If you’re a contractor that hires subcontractors, then this article is for you. We’re going to discuss what you need to get from your subcontractors before you let them on a job site and whether or not they’re required to have workers’ comp coverage.
If you’re a subcontractor without employees you’re likely not legally required to have workers’ compensation insurance coverage. If you have employees most states will mandate that you have an active worker’s comp policy in place. There are situations in which you may still want to have workers’ compensation insurance even if you are not legally required to have it.
What if My Subcontractors Don’t Have Workers’ Comp
In New York, the State Insurance Fund says “Subcontractors you hire must be covered by Workers’ Compensation insurance. If your subcontractor does not have coverage, they will be included in your policy and you will be responsible for premium payments and claims filed for that subcontractor.
To avoid this, you should obtain a certificate of workers’ compensation insurance from your subcontractor before work is started and annually thereafter. A valid certificate of insurance will ensure the subcontractor has insurance.”
We always recommend our contractors obtain a certificate of workers’ compensation and general liability insurance from a subcontractor before they let them on a job site. You can read more about contractors’ general liability here https://www.lafadvisers.com/general-liability
How to Verify Workers Comp Coverage
In New York to verify your subcontractor’s workers comp insurance coverage, you can use websites like www.nysif.com and wcb.ny.gov however make sure you check with your specific state on which tools you can use to verify coverage. When you pull the employers’ information up on these sites you’re going to want to make sure they have an active and current policy in force.
Why a Subcontractor Without Employees May Need Coverage
As a subcontractor, you’re not an employee, you’re a completely separate entity, which is independent of the contractor, or company that hires you. Because you’re not an employee the company or person that hires you doesn’t need to carry workers’ comp coverage for you.
However, to protect themselves in case you try to claim against them, most businesses will write a workers’ compensation insurance requirement into your contract stating that workers comp must be in force before allowing you on the job site. They’ll probably ask you to prove this as well by showing a valid and current certificate of insurance.
And of course, if you’re a subcontractor with employees, most states require you to have workers’ comp anyway. In New York, if you have employees but don’t carry workers comp coverage the penalties for non-compliance can be as high as $2,000 for every 10-day period without coverage. By the time an employer receives their first penalty notice, the penalty may be more than $12,000.
Do I Have to Pay Extra for Having an Uninsured Subcontractor
At the end of your workers’ comp policy period, the insurance carrier will schedule an audit with you. During the audit, you will be asked to produce all the certificates for the subcontractors you hired.
To make things run smoothly make sure to keep a record of all subcontractor coverage documents in your system and have your broker assist you with this. Some of the larger contractors use software to assist them with this.
If during the audit, you can’t produce Workers’ Compensation insurance coverage documents for the subcontractors you hired, your policy premium will be recalculated to include those subs in your payroll which will increase your premium and you will receive a bill for the additional payroll added.
Can Health Insurance Replace Workers Comp Coverage
A question we get all the time is “well Shawn why do I need workers comp coverage when I have an active health insurance policy”. Well, it’s great that you have health insurance but most health policies won’t pay out for a work-related accident or illness and that’s where the workers’ comp policy comes into play.
If you have an accident at work, workers comp covers your medical bills, and if the accident stops you from working it will pay your lost income as well. It’s usually in everyone’s best interest for subcontractors to have workers’ comp. This protects them from injuries and lost wages, and you from potentially costly lawsuits and increased premiums.
If you are interested in learning more about this or if you’re interested in purchasing a new workers’ compensation policy, then I would encourage you to reach out to us today: https://www.lafadvisers.com/quotes
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We look forward to working with you!