What You Need to Know about Insurance for Contractors

A contractor’s incomplete work or mistakes could become your financial responsibility if they don’t have their own insurance. For example, if you hire a contractor to complete work on a project for a client, the client can sue you over the contractor’s errors or unfinished work. If the contractor has insurance, however, you can recover your losses.

Similarly, if your contractor doesn’t finish their work for your business, you can take action to recoup your losses.

To verify whether your contractor has coverage, ask to see their certificate of liability insurance.

Three Policies You May Want Your Contractor to Carry

Depending on your industry, the contractors you hire could have numerous insurance policies, or none at all. The three policies below offer protection for common business-related lawsuits:

1. General liability insurance covers third-party bodily injuries or property damage that a contractor may cause you, your employees, or another third party. It also can pay for libel or slander lawsuits and product liability lawsuits. Because accidents are unpredictable, it’s a good idea to make sure any contractors you hire at least have this policy.

2. Professional liability insurance, also known as errors and omissions insurance, can pay for professional oversights or incomplete work. For example, let’s say you own a small advertising agency and hire a freelance copywriter. If they produce plagiarized content and your client holds your firm accountable for it, you can recover your losses from the writer’s professional liability coverage.

3. Workers’ compensation insurance may be a useful policy for your contractor to have, especially if they work for you long-term. Per some state laws, an ongoing contract may help classify the worker as an employee, not a contractor. When that happens, your company would owe the worker certain employment benefits, such as workers’ comp coverage, unemployment insurance, and more. If the contractor has their own workers’ comp policy, it helps prove they are in business for themselves and are not your employee. Their workers’ comp policy can also cover their work injuries so they are less likely to try to recover those medical expenses from your company.

When to Add Contractors to Your Insurance Coverage

In some cases, it might make sense to cover a contractor under your own business insurance policies. For example, let’s say you need to hire a few workers to help out for a month on a particular project. You found a few people who are available to work, but they don’t have their own insurance coverage. In this instance, you can add them to your policy as an “additional insured” for the days they will work for you.

Some additional insured endorsements are very specific and will only cover the exact person or company listed in the endorsement. Others may cover anyone who meets the definition of additional insured in the endorsement. In both cases, coverage is usually more limited for the additional insured than it is for the policyholder.

Your insurance provider can help you temporarily add subcontractors to your policy. It will cost you a little bit more, but it also helps you manage your risk more efficiently because your policy can cover the contractor’s mistakes.

Rebecca Hosley is a writer for Insureon, a leading provider of online small business insurance. She is based in Chicago and writes frequently about small business insurance and tech startups.

Rebecca Hosley

Rebecca Hosley is a former writer for Insureon, an online small business insurance agency. A pioneer in insurance technology, Insureon operates the largest online marketplace for small business insurance in the United States. Their proprietary technology platform enables business owners to easily compare quotes and purchase the insurance policies they need. The Insureon platform is also licensed to select industry participants looking to improve service to their clients. Insureon is integrated with every major U.S. carrier, manages over $400 million in premiums annually, and is licensed in all 50 states. Previously with Insureon, Rebecca was the content and public relations manager. Rebecca wrote and developed online content that led to organic web traffic growth of 50% year-over-year and increased inbound links. She also oversaw company public relations and grew online commercial insurance applications by 15% year-over-year. Rebecca is a graduate of Webster University with a BA in Communications. Insureon is based out of Chicago, Illinois.

Recent Posts

Winning Together: How Supporting Other Businesses Can Help You Win

Sometimes it’s easy to get caught up in the day-to-day activity of your business that…

1 week ago

5 Big Marketing Opportunities for Your Business In 2024

Can you believe we’re already in April? The year is passing by and we want…

2 weeks ago

How to Start A Local Service Business

Congrats! You’re starting a business to serve the people in your local community. How exciting!…

4 weeks ago

The Best Way To Start a Construction Company

You’ve spent years working in construction managing projects and dealing with clients for former bosses.…

4 weeks ago

What to consider when choosing your nonprofit payment processor

When selecting a payment processor for your nonprofit organization, you may be tempted to opt…

1 month ago

How to Protect the Privacy of Your Small Business’ Data

Data breaches and cybersecurity threats can threaten the security and privacy of a small business.…

5 months ago