What Is Subcontractor Insurance and How Does It Work?

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Last updated on: October 10, 2020
Subcontractor Insurance

A subcontractor, particularly one with a specialized skill set, can make a great living without having to go through the trouble of owning their own business. While working with the general contractor, a subcontractor only needs to focus on the projects he or she is working on instead of the big picture.

Though there are no subcontractor insurance requirements most of the time, if this type of work is the majority of your income, it’s prudent to make the purchase. Besides the coverage it could provide, the general contractor could potentially ask for the information before you begin work.

Let’s dive a little deeper into not only what a subcontractor is, but how a subcontractor insurance coverage is beneficial in different eventualities.

What is a Subcontractor?

A relevant question is first to establish what a subcontractor is before discussing various insurance policies begins. A subcontractor is similar to a general contractor in that, aside from potentially having specialized skills, they perform the same contractor function. However, unlike the general contractor, they do not deal with the client directly.

Their function is to provide a work or service on a larger project which a general contractor has agreed to perform for a client. This means they are getting paid for their portion of the work by the general contractor rather than the client. Of course, this may be a means to make a living and should be treated as such when it comes to liability and potential losses.

Is It Necessary?

There may not be a particular law that mandates a subcontractor to purchase insurance, but as mentioned, a general contractor can require proof. A general contractor, who has to purchase insurance to operate, can require such insurance from their subcontractors to mitigate liability. An uninsured subcontractor leaves not only themselves, but the general contractor vulnerable to lawsuits should something happen.

Subcontractor insurance consists of different coverages based on your specific needs. As you go through finding quotes from various insurance companies, keep in mind some of the coverage points that should grab your attention.

Subcontractor Liability Insurance

One of the most common coverages is subcontractor liability insurance coverage. This type of coverage will cover you in any situation where you may be found liable for damages or injuries which can happen to anyone at any time. Liability insurance is a broad coverage, covering you and the client in many eventualities that don’t fit under more specific coverage listed below.

What should be kept in mind is that the insurance a general contractor purchased may not extend to their subcontractors, making it all the more prudent to purchase the coverage.

Errors and Omissions

Also called professional liability insurance, this type of subcontractor insurance coverage helps when you make a mistake or an oversight while on the job. This type of insurance doesn’t cover any bodily injury, but only when the client makes a claim that the job wasn’t performed correctly, which caused them to lose money.

Errors and omissions will cover certain costs associated with this type of claim, such as a lawyer, as well as any damages the client may be awarded as a result. Even if the mistake made was not intentional, a subcontractor will likely not have the funds to deal with a lawsuit of any magnitude.

Commercial Auto Insurance

Commercial auto insurance can get added to subcontractor insurance so long as you use your personal vehicle for work, which extends beyond the scope of using it to get to work. Specifically, this refers to using your vehicle as a means to transports yourself, tools, materials, or others to and from different sites all while on the clock.

Should an accident happen during those work hours, the wronged party can file a lawsuit against not just you as the subcontractor, but the company or client that hired you. Therefore, any potential client or general contractor could ask for proof of insurance if you’ll use your car for more than getting to work or back home.

Worker’s Compensation

Worker’s compensation is a common type of insurance coverage that is available for purchase through many different insurance policies. Having a worker’s compensation coverage in the insurance policy will cover you during work-related injuries if they render you unable to work. Though laws vary from state to state, most companies will require workers’ compensation, and the general contractor’s policy may not extend to a subcontractor.

Before you begin working with a client or a general contractor, it should come as no surprise they may request proof of such insurance. Though clients will ask to ensure they are not being held liable in the event of an injury, this type of coverage will also work for you. If subcontractor work is your main income source, you do not want to find yourself without coverage.


A subcontractor, someone with a specialized skill-set who is usually a part of a larger project, is not immune to the occasional accident. Whether you’re working with a client directly or for a general contractor, it’s good to make sure you and your earnings are covered.

States have different rules when it comes to owning an insurance policy, but as a general rule, it’s more sensible to make the purchase. The forward-thinking, even as a subcontractor instead of the general contractor, could save you hours of heartache and potentially, lots of money. Various types of insurance policies are available to help you when you need them most.

Subcontractors can typically choose from liability insurance, worker’s compensation, errors and omissions, and a commercial auto insurance policy. If all of them are included, it becomes a well-rounded policy that is capable of covering you in any eventuality.

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