Subcontractor Business Insurance
Coverage for independent contractors who provide specialized services can be a challenge. Many vital services are provided by independent contractors, such as landscapers, electricians, concrete suppliers and excavators. We also understand that when it comes to working with subcontractors, time is of the essence, and after all, time is money! Box Insurance has created a Subcontractor Protection Package that fine-tunes the protection process and offers:
- 360º Protection SM Approach
A Box Insurance team member will interview you to get a complete understanding of your exposures from a 360-degree angle, including your business exposures plus your personal exposures - Aggressive general liability pricing
- Industry experts in construction insurance
Subcontractor FAQs
Q. I am asked to name general contractors and everyone else as an additional insured. What is that, and why do they want it?
A. Naming a general contractor as an additional insured provides the general contractor with limited coverage on the subcontractor’s policy with respect to your work as the subcontractor. It’s required so that if they are filed suit against due to negligence from your work, your insurance policy will defend them and pay on their behalf.
Q. Are there different types of additional insureds? It seems that half the time I have a certificate issued, the general contractor kicks it back and states the additional insured is wrong.
A. Yes, there are different types of additional insured endorsements. One type offers additional insured status to the general contractor with respect only to ongoing operations. Once the job is complete, the additional insured status is removed. The other type offers additional insured status for both ongoing and completed operations status. There is also a blanket additional insured endorsement with all general contractors and owners named as additional insureds if required to by a written contract between the general contractor and the subcontractors. Box Insurance typically uses the blanket additional insured endorsement.
Q. What is a Waiver of Subrogation, and why do general contractors require it?
A. Another name for the Waiver of Subrogation is a “Transfer of Right of Recovery.” The Waiver of Subrogation waives your insurance company’s right to go back and try to recover partial or complete damages from the general contractor or their insurance company alleging partial negligence. The general contractor requires it so that when your insurance company pays the claim on your or their behalf, they will not have the right to go back and subrogate against the general contractor or the general contractor’s insurance carrier and recover damages.
Q. Do I really need Workers Compensation? I’ve heard that I don’t have to carry it in Texas.
A. While it’s true that Texas is the only state that doesn’t require you to carry Workers Compensation if you have more than one employee, don’t be deceived. Texas removes all of your legal defenses if you decide not to carry Workers Compensation. In other words, you pay all medical bills, lost time pay and rehabilitation costs for an injured employee. In addition, you are open to a lawsuit from the injured employee. If you carry Workers Compensation, not only are you protected from employee injury, but also from lawsuits from an injured employee. Under state law, the injured employee must take the Workers Compensation benefits provided by the state if injured. What many employers in low-risk industries don’t understand is that an employee who is injured while running errands for the business in their own vehicle is covered under the Workers Compensation policy, not their personal auto policy. The employer is liable.
Q. How are insurance premiums for general liability for subcontractors determined?
A. All the factors that go into calculating insurance premiums are quite complex, however, the basic principle is simple: Premium = Premium Basis X Rate. Rate is determined by the insurance carrier and the premium basis for subcontractors is typically estimated with annual payrolls by trade class.
Q. One year, my agent quoted me a premium that was reasonable, however, at the end of the year, the insurance company inspected my books, and I ended up paying twice the amount he quoted me. I learned the hard way that insurance premiums may not be guaranteed. Why not?
A. Most insurance policies are auditable. The insurance company has the right at the end of the year to audit your books to verify an accurate premium basis (typically sales or payroll if you’re a subcontractor). If your premium was based on payroll, then they will determine actual payroll for the listed trades for policy period and multiply this times the rate applicable for the policy period to calculate the actual premium you owe. This is reconciled to the estimated premium that was charged at policy initiation, and the insurance company pays a refund or the insured pays an additional premium as a result of the audit. However, if you have a surplus lines policy, please note that the insurance company will not refund money, so estimate conservatively. Audits can be quite painful, especially if they are unexpected and not planned. Make sure to confirm with your agent whether a policy is auditable. If so, it is critical to estimate your premium basis (payroll) as accurately as possible.
