Whether you own a small plumbing business or a large excavation company, make sure you’re adequately insured if you sign on as a subcontractor to a construction project. While the general contractor (GC) is responsible for managing the project and ensuring the job is completed on time, you could still be liable if something goes wrong.

If one of your employees is injured on the job, you could be subject to a workers’ compensation claim. If faulty workmanship on your part causes damages or injuries, you could be held liable. If you fall behind schedule or your expenses exceed the contracted amount, you could be sued by the GC. You could also be named in a lawsuit if the owner of the project has a dispute with the GC. The blame for an accident or delay could be shifted to you, even if it isn’t entirely your fault.

Since a big loss could potentially bankrupt your business, you’ll want to make sure you’re adequately protected. A good first step is to talk to an insurance broker who specializes in construction.

Checklist for subcontractors

Let’s first review some of the basic protections you should have as a subcontractor.

CGL coverage

CGL is a common coverage nearly every contractor carries and one that’s required on many construction projects. CGL covers injuries or damages caused by your company. Typical examples include injuries to individuals (other than your own employees) on job sites, property damage and faulty work. CGL covers the cost of your legal defense and pays damages up to the limits in your policy if you are found liable.

It’s important to note that CGL doesn’t cover negligent professional acts. These would be covered by a separate professional liability policy.

Wrap-up policies

For large construction projects, the owner or the GC may elect to use a controlled insurance program known as a wrap-up. Wrap-ups consolidate all of the coverage needed for the project, and they cover all of the contractors on the job. These policies typically include CGL and workers’ comp. In exchange for this coverage, you’ll be asked to reduce your bid by the amount you would normally include for insurance costs.

Other coverages you may need

CGL and workers’ comp are the two main policies you’ll need as a subcontractor, but there are other types of insurance you should consider, too. Here are a few to think about:

Working on a construction project can be exciting and profitable. It can mean steady work for an extended period of time and perhaps lead to additional projects. But keep in mind that, as a sub, you’re exposed to many risks. Take steps to protect yourself legally by securing a contract that details your work requirements and terms of payment. And talk to an insurance broker about CGL, workers’ comp and other coverages you’ll need to avoid big financial losses.

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