Contractors and subcontractors often perform similar work and have similar insurance coverage needs, but there are important differences between them you should know about. These differences are critical when it comes to having the right insurance coverage in place for your projects. 

Read on to learn more about the differences between contractors and subcontractors and their insurance needs, then contact the experts at Meslee Insurance to learn more. 

What are the Differences Between a Contractor and a Subcontractor? 

When it comes to hiring contractors and subcontractors, the differences between them are important to understand. 


A contractor is hired directly by the client to complete a project. The contractor and client agree on the scope and estimate for the work and sign a contract. It is up to the contractor to complete the work as agreed to, and many contractors use subcontractors to fulfill the work. Contractors work directly with the client, communicate with them, and complete the project as per their contract. 


A subcontractor is hired by the contractor, not the client, to work on the part of the project the contractor was hired to complete. Often subcontractors are employed because they have specialized skills that are needed for a portion of the project. For example, a contractor working on a new house may hire a subcontractor to do the plumbing, masonry, or painting work. 

A contractor may also decide to hire a subcontractor to farm out extra work they have. If a contractor finds they cannot finish all their projects on time, they may need to hire someone to take a part of the work they committed to. This person is their subcontractor for the duration of that project. Often contractors use Subcontractor Agreements to outline the scope of work, pay, and conditions. 

Subcontractors work for the contractor that hired them directly – they are not employed by the client. This is a major difference to know between contractors and subcontractors. 

Subcontractors communicate with the contractor, not the client, and take direction from the contractor. The contractor is responsible for paying the subcontractor, and the client has no responsibility to the subcontractor. 

How do Insurance Needs Differ Between Contractors and Subcontractors? 

Having the right insurance protection is important for both contractors and subcontractors. Subcontractors may need to add contractors as additional insureds or verify the subcontractor has sufficient alternative coverage of their own through collecting certificates of insurance.  

Subcontractors may need to have their own coverage to ensure they are protected against various hazards at the worksite. While the coverage provided by the contractor may cover part of the risks faced by the subcontractor, it is a best practice for subcontractors to have their own insurance policy. 

Both contractors and subcontractors need to consider their individual risk factors for each project in order to have the right blend of insurance coverage in force. If you have not worked as a subcontractor or contractor before, you may not know how to protect your business if a loss happens. 

Why do Contractors and Subcontractors Need Insurance? 

Contractors and subcontractors need to have business insurance for several key reasons. 

To begin, clients may require minimum insurance coverage. This minimum coverage is likely to be included in their contracts. To do work with this client, contractors and, by extension, their subcontractors must be insured at least to the minimum levels cited by the client in the contract.

Clients know that requiring insurance from those working on their property protects them from damages, lawsuits, and claims against them stemming from the workers activity. This gives peace of mind to the client. Clients are more likely to work with contractors that have sound insurance coverage. 

Statutory requirements often require insurance coverage of at least minimum limits, so having coverage means contractors and subcontractors are most likely also licensed.

Types of Insurance Policies Available for Contractors and Subcontractors 

There are several types of commercial insurance policies available for contractors and subcontractors that you might consider. Your agent can help you find the best mix of coverages for your individual needs. 

Commercial General Liability

As a contractor or a subcontractor, you can purchase your own CGL policy. Your carrier can issue you a Certificate of Insurance to prove your coverage to clients. A CGL is a basic commercial insurance policy that provides protection for liability and property damage arising from negligence.

It is a good start to securing insurance coverage as a contractor or subcontractor and forms the basis of many commercial insurance packages. You can add more specific coverages by endorsement as needed for your individual risks.  

Insured Endorsement to the Client’s CGL

The client can decide to add the contractor or subcontractor to their policy as an additional insured. This is usually done by adding an additional insured endorsement to the client’s CGL policy. Having additional insured status may be required contractually, and it adds a layer of protection to both parties. The additional insured status formalizes indemnification in the contract, meaning the contractor has a path for making a claim through the client’s CGL policy. 

Specialized Insurance Coverages

Depending on your exposures, you may also need specialized insurance coverages like:

  • Workers’ Compensation
  • Commercial Auto
  • Cyber Insurance
  • Errors & Omissions
  • Commercial Property / Inland Marine
  • Pollution Insurance
  • Other specialized insurance coverages depending on the type of work you perform as a contractor or subcontractor. 

Talk with your agent to review the scope of your projects and the type of work you perform – they can help you identify your risks and plan your insurance coverages accordingly. 

How do you add an Additional Insured to Your Commercial General Liability Policy? 

The owner of the business hiring the contractor may add them as an additional insured to cover them for the duration of the project or for another specified time frame. To do this, call your agent to ask about adding an additional insured to your policy for a certain time period. 

A new COI can be printed to show the additional insured status once the additional insured has been added to the CGL. With some carriers, you may be able to go online and add an additional insured and print the COI through a self-service option. Either way, adding an additional insured to your CGL is a fast and simple process. 

Final Thoughts 

Having the right insurance coverage for your needs is critical, whether you are a contractor or a subcontractor. If you are a subcontractor, it is important to cover your exposures in case the sub contractor does not fully cover risk – be sure to take care of your business risks as a general contractor by having your own coverage. Do not rely on someone else to cover your exposures, whether you are acting as the contractor or subcontractor. 

Your business has specific risks, needs, and exposures to manage. Planning ahead by reviewing your risks and understanding how your insurance coverage will work is important. Understanding if you are working as a contractor or subcontractor and which insurance policy covers you is critical when starting new projects. 

Talk with the experts at Meslee Insurance for more information about insurance coverage for contractors and subcontractors. We can help you find the right options.  

To learn more about insurance for contractors and subcontractors, contact the experts at Meslee Insurance. Our licensed professionals will be happy to answer any questions you have.

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