Subcontractor Insurance Requirements: What Builders Should Require
Subcontractor insurance requirements are the coverages a builder makes every trade carry before they work on a job: at minimum general liability and workers’ compensation, plus commercial auto for vehicles used in the work, with the builder named as an additional insured on the liability policy. The requirements are written into the subcontractor agreement and proven with a certificate of insurance. The dollar limits are something you set with your insurance agent, not something you copy from the internet.
When a trade’s work causes a loss and they have no coverage, the claim doesn’t disappear. It rolls uphill to you. Your requirements exist so that the company that caused the problem is the one whose policy pays for it.
What insurance should a builder require from subcontractors?
Most builders’ contractor insurance requirements start with the same core list:
Commercial general liability. Covers property damage and bodily injury caused by the trade’s work. This is the big one.
Workers’ compensation. Covers the trade’s employees if they’re hurt on the job.
Commercial auto. Covers the vehicles they drive to and around your sites.
Umbrella or excess liability. Extra limits on top of the policies above. Often required for higher-risk trades.
Professional liability. Sometimes required for trades that do design work, like engineered trusses or design-build mechanical systems. Ask your agent when it applies.
Not every trade needs every line at the same level. A roofer and a final-clean crew don’t carry the same risk. Many builders set a standard tier and a higher tier for the trades that can do the most damage.
What should general liability requirements cover?
The general liability requirement should cover more than a policy existing. The details are where coverage quietly goes missing. Talk through these with your agent:
Limits. Per-occurrence and aggregate limits. Your agent will tell you what’s appropriate for your market, your contracts, and your own policy’s conditions.
Completed operations. Construction defects usually show up after the trade has left. You want coverage that applies to finished work, and you want it maintained for a period after the job.
Exclusions. Some low-cost policies exclude residential work, certain building types, or the exact operation the trade performs. A roofing contractor with a roofing exclusion has a piece of paper, not insurance.
Primary and noncontributory wording. This addresses whose policy responds first. Your agent can explain how it should read.
What about workers’ comp requirements?
Require proof of workers’ compensation, or proof of whatever exemption your state allows, from every trade. Workers’ comp rules are set state by state. Some states let sole proprietors or owner-operators opt out. Some have alternative coverage arrangements.
Two things are commonly true and worth confirming with your agent. First, if a trade’s uninsured worker gets hurt on your job, you may end up with the exposure. Second, your own carrier may charge you premium at audit for trades who couldn’t show coverage. That audit bill arrives long after the job is closed out and the profit is spent. Find out your carrier’s rules before the first uninsured sub shows up, not after.
What does “additional insured” mean, and why does it matter?
Additional insured status means the trade’s liability policy extends certain protection to your company for claims arising out of the trade’s work. It gives you rights under their policy, so their carrier can be asked to respond when you get pulled into a claim their work caused.
A few points that matter in practice:
It’s done by endorsement. A note on the certificate saying you’re an additional insured doesn’t make it so. The policy has to be endorsed. Ask for a copy of the endorsement.
Ongoing and completed operations are different. Some endorsements only cover you while the trade is actively working. Ask your agent which forms to require so finished work is covered too.
Certificate holder is not additional insured. Being listed in the holder box means you get a copy. That’s all.
Waiver of subrogation. Often requested alongside additional insured status. It limits the trade’s insurer from coming after you to recover what it paid. Again, an endorsement question for your agent.
What subcontractor agreement insurance requirements should be in writing?
All of them. If it’s only on a certificate request form, it’s a wish. Your subcontractor agreement insurance requirements should spell out:
Each required coverage and its limits
Additional insured status for your company, and for the owner if your client contract calls for it
Any required endorsements, such as primary and noncontributory wording and waiver of subrogation
That a current certificate and endorsements are delivered before work starts and at each renewal
That coverage is maintained through the job and for a stated period afterward
That you can withhold payment or stop their work if coverage lapses
That the trade holds their own subs to the same standards
Have your attorney and your agent look at this section together. The insurance language should fit with the indemnity clause in your subcontractor agreement, and both are shaped by state law.
How do you verify and track subcontractor insurance?
Collect a certificate before work starts, read it, and track the expiration date. That’s the whole system. Most builders fail on step three.
Get the certificate from the agent, not a photo of last year’s from the trade’s glove box.
Learn to read it. I walk through each box in how to read a certificate of insurance.
Keep a simple log. Trade name, policy types, expiration dates. Review it monthly.
Tie it to payment. Expired certificate, no check. Renewals show up quickly after that.
Insurance is one of the items on my subcontractor paperwork checklist, and it’s part of what our Subcontractor Paperwork Package is designed to organize.
Frequently asked questions
How much insurance should a subcontractor carry?
There’s no single right number. Limits depend on the trade, your market, your client contracts, and the conditions in your own policy, so set them with your insurance agent.
What if a good subcontractor can’t meet my insurance requirements?
Talk to your agent before you make an exception. Sometimes there’s a workable solution, and sometimes the right answer is that the trade isn’t ready to work for you yet.
Do subcontractors need to list the builder as additional insured?
Most builders require it, and many builders’ own policies expect it. Confirm it with a copy of the endorsement, since the certificate alone doesn’t create the coverage.
How often should I collect updated insurance certificates?
At onboarding and every time a policy renews, which is usually once a year per policy. Track each policy’s date separately, because liability and workers’ comp often renew at different times.
BTW, if you want your insurance requirements to live inside a complete trade partner paperwork system, grab our Subcontractor Paperwork Package over at the Building Optimal Shop, where you can check out the rest of our swag to build a better business. Proceeds go to benefit, Exponencialistas, my non-profit investing in entrepreneurs transforming their communities in Latin America.