We often get the question, “Why do insurance companies charge for subcontractors?”. How does general liability and adequately insured subcontractors work?The answer is simple: Contractors that hire subcontractors could have claims brought against them as a result. This is due to certain liabilities that come with hiring subcontractors or “subs”. The premium charged for adequately insured subs helps offset the costs of defense and judgments that may be brought against the hiring contractor. These could include subcontractors’ torts, negligence or inadequate limits of insurance.
An agent may ask you, what are the total costs of your subs? When answering this, make sure you follow the below rules.
The basis of premium charged for adequately insured subcontractors is “total cost.” By definition, total cost includes all labor, materials and equipment furnished, used or delivered for use in the execution of the work. However, it does not include the cost of furnished equipment installed but not furnished by the contractor, if the subcontractor does no other work on or in connection with such equipment. Total cost also includes all fees, bonuses or commissions made, paid or due.