Subcontracting work to others can significantly impact your business since you and your insurer can be on the hook for damages caused by subcontractors who don’t have their own insurance policy. That’s why you should always request a certificate of insurance (COI) from every subcontractor you hire.
Certificates of insurance contain policyholder details, and are used to confirm coverage. Pay close attention to each subcontractor’s liability coverage and request their certificate of insurance before they start each project, or annually if they regularly work for you.
Why do you hire a subcontractor?
As a contractor, you may only want to take on particular types of projects that are within your business’ realm of expertise. By hiring subcontractors, your business may have more flexibility to take on bigger projects, as well as more projects, which could lead to an increase in business earnings.
Types of subcontractors to involve in your next construction project may include one of the following:
- Heating ventilation and air conditioning contractors (HVAC)
- Flooring contractors
- Landscaping contractors
- Well drillers
- Septic system installers
- Blasting contractors
- Concrete contractors
- Waterproofing contractors
- Paving contractors
- Siding contractors
- Insulation contractors
- Finish carpenters
- Stair builders
This list could go on and on, as there are many types of contractors that specialize in other areas.
Ways to find a good subcontractor
Good help is hard to find! Here are some ways you can find a good subcontractor:
Ask for recommendations: Whether it be current employees, other contractors, suppliers, friends, family, or even neighbours – they could know a great subcontractor or have worked with one that they can recommend to you. They may even have before and after photos, or invite you over to take a look at the great job that was done.
Look around: See any work being done in your neighbourhood or a jobsite that looks like it’s coming along? If the work is visible from outside of the job site, this is a great way to watch the progress before the project is complete. From there, you can ask the owner of the home, or get in touch with the contracting company to find out more information about the subcontractors they are using for their project.
How uninsured subcontractors affect your business
Your business may be insured, but that doesn’t mean that your coverage extends to subcontractors. Here’s why it’s important that subcontractors have their own coverage:
- Your business may be liable if the subcontractor doesn’t have insurance
- Your business may be liable if the subcontractor has insufficient insurance
- In the event of a claim, if your insurance company has to pay because of your subcontractor:
- It impacts your loss history
- It may increase your premiums
- It may increase your deductibles
- It may affect your ability to get insurance
- You may have to pay a deductible
Ask yourself these questions before hiring subcontractors
When you’re in the process of hiring a subcontractor, it’s important to do your due diligence, as it may protect your business, as well as save you time and money down the line. Here are some things you should inquire about before you hire a subcontractor:
Their work history
- Has the subcontractor recently completed three jobs similar to the one you’re hiring for?
- Have you verified the quality and timeliness of their work with owners and general contractors?
- Can the subcontractor’s employees adequately perform the work?
Their claims history
- Does the subcontractor have adequate liability coverage?
- Has the subcontractor had any claims in the past?
Their financial stability
- Have you verified the subcontractor’s bonding line of credit (if applicable)?
- Have you requested an independent financial report on them?
What to do once you’ve chosen a subcontractor
Once you find a subcontractor that meets your requirements, ensure that you’ve asked for their COI before you sign an agreement to work together. If a contract has already been signed, and no COI has been received, request it as soon as possible. It’s important to know what liability your business is taking on in case something goes wrong.