Understanding Subcontractor Insurance – What You Need to Know

For large construction projects, managing subcontractor insurance is no easy feat. Not only can it be a time-consuming process with all that paperwork to keep track of, but to mitigate risk and keep everything on the up and up, certain compliance requirements are necessary for each job.

That’s why reliable software solutions have been created specifically for subcontractor management: so you can digitize important insurance documents and easily store, audit, and track them from start to finish!

In this article, we will cover the basics of subcontractor insurance verification and provide a handful of top subcontractor compliance management tools on the market.

Ensuring Comprehensive Contractor Insurance

Does General Liability Insurance Cover Subcontractors?

When it comes to safeguarding your business operations, having the right general liability insurance is key. However, not all subcontractors have the coverage you may need for projects. That’s why verification of a Certificate of Insurance (COI) from each subcontractor becomes so essential.

A COI confirms that they carry appropriate and sufficient subcontractor insurance coverage against potential risks associated with their work activities, ensuring both parties are protected in contract agreements.

Best Practices for Subcontractor Insurance Tracking

To reduce potential risks, General and Prime contractors need a reliable subcontractor insurance tracking process, not just a folder full of certificates. This includes implementing effective practices such as having thorough contract documentation and establishing relationships with subcontractors who adhere to safety protocols.

Here are the best practices you can use to track your subcontractor COIs:

1. Develop a System for Tracking Insurance Info: Establish a system for collecting and organizing subcontractor insurance information for each subcontractor. This system should include details such as the type of insurance coverage, policy limits, and ensure that subcontractors provide proof of insurance before beginning work.
2. Verify Insurance Coverage: Verify that each subcontractor’s insurance coverage is current and sufficient for the work they are performing. Contact the insurance provider directly to confirm the details of their coverage and make sure the subcontractor’s certificate of insurance matches the project requirements.
3. Maintain Accurate Records: Keep accurate and up-to-date records of each subcontractor’s insurance coverage, including the policy number, coverage limits, and expiration date. Develop a process for refreshing this information to ensure everything stays accurate.
4. Enforce Insurance Requirements: Hold subcontractors accountable for maintaining insurance coverage and enforce your insurance requirements. Consider including language in your contracts that outlines your insurance requirements and the consequences of non-compliance.

Need help getting subcontractor insurance information? Download our COI Request Template. Send it off to your subcontractors so they can fill it out in under five minutes.

Subcontractor Insurance Requirements Checklist

Before a subcontractor starts work, general contractors should have a clear process for collecting and reviewing insurance documentation. A COI is a good starting point, but it should not be the only thing you check when reviewing subcontractor insurance requirements.

Use this subcontractor insurance requirements checklist as a general guide:

• Commercial general liability: Confirm the subcontractor has liability coverage for bodily injury, property damage, and certain completed operations claims.
• Workers’ compensation: Confirm the subcontractor has coverage for employee injuries, when required by state law or contract terms.
• Employer’s liability: See if they have protection for certain employee injury-related claims that may not be covered by workers’ compensation alone.
• Commercial auto insurance: Does the subcontractor have protection under company-owned, hired, or non-owned vehicles for project-related work?
• Umbrella or excess liability: Do they have another layer of coverage when the underlying policy limit is not enough for the project’s risk level?
• Professional liability: Check if you are hiring design, engineering, consulting, or other professional services subcontractors.
• Pollution liability: May be needed for trades that handle hazardous materials, excavation, demolition, fuel, chemicals, or environmental exposures.
• Additional insured endorsement: Confirm that the general contractor, owner, or other required parties are added to the subcontractor’s policy.
• Waiver of subrogation: This document helps prevent the subcontractor’s insurer from seeking recovery from the general contractor or other named parties after a covered claim.
• Primary and noncontributory wording: See if the subcontractor’s policy responds first before the general contractor’s own insurance is asked to contribute.
• Policy effective dates: Confirm whether the subcontractor’s coverage is active before work begins and stays active for the required project period.
• Coverage limits: Confirm whether the subcontractor meets the minimum insurance limits listed in the contract.
• Exclusions: Identify policy language that could create a coverage gap based on the subcontractor’s actual work.
• Certificate holder details: Confirm the correct project owner, general contractor, or other required party is listed.

How General Contractors Should Verify Subcontractor Insurance

For general contractors, subcontractor insurance verification is about more than collecting documents. A COI can show that coverage exists, but it does not always prove that the coverage meets the exact requirements of the contract. That is why GCs need a consistent subcontractor insurance verification process that looks beyond the surface-level details.

Here’s what GCs can do to verify subcontractor insurance:

1. Compare the subcontractor’s COI against the insurance requirements in the subcontract.
2. Check each required policy type, limit, effective date, and endorsement.
3. Confirm that the correct endorsement is attached or otherwise provided.
4. Review whether the coverage actually fits the subcontractor’s scope of work.
5. Verify that coverage stays active throughout the project.
6. Review the COI against the subcontract requirements.
7. Look for exclusions that conflict with the subcontractor’s scope of work.
8. Track expiration dates and renewal requirements.
9. Re-verify coverage when project scope changes.
10. Keep accurate records of every document and approval.

Minimum Subcontractor Insurance Limit Examples by Trade

Minimum insurance limits vary by contract, project size, location, and scope of work. The examples below are general benchmarks only and should not replace legal, insurance, or risk management guidance. General contractors should always follow the requirements listed in the subcontract and consult their insurance advisor when setting limits.

Trade	Example Minimum Limits
Electrical	$1M per occurrence / $2M aggregate general liability; $1M auto; $2M umbrella.
Plumbing	$1M per occurrence / $2M aggregate general liability; $1M auto; $2M umbrella.
Roofing	$1M per occurrence / $2M aggregate general liability; $1M auto; $2M umbrella.
HVAC	$1M per occurrence / $2M aggregate general liability; $1M auto; $2M umbrella.
Concrete	$1M per occurrence / $2M aggregate general liability; $1M auto; $2M umbrella.
Excavation	$1M per occurrence / $2M aggregate general liability; $1M auto; $2M umbrella may be required.
Demolition	$2M per occurrence / $4M aggregate general liability; $1M auto; $5M+ umbrella may be required.
Painting	$500K per occurrence / $1M aggregate general liability; $500K auto; $1M umbrella.

4 Best Subcontractor Compliance Solutions

The above best practices can be easily managed with the right subcontractor compliance solution. If you’re unsure of where to begin your search, we’d recommend the following list as great entries worth considering.

1. Evident

Evident is the only completely automated COI verification and insurance verification solution on the market. We give clients the tools they need to ensure total COI compliance and risk mitigation across industries such as retail, lending, supply chain, marketplaces, construction, franchises, and more.

Advantages:

• Full automation
• Leading turnaround time and accuracy
• Scale for high-volume networks
• Connected coverage to insurers
• International coverage
• One-Click compliance

Disadvantages:

• Limited to insurance documents like COIs, Endorsements, Exclusions, etc.
• A fully automated solution, so if you are looking for a workflow solution, other tools may be a better fit.

If Evident checks all of your boxes for subcontract compliance requirements, book a demo and see how Evident can transform your subcontractor COI Management.

2. TrustLayer

TrustLayer is another tool that brings automation to COI compliance, using AI-powered software to automatically validate COI points.

Advantages:

• Multiple integrations
• Pricing is based on the number of subcontractors

Disadvantages:

• Manual offerings
• Geared toward General Counsels

3. MyCOI

MyCOI provides a seamless solution for third-party COI verification, providing a straightforward way to track and review documentation.

Advantages:

• Central data reporting platform
• Dedicated insurance certificate team

Disadvantages:

• Not fully automated
• Slow to handle large amounts of requests speedily
• Limited branded emails

4. Jones

Jones provides a great insurance management experience for property management and construction companies.

Advantages:

• Easy to use
• Real-time compliance reports
• Integrates with Procore

Disadvantages:

• Only works in the property management and construction space
• Limited to insurance and compliance docs

Stop worrying and start doing: get the smart subcontractor compliance solution

At the end of the day, all subcontractor compliance solutions meet the same basic need: providing peace of mind to companies by mitigating their third-party network risk. Solutions like Evident were designed for this very purpose, providing an end-to-end compliance verification solution unlike any other.

If you’re ready to stop worrying about your teams and start focusing on the tasks that drive value to your organization, contact our team. You can access our free demo and see just how easy it is to stay on top of your compliance goals.

FAQs

Do subcontractors need insurance?

Yes, subcontractors typically need their own insurance to protect against liability, property damage, or injuries that may occur during a job. Most general contractors and clients require subcontractors to carry their own coverage, such as general liability and workers’ compensation, to minimize risk and ensure legal compliance.

What happens if my subcontractor does not have insurance?

If your subcontractor does not have insurance, your business may be exposed to liability for property damage, injuries, defective work, or claims tied to their scope of work. You may also face contract violations, project delays, or uncovered losses. Before work begins, require the subcontractor to provide valid proof of insurance that matches your contract requirements.

How much does subcontractor insurance cost?

The cost of subcontractor insurance varies based on factors like the type of work performed, business size, location, and coverage limits. On average, general liability insurance for subcontractors can range from $500 to $2,000 per year, while workers’ compensation can cost significantly more depending on payroll and risk level.

Are subcontractors covered under the contractor’s insurance?

Generally, no. Subcontractors are not automatically covered under a general contractor’s insurance. Most policies exclude independent contractors, which is why subcontractors must usually provide proof of their own insurance to ensure all parties are adequately protected.

What is subcontractor default insurance?

Subcontractor default insurance (SDI) is a policy purchased by general contractors to protect against the financial loss caused by a subcontractor’s failure to complete their work. Unlike performance bonds, SDI provides broader coverage and allows the general contractor more control in managing and replacing defaulting subcontractors.

Does a subcontractor need workers’ compensation insurance?

Yes, if a subcontractor has employees, most states require them to carry workers’ compensation insurance. Even if they work solo, some clients or general contractors may still require coverage to mitigate liability in case of injury on the job site.