Quite simply, anyone who is a subcontractor needs subcontractor’s liability insurance. This includes fairly large subcontractors working on major projects such as substantial residential housing or retail developments. But it also includes one-man bands who are working on a small part of a larger project because they specialise in a particular niche. But, when you’re looking for insurance, what exactly do you need to look out for? We’ve provided a rundown below so you know exactly what you need to consider.
Do subcontractors need their own insurance?
Anyone who works as a subcontractor needs subcontractor’s liability insurance to protect their business against liability claims made against them.
Subcontractors also need subcontractor’s liability insurance to enable them to comply with the conditions of the contract that they are working under. The main contractor will almost always insist that all of the subcontractors working on its projects can produce evidence that they have this type of insurance before they are allowed on site.
Every subcontractor working on a project needs subcontractor’s liability insurance. This is the case whether they are working for the main contractor on the project or whether they have been engaged to work on the project by one of the other subcontractors.
Subcontractors liability insurance is not just required for subcontractors who are working on a project for its entire duration. Even if a subcontractor is only working on a project for one single day – or even just one single hour – that subcontractor will need to have subcontractor’s liability insurance in place.
What does subcontractor’s liability insurance cover?
There are two main sections of a subcontractor’s liability insurance policy.
The core section is public and products liability insurance. This covers the subcontractor against claims made against it by third parties who allege that something a subcontractor has done, or a product that a subcontractor has supplied, has injured them or damaged their property. A specialist subcontractor’s public liability insurance policy should also have an extension for financial loss cover so that it covers claims made for purely economic losses, rather than being restricted to only cover claims arising from injury or damage.
The other section is employer’s liability insurance. This section is optional because only subcontractors that employ people require this type of insurance. However, subcontractors that employ people are legally required to have employer’s liability insurance. This type of insurance covers the subcontractor against claims made against it by employees that have been injured at work, and allege that their injury was the fault of their employer.
Won’t the main contractor’s insurance cover me?
The main contractor’s insurance covers the main contractor, not the subcontractor. Even if a claim for an incident that was caused by a subcontractor is made against the main contractor in the first instance because it’s the main contractor’s company name on the signs at the job site, the main contractor will pass the claim on to the subcontractor to be dealt with by the subcontractor’s liability insurance rather than dealing with the claim under their own insurance.
This is one of the reasons that the contract between the main contractor and the subcontractor almost always insists that the subcontractor has subcontractor’s liability insurance. By doing this, the main contractor knows that in the event of a claim, the subcontractor is insured. This prevents a lot of problems that could otherwise have arisen in the event of a claim. It is also why most main contractors will not allow a subcontractor to start working on site until that subcontractor has shown that they have subcontractor’s insurance.
The other reason that contract almost always stipulates that the subcontractor has to have subcontractor’s liability insurance is that the main contractor’s insurance will often contain a provision that states that the main contractor’s insurance is only valid if all subcontractors working for the main contractor have valid subcontractor’s liability insurance.
Subcontractor insurance requirements UK
So, now we’ve established you do need your own insurance as a subcontractor, the question remains – what requirements are there in place that you need to consider when taking out your subcontractor’s insurance policy?
First, let it be said, there are no specific requirements you need to fulfil in order to take out your subcontractor’s insurance policy. However, that being said, there are some details that you may want to consider when taking out your policy.
The first of these is ensuring that you include all the work you undertake in the trades that you select. So, for instance, if you work as a builder but you also undertake some handyman work, you’ll need to list both trades in order to be covered for all the work you do. If you don’t, it could mean that you’ll be faced with a compensation claim if something goes wrong n the work you didn’t specify on your insurance, and you then won’t be covered for your insurance policy. You should also be sure that if you work with heat, you get a policy that includes work with heat, as if you don’t and a claim arises as a result of working with heat, that also won’t be covered.
There’s also indemnity limits to consider. These are the maximum value a claim can be paid for and you should look at the type of work you do in order to influence which indemnity limit you should pick. Pick too high an indemnity limit and you’re essentially wasting money by paying for a value you’ll never need – but on the other hand, too low an indemnity limit and, when you’re faced with a high claim, you’ll find yourself in a tough situation. It’s important to sit down and consider thoroughly which indemnity limit you’re likely to need in order to ensure you have the right level of cover for the work you do.
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