With many remodeling company owners having to lay off employees, they are increasingly turning to trade partners. What does that do to insurance risk? “It’s actually less risky [for the remodeler] because their insurance is becoming secondary to [the subcontractor’s], and it’s cheaper, too,” says Jeremy Borchert, sales team leader at insurance brokerage company Lockton Affinity’s Kansas office.
Where you can run into trouble is if you think you’ll save even more money by using uninsured trade contractors. “If you hire uninsured subcontractors, your premiums will go up,” Borchert says. He has seen instances where a subcontractor has made the first payment to his or her insurer, gotten the certificate, made copies of it, and then stopped making payments. When audit time comes, you will pay the price in higher premiums for the portion of time that the uninsured subcontractor worked with you during the year.
Verify before each job that the trade partner is current with general liability, workers’ compensation, and auto-liability insurances. Keep insurance certificates on file and regularly update them. Make sure you are listed as additional insured. “You should be notified if the policy is cancelled,” Borchert cautions.
Look for parity in insurance coverage. The standard policy that most remodeling company owners take is for $1 million per occurrence. If the subcontractor has less insurance than you do, your insurance will have to kick in the rest of the money for a claim.
Making the changeover from using insured employees to using insured subcontractors means a phone call to your insurance agent. “It’s just a matter of changing from the carpentry payroll class for an employee, for example, to an insured subcontractor class code,” Borchert says. “And you can stay on the same kind of policy.
—Stacey Freed, senior editor, REMODELING.