Subcontracting can affect the liability exposure of your business. If the work is not done properly and a loss occurs, you and your insurer may have to pay for the loss.
Certificate of Insurance
Apart from projects covered under a wrap-up liability policy, many different types of business will ask subcontractors to provide a certificate of Insurance to confirm coverage. It contains the insurance details for the policyholder. A Certificate of Insurance should be requested from each subcontractor, detailing his liability insurance coverage.
It should be requested prior to each project, or annually for those subcontractors who regularly work for you.
Insured or not, a subcontractor could cost you your business, your reputation or both. How?
- If the subcontractor has no insurance – you or your insurance company may be required to pay for the loss.
- If the subcontractor has insufficient insurance – you or your insurance company may be required to pay for the loss.
- If your insurance company now has to pay because of your subcontractor:
- Your loss history is impacted.
- Your premiums may increase.
- Your deductibles may increase.
- Your ability to get insurance may be affected.
Finally, make sure you get details on the subcontractor’s work history. Find out if they’ve done similar jobs in the past. Talk to general contractors they’ve worked with and get their feedback on the subcontractor’s timeliness and quality of work. Do a credit check. And of course, be sure to review their claims history for the past three years.
While you might have to do a bit of legwork upfront when you’re dealing with a new subcontractor, it could save you a lot of money and hassle in the long run.