Builders Insurance and Sub-Contractors – what you need to know?
It is important to note that most builder’s insurance policies do not include cover for sub-contractors. Many builders use sub-contractors on a project by project basis and we would recommend that you invest in the additional cover to ensure you are adequately protected.
Building and related professions present all sorts of risks. The word demolition raises all sorts of alarm bells. Building sites are known for health and safety risks and issues. Exposure to outdoor elements and the unknowns as you dive into a project is part and parcel of the profession. There is a huge risk for serious injury or even fatal accidents. The industry is plagued with customer disputes, legal challenges, and many court appearances. The tools of the trade can be extremely expensive and have a high resale value in the black market. All of these factors are what makes it a high-risk industry and all the more reason to protect yourself and your business in the unfortunate event that any one of these risks could affect you.
Whether you are a builder, tradesperson, or contractor you should always make sure that you have the right insurance to protect you, the people you are working for, and the people you are working with. Within the insurance sector these people are typically categorised as follows:
- Subcontractors who use your tools and materials and work under your supervision, also known as labour-only subcontractors,
- Subcontractors who use their tools and materials and make their own decisions, also known as bona fide subcontractors,
- Employees who use your tools and materials and work under your supervision on a full-time or part-time basis.
You are legally required to have employer liability insurance that covers both employees and labour-only subcontractors. It protects you in the event of workplace accidents, theft, and other risks.
A real-life example
Imagine you are renovating a townhouse. You know your strengths and skill set but have to complete the entire job. You have little experience in installing wiring and electrics so you need to call in an electrician. This means that you will be subcontracting the electrical part of the project. The project appears to end well and all parties are happy. Then a few weeks down the line the client starts having problems with electrics. The lights are blowing, the fuses are burning out and the main electrics are continuously tripping. The client contacts you because you are their main contact for the job. After all, it is you that they paid for the job. The homeowner has another electrician look at the job and it is going to be costly to repair. The client sues you and you have to deal with the consequences. If you have the appropriate subcontractor insurance in place your insurance provider will deal with the claim on your behalf and deal directly with the subcontractor’s company who is actually at fault.
What should I consider before hiring a sub-contractor?
If you are hiring a subcontractor, it’s important that you practice good risk management so that you avoid liabilities. The three biggest concerns are quality control, time management, and liability.
- Before you hire or start working with the subcontractor, ask for references of their past work.
- Make sure they can demonstrate the skills you need and have the experience you require for the job.
- It is good practice to check that their quality level matches your own, we are really talking about quality checks and ensuring they do not cut corners by using cheap or substandard materials or unsafe practices.
- Communication is so important and make sure to walk through the site with them in advance and layout your expectations.
- Once you understand their capabilities and availability you should work agree a reasonable deadline for the finished project.
- Make sure that they’re properly licensed and insured.
Having the right builders insurance is so important and the appropriate sub-contractors policy will protect you in such a scenario. Our Broker Team at Sheridan Insurances would be happy to talk you through the options available to you and help you find the right insurance for your needs.