What insurances do you need as a self-employed subcontractor?

Looking for tradesmen cover? Find out which insurances you might need as a self-employed subcontractor in the construction sector

Insurance for tradesmen, why is it important?

When we think about risk within the construction industry, the first things that come to mind are obvious physical risks such as falling debris or misuse of machinery causing injury. However, whilst these are the most common risks, there are a number of other less tangible risks which could impact a tradesperson, such as litigation relating to property damage, or negligence.

For almost all risks faced by a tradesperson, there is likely to be an insurance policy in place to provide protection. Having the right business insurance policy in place could ensure a claim stops at the early stages to minimise business disruption, all the way through to ensuring you have the financial security to prevent a large loss resulting in the business needing to be closed.

With this in mind, let’s take a look at some key insurance topics for subcontractors.

 

Are subcontractors covered under contractors’ insurance?

In short, not always. Bona fide subcontractors tend not to be covered by the insurance of the contractors that engage them. This is opposed to labour-only subcontractors who tend to fall under the protection of their contractor’s insurance coverage.

As such it is generally expected that bona fide subcontractors will have their own insurance coverage in place to cover them throughout any engagements.

 

What is the difference between bona fide and labour-only subcontractors?

• Labour-only: Use the tools and equipment of their contractor and have a timesheet and salary set out for them. Generally speaking, labour-only subcontractors operate under the supervision, direction, and control of a contractor. This bears a closer resemblance to temporary employment.

• Bona fide: Use their own tools and equipment, work independently and free of the control or supervision of the contractor, this includes producing their own invoices. Bona-fide subcontractors will be seen as businesses in their own right, and as such responsible for their own losses.

Standard subcontractor insurance requirements

Nearly all construction sector contractors and subcontractors will be required to hold Public and Employers Liability Insurance. This is a common stipulation often found within your contractual terms. As such, some tradesmen opt to keep a valid policy in place to enable them to find and gain contracts efficiently.

Why do subcontractors need Public Liability Insurance?

Simply put, Public Liability offers cover where you have caused, or are alleged to have caused, physical injury to a third party or damage to third party property during the course of service provision. The policy will fund any legal representation that may be required, as well as any compensation or legal liability the tradesperson is deemed to owe.

For subcontractors working on site, Public Liability Insurance is an invaluable safety net. Claims for damage to third party property, or injury to a third party, are not uncommon in a role that is by nature more hands on.

Whether it concerns those passing by, or one of your clients, this insurance provides peace of mind and its importance in the trades industry cannot be overstated.

What about Employers Liability?

This insurance covers you in the event that an employee, or representative, takes legal action relating to physical injury, illness, or accidental death as a result of their employment through your business. Similar to Public Liability, it covers the defence costs and any financial awards that may be due to the employee following the conclusion of the dispute.

It makes sense then that businesses with employees, more often than not, will need Employers Liability Insurance. In fact, for most businesses with employees it is a legal requirement to hold a valid policy in place. However, when it comes to subcontractors, it might not be so simple.

Whether or not a business needs Employers Liability Insurance hinges upon whether that business hires one or more employees, whether they are fee earners, back office clerical, or otherwise.

Please note, employees here may also include subcontractors. You may need Employers Liability insurance for your engagement of subcontractors dependent on the relationship with them, and the degree of control you have over them. It wont simply be the case that just because you do not call someone an ‘employee’ that you are not required to carry Employers Liability.

Our joint Public and Employers Liability Insurance provides a one-stop shop for subcontractors from as little as £158, offering instant cover and documentation.

In addition to Employers and Public Liability, depending on the nature of the services provided Professional Indemnity Insurance may also be a contractual requirement. 

What is Professional Indemnity Insurance?

Professional Indemnity Insurance provides the defence costs, such as legal representation, and any legal liability that may be owed should a tradesperson be subject to a Professional negligence dispute. Such a dispute occurs where a client alleges that there was a mistake or omission in the professional services provided, which a similarly qualified professional would not have made.

Do I need Professional Indemnity Insurance?

Not all service providers will need Professional Indemnity Insurance. Professional negligence disputes will most typically stem from errors or omissions in advice, design or consultancy services provided. If you do not provide these services, Professional Indemnity insurance may not be required. 

 

Additional forms of risk protection for subcontractor

Just because a certain insurance policy isn’t specified within your contract, that doesn’t mean that you are free of risk, neither may you be free of liability should an incident occur. Subcontractors should consider cover for a range of other risks where relevant to their business.

Contractors’ All Risk Insurance

Another common policy for subcontractors is Contractors’ All Risk. Whilst it tends not to be a contractual requirement, contracts do in many cases specify that the worker is responsible for the property insured. Contractors’ All Risk provides you with property damage cover in a range of circumstances, such as fire and flood. Whether you are a tradesman working on residential jobs or on a building site for a contractor, this policy ensures that you are protected for damage to the property you are responsible for on a construction site. Such property includes the contract works, equipment/machinery and employees tools and effects.

It is a common misconception that Contractors’ All Risk provides you with all the insurance cover you might need, however ‘all risks’ simply refers to the fact the policy will cover all causes of a claim (providing it is not specifically excluded).

Personal Accident Insurance

Another popular policy among subcontractors is Personal Accident cover. Working in a manual environment with inherent physical risks means that not only are you at a higher risk of bodily injury than an office worker, but also at greater risk to loss of income when you cannot work as a result. Personal Accident insurance provides a lump sum benefit up to £50,000 dependent on your injury, as well as up to £50 per day hospital benefit, helping you to continue paying your bills whilst you recover.

For any of the above insurances, receive an instant quote today or get in contact with a member of our expert team to discuss your business requirements.