business owner’s policy (BOP)
Workers’ compensation insurance
Compensation for workers is required in most states for employees who are unable to work due to a work-related illness or injury, as it provides financial protection in such cases for businesses with more than one employee.
For example, if you imagine that you trip on a power cord while installing a server at a job site and hurt your back, you might not be able to work and face a loss of income. In this case, Worker’s compensation would cover some of your lost wages and also provide compensation for your personal injury. Additionally, your regular health insurance might not cover a work-related injury.
Your employer may be willing to add coverage of the cost to their existing policy, but some contractors and employers may require subcontractors to have this coverage.
Commercial auto insurance
It also insures you against weather-related events and acts of vandalism or theft. However, in the case of an accident involving business-owned vehicles, it covers liability insurance for your personal auto insurance, similar to commercial auto insurance.
Hired and non-owned auto insurance (HNOA)
If you use your personal vehicle for work purposes, it is unlikely that your individual car insurance policy will cover you in the case of a job-related accident.
Non-owned and hired auto insurance (HNOA) offers liability protection for any personal vehicles leased or rented for business purposes, providing financial protection against bodily injury and property damage in case of accidents where you are at fault.
To ensure that your vehicle is not covered for collision damage, it is necessary to have a separate policy. It is important to note that HNOA coverage does not include this type of protection. However, it is common for the policy owner’s business or general liability insurance to provide this coverage.
Fidelity bonds
Fidelity bonds protect your company from financial loss if an employee commits fraud, theft, or forgery against a client or your business.
Some contractors and businesses require fidelity bonds. Select insurance companies sell fidelity bonds, and there are companies available that specialize in them.
How much does business insurance cost for a subcontractor?
There are numerous factors that determine the expenses of subcontractor insurance, including:.
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