Do the premiums for general contractor’s liability insurance get calculated based on sub-contractor payments?
UPDATED: Feb 10, 2014
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Asked February 10, 2014
General Contractor's insurance is based on the total risks of a job. It covers the job site, materials, and calculated potential for losses. The cost is based in part on what it could cost for contractors under some circumstances, but is not intended to protect against the liability concerns of the contractors themselves. For that, each contractor should be individually insured, covering their own assets and business interests.
In some states, General Liability insurance is required by law. This type of coverage protects against bodily injury and property damage which your company causes to others. The general contractors have coverage for their own business concerns, and subcontractors carry similar coverage for theirs. Where it is required by law, contractors must present proof of coverage in order to buy or renew a business license.
Your business liability is not based on what you pay contractors. You are liable to your customers and others, but have no liability for your subcontractors or the wages they are paid. The single exception to this would be a policy known as business income protection which would guarantee that your company is able to pay their bills after a covered event, including the wages owed to subcontractors.
You are not responsible for providing Workers Comp, unemployment, or health care to subcontractors. By law, each company is responsible for its own insurance needs, and your liability ends with how the contractor could potentially be harmed by your company. In most cases, even business income protection coverage is up to the individual company and not the general contractor.
Answered February 10, 2014 by Anonymous