By: Sean C. Stevens
If you are not already aware, Insurance companies (especially in the construction industry) are really tightening the procedures for underwriting and audits.
I wanted to address a few common items that I have seen lately, and touch on a few suggestions. Please do not hesitate to call if you have any questions, or would like clarification.
Subcontractor Agreements:
To start, you need to be using a subcontractor agreement, and having each subcontractor sign that agreement once a year. If you are not using a subcontractor agreement, that is another conversation all together.
Do you know if the coverages/wording being required in your subcontractor agreement are the same as what you are asking your subs for?
Once you get a certificate from your subcontractor, are you checking the certificates that you get back from your subcontractors? Do you know what you are looking for? You will want to also make sure that the certificates you are getting from your subs have the correct liability limits or you may be charged for hiring underinsured subcontractors.
Workers Compensation:
I highly suggest that you have a worker’s compensation certificate for every subcontractor you hire. If you do not, your workers compensation insurer may charge any money paid to that subcontractor as employee wages. (This can get very expensive, very fast)
You also should have a work comp policy for your company if you are hiring any subcontractors, even if you do not have any employees. This is an inexpensive way to protect your company from a claim that could bankrupt your business.
As I mentioned above, insurance companies as a whole are tightening their procedures, so what you used to get away with, may not be the case anymore. I am seeing more and more companies doing this, so you will want to be prepared.
A couple of side notes:
-When you are asked for subcontractor costs. Subcontractor costs are materials plus labor, when you hire a sub to do the job.
-If you want to separate payroll for an employee, you need to keep detailed records at a minimum by the day. (Some classifications cannot be split)
I did not get into all of the specifics above, as each company’s insurance is different.
Sending thoughts:
Have you ever had your agent review your subcontractor agreement?
If you did, would they even know why you were sending it to them or what to do with it?
Insurance for the construction business is very specialized. Make sure that your agent is well versed in the construction business, and also make sure that they know your business.
There is more to a good agent/risk manager then just writing a policy.
Sean C. Stevens
Construction Department Manager
Associated Insurance Agents
763-549-2239 – Office
763-549-2299 – Fax
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