Subcontractor Insurance REQUIREMENTS

In the construction industry it’s very common for workers to operate as subcontractors, and it’s important to know your insurance requirements.

In this guide we’ll be looking at a range of common questions relating to subcontractor insurance requirements within the Australian building industry:

• Do I need insurance as a subcontractor? • What insurance do you need as a subcontractor? • Do subcontractor insurance requirements vary by state? • Does it matter if I’m a sole trader or company? • How much does subcontractor’s insurance cost? • How much public liability do subcontractors require? • Are subcontractors covered by my insurance?

If you have any questions which are not covered by this guide, please contact us. We’ve helped thousands of subcontractors with their insurance requirements and would love to help you too.

Do I need insurance as a subcontractor? As a subcontractor you are running your own business, even if it’s just you as a sole trader.

This means you are largely responsible for your own actions, and if something goes wrong, you could be financially exposed.

For this reason there are a number of different insurance types required by subcontractors in Australia.

What insurance do you need as a subcontractor? There are two main forms of insurance required by subcontractors. These are public liability insurance and income protection insurance.

Depending on your business activities you may also require professional indemnity insurance, but this is less common for most typical building trades.

Public Liability Insurance

The most commonly required form of subcontractor insurance is public liability.

Public liability insurance will respond in the event that you cause property damage or personal injury to a third party. A third party could be your client or a member of the general public.

Minor claims for public liability generally relate to property damage. For example you might be working in a roof and put your foot through the ceiling. As a subbie you’d be responsible for the cost of repairing and repainting the ceiling.

Larger claims typically relate to personal injury, and climb into the hundreds of thousands (or even millions) if you cause serious injury or death to another person as a result of your negligence.

It’s important to remember that you won’t always be covered by the main contractor’s insurance If you are the one found to have been negligent, you are the one who will be held financially responsible.

Even if the company engaging your services does not require that you hold public liability insurance, it is still incredibly important for your own protection.

As a subcontractor you are not covered by sick leave, and in many cases worker’s compensation won’t protect a subbie either.

For this reason, income protection is not only important, but also mandatory for subcontractors on many worksites.

Income protection will cover a large percentage of your income for a period of time whilst you are unable to work due to injury or illness. As you won’t be receiving any sick leave, this is vitally important.

Other insurance types

For a typical trade business there are no other insurance types that are a mandatory requirement for subcontractors, but there are certainly others worth considering.

Tool insurance is a common one, especially if you’re providing your own tools and equipment like most subbies do.

If your business is a little larger and operates from its own premises you’ll need more of a business package, but you

Do subcontractor insurance requirements vary by state?

There is really no difference in the subcontractor insurance requirements from one state to another.

For public liability there is certainly no difference. Whichever state you operate in, you will need to have your own public liability insurance in place.

There is one slight difference on the income protection side in NSW. It’s not that the income protection is different, but if you operate as a company in NSW you can access workers compensation, even if you’re a one-person company.

This may mean that you can hold workers compensation instead of income protection and may still meet the requirements of the company you are subcontracting to.

But remember that workers compensation is very different to income protection. It will only cover you for incidents at work, so if you simply fall ill or suffer an injury on the weekend, there is no cover. A good income protection policy will cover you for both accident and illness regardless of whether it’s related to your work or not.

Does it matter if I’m a sole trader or company?

For public liability insurance there will be no difference regardless of whether you operate as a sole trader or a company.

Either way, you will require public liability and there is no difference in the cover itself or the cost of the cover.

Income protection is no different. The insurer will class you as self-employed regardless of whether you operate as a sole trader or company, so the insurance will be the same either way.

As mentioned in the previous section, if you operate as a Pty Ltd company in NSW you may be able to use workers compensation instead of income protection, but it is a very different type of cover.

How much does subcontractor’s insurance cost?

The cost of subcontractors insurance can vary widely depending on a number of different factors.

For public liability insurance, the cost vary depending on the size of the business in terms of revenue or staff numbers, as well as the business activities and whether or not those activities undertaken in hazardous locations.

For example if you’re a one-person business undertaking standard residential carpentry, the public liability cost for the minimum $5 million cover will start from around $400 a year.

But if you’re a larger business with multiple staff undertaking higher-risk activities at locations such as airports or mine sites, the cost will be well into the thousands or even tens of thousands per year.

Income protection is different again. The cost of income protection for a subcontractor will depend on your age, occupation, smoking status and the trade you’re undertaking.