Why Do General Contractors Prefer to Hire Insured Subcontractors?

FEATURE

Why Do General Contractors Prefer to Hire Insured Subcontractors? by Hannah Sullivan, Pogo Insurance

One of the great debates among the contractor community is in regard to workers’ compensation insurance. Who’s responsible for providing it -- the general contractor (GC) or the subcontractor?

In the United States, workers’ compensation coverage is mandatory for W-2 employees once a business has reached a certain size. This number of employees varies by state. As a subcontractor, when you are hired by a GC, you are not technically an “employee.” You work independently “with” the GC, not “for” the GC as a traditional employee.

General contractors are not actually required to provide subcontractors workers’ comp insurance, and because of this, they typically prefer to require subcontractors to provide their own workers’ comp coverage. Why are subcontractors expected to get their own workers’ comp?

General contractors require subcontractors to have their own policy to reduce their own liability. Your policy will pay out if an accident occurs, instead of theirs. Workplace incidents can happen at any time, especially when you’re working with dangerous equipment and tools. Common jobsite injuries include muscle strains, lacerations, or even ladder falls. And most general contractors don’t want to be on the hook, or pay for extra insurance coverage, if something happens. That’s why most require subs to provide a Certificate of Insurance before they start the job.

If a GC contracts with an uninsured subcontractor and they get hurt on the job, they could be found responsible, as they are the hiring party. Workers’ comp claims include medical bills, lawsuits, and lost wages. If you get injured while working and you do not have workers’ comp coverage, your GC will be responsible for paying for those claims.

Additionally, GCs want the subs they hire to have their own insurance because workers’ comp premiums are based on payroll. If they hire you, and you don’t have insurance, they’ll be charged for hiring you when the workers’ comp carrier audits them at the end of the year. If a general contractor hires a subcontractor with their own policy, they won’t get charged for that payroll.

Can general contractors add subs to their own workers’ comp policy?

Although general contractors can technically add subs to their policy, it’s not as common.

In some cases, they’ll add subcontractors to their policy as an “additional insured.”

An additional insured is a person of entity who may be added to an existing party’s workers’ comp policy with respect to work performed on a specific job.

If you’re listed as an additional insured, you’ll get workers’ comp protection while you’re working for the general contractor. This includes medical bills, defense coverage, and third-party lawsuit coverage. Keep in mind, being listed as an additional

insured for one party does not mean you have coverage while working for other parties.

Why don’t more general contractors list subcontractors as additional insureds?

Simply put, it’s all about the money. The more payroll a general contractor has, the more expensive the workers’ comp policy. When a GC hires a sub that has their own insurance, they are not charged for that payroll, resulting in a more affordable workers’ comp policy for themselves.

Not only that, but if an accident happens, it can impact the general contractor’s loss history. If a claim occurs, it will raise their experience modifier. The higher the mod, the higher their insurance will cost.

Why do subcontractors need workers’ compensation?

It doesn’t matter if you’re working as a one-person operation or as a team. If you’re on a jobsite, you should have workers’ comp. This form of commercial insurance protects you in the event you get injured or fall ill due to work-related activity. Your workers’ comp policy will cover medical bills related to things like wounds, broken bones, asbestos poisoning, and more.

Additionally, if you or an employee require time off work to recover from an illness or injury, the lost wages will be supplemented by your policy. Many providers also offer back to work programs to help you and your employees return to work faster.

Medical bills and lost wages aren’t the only benefits of workers’ comp insurance. If you face a lawsuit regarding claims of negligence or an unsafe work environment, court costs, legal fees, and settlements are taken care of through your policy.

Without workers’ comp, you would have to pay for any financial damages out of pocket. But a good policy will pay for the cost of claims.

Learn more about workers’ comp

for subcontractors.

What are workers’ comp requirements?

Every policy is different because every subcontractor is different. The main question is: Do you have employees?

If you are a subcontractor working on your own with zero employees, you may be eligible for a ghost policy. This is essentially the most affordable form of workers’ comp on the market, as you are only paying the minimum premium as dictated by the state. It does not provide workers’ comp coverage, however, it does still provide you with your Certificate of Insurance. It’s an affordable way to get hired, but it can be more of a risk because if something happens you will not have the financial protection from your policy.

If you do have employees, you will need a standard workers’ comp policy where you have the choice to include or exclude yourself from coverage. Your employees are covered either way.

How much does subcontractor insurance cost?

There are several factors that dictate the price of your workers’ comp policy. Location is a big factor. Workers’ comp is a state-regulated coverage, which means each states’ rates are different.

The greater the risk, the greater the rate. For example, a subcontractor that specializes in cabinetry has a much lower rate than someone involved with roofing.

The number of employees also plays a role in determining the cost of your workers’ comp policy. This is largely due to the fact that premiums rely on payroll. The greater the payroll, the greater the cost of the policy.

Your loss history is another factor that determines the cost of your workers’ comp. If you have had claims in the past, your premium tends to be higher than someone who has not experienced losses.

As an example, if you are a sole proprietor with no employees and purchase a ghost policy, in many states you will find rates as low as $750 annually.

Check out this subcontractor

insurance cost guide to learn more on how much subcontractors might pay for workers’ comp insurance.

Where should subs purchase workers’ compensation insurance?

There are a variety of ways to find workers’ comp. You may contact an insurance agent, a broker, or insurance carrier. In some cases, you may be able to purchase workers’ comp from the state directly.

About the Author

Hannah Sullivan is VP of business development for Pogo Insurance, a company that provides cost and coverage comparisons from dozens of top insurance providers by analyzing workers’ comp rates. Learn more about subcontractor insurance and get free estimates from multiple carriers.

Mask-on Communication Tips

You wear your mask, keep six feet between yourself and others, and are committed to safety. But the measures that help minimize your risk of COVID-19 can also have an impact on your interactions with others.

“The physical barrier actually changes the sound waves that are reaching your ear,” says UNC Health audiologist Patricia Johnson, AuD. “High pitches aren’t able to make it through the material, so you start losing access to consonants, particularly ‘f,’ ‘s,’ ‘sh,’ ‘th,’ which carry a lot of the weight in the clarity of the words that we hear.”

If you want to increase understanding with a masked individual, you should look them in the eyes – which may be easier said than done. Eye contact triggers self-

consciousness, consumes extra brain

power and becomes uncomfortable after only three seconds. But bear in mind, eye contact can also make you appear more intelligent and trustworthy.

Body Language

You might be surprised how much information is conveyed by the body itself. For instance, when someone is happy, they stand up straighter and lift their head; when they are sad, they slouch and drop their head; and when they are angry, their whole body tenses up. Learning how people use their bodies to convey emotion may help reduce the uncertainty you feel when communicating with someone in a mask.

Become aware of your own body language, too. When engaged in a conversation, you can appear more attentive by turning your body toward the individual, leaning in or nodding. To let another person know you want to start speaking, straighten your posture, hold up your index finger or nod more frequently. Finally, be aware that imitating the posture of another person can increase how much they like you and even agree with you.

The Voice

Don’t forget the impact of your voice. It’s not just what you say, it’s how you say it. Along with the actual words, you also use volume,

tone, pauses and fillers to convey your

message. For instance, a lower-pitched whisper may denote sadness or insecurity, whereas a higher-pitched shout could show anger or intensity.

If you feel the need to speak louder, just be aware that raising your voice can alter the message you are trying to send. Changing the tone of your voice can change the whole conversation, so instead of increasing volume, try improving enunciation.

Use your body and voice to convey the emotions you fear your mask might hide. Maybe most importantly, don’t expect it to go perfectly. Just like any conversation, mistakes will be made.

When someone can’t understand you, try rephrasing your statement, saying it a bit more slowly and enunciating more. If you are struggling to understand someone else, try to ask close-ended questions, like “Do you want to go to the park?” instead of open-ended ones, like “Where do you want to go?”

More Resources:

https://www.asha.org/public/ communicating-effectively-while-wearingmasks-and-physical-distancing/

https://www.aacn.org/blog/what-didyou-say-tips-for-communicating-whilewearing-a-mask

The Devil's in the Details—But That’s What You’re Good At! Get Recognized for Your Excellence

Are you proud of your company? It’s policies and practices? Do you want to show the world that despite COVID-19, you’re doing things right? Then apply and be proud to the whole world of your company. Yes, you’re busy. But a little each day, and you’ll have no problem getting your application in by December 31st.

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Ethics Timeline. • ASA’s Certificate of Excellence in Ethics Program

Q&A LinkedIn Group—a forum for getting answers to your questions about the awards and application process. This forum includes current award recipients who have been through the application process and are willing to help guide new applicants through their application process. (Be sure to log‑in to your

LinkedIn account first.) • Recipients of the 2019 ASA Certificate of

Excellence in Ethics may re‑apply for 2020 using the Recertification Form. Download the 2020

Recertification Form. • Download the ASA Model Code of Ethics for a

Construction Subcontractor.

Application deadline: Dec. 31, 2020.

Don’t Forget Other ASA Awards:

There are many more awards available through ASA, and more information about all of them can be found by clicking here. ASA Awards winners will be honored by ASA National. We highly encourage all ASA members to get involved in our awards program. These valuable recognition opportunities are only available to ASA members.