Working with subcontractors is a standard practice when you’re in the construction, contracting, and skilled trades industry. Using subcontractors allows you to take advantage of additional expertise without taking on new permanent employees. But it also brings new risks that could potentially have a significant impact on your business. That’s why it’s important that you ask questions about your subcontractor’s insurance.
In the eyes of your customers, there is little distinction between a general contractor and subcontractor, since they’re mainly concerned with seeing quality work getting done on time and on budget. So choosing a subcontractor to work with is a big decision that requires careful planning.
The risks of working with subcontractors
You should think of subcontractors as an extension of your business. After all, you aren’t just putting your business’s reputation on the line, but also your finances. For example, if your subcontractor isn’t able to complete a job within the agreed-upon timeline, lacks the expertise required to finish the job, or simply does poor work, your business could be on the hook for damages.
If your project isn’t completed or has problems due to your subcontractor, your business may ultimately still be responsible. If your subcontractor actually causes damage to a customer’s property, your business may be liable. Depending on the amount of damage, it could have a big impact on your reputation and your bottom line.
The four questions you should ask about your subcontractor’s insurance
There are many questions that may be relevant to ask your subcontractor about their insurance policy. Here are four that you may want to consider, and some extra details that could be important for you to know:
- Do you have a certificate of insurance?
- Is the certificate and coverage recent?
- Is the coverage amount enough to match the cost of the project?
- Do you have work history references?
- Ask the contractor about at least three similar jobs they’ve recently completed, and to provide you with their reference’s contact information.
- Verify the quality and timeliness of their work.
- Do you have any insurance claims history?
- Review the subcontractor’s claims history from the past three years to get a better sense of their workmanship.
- If they have a lot of claims, consider using another subcontractor.
- Do you have financial or credit reports to prove financial stability?
- Request a financial report on the subcontractor’s business from a company like Equifax or Dun & Bradstreet.
- Verify the subcontractor’s bonding line of credit (if applicable).
Asking the right questions about your subcontractor’s insurance can help make sure your business isn’t exposed to unnecessary risks by working with the wrong subcontractor.
Ensure you’re protected
Unfortunately, accidents can and do happen. Despite your best efforts and preparation to hire the best subcontractor, there are some things that you simply can’t control. That’s why it’s important for you to invest in the right insurance coverage. Learn more by visiting our construction and contractor’s insurance page today!
This blog is provided for information only and is not a substitute for professional advice. We make no representations or warranties regarding the accuracy or completeness of the information and will not be responsible for any loss arising out of reliance on the information.