Are a general contractor's liability insurance premiums based on what they pay sub-contractors?

Answer

A contractor's premiums are based on their payroll--in otherword's what they pay employees. Sub-contractors are not employees they are independent contractors who must carry their own liability insurance.

Answer

Premium for a general contractor can be based on one of two things, either your gross receipts or your subcontractors payroll, depending on which market is quoting for you. As far as the distinction for subcontractors costs, i.e. materials vs labor, I have always had my clients rated off of their subcontractors labor payroll. If your subcontractors do not have there own liability insurance this will be picked up at your year end audit and you will pay a significantly higher premium for them then you would have had they carried their own insurance.

Answer

The insurance company that I've had experience with charges for both: 1) payroll of employees, and 1) Total Cost of sub-contracted work, if any.

But keep in mind that the "rate" charged per $1,000 of either the employee payroll or Sub-Contracted Total Cost is vastly different.

For example, suppose you are a General Contractor with employed carpenters. Your rate per $1,000 of payroll may be $39.45, but your rate for the Total Cost of sub-contractors is only $0.58 per $1,000.

There may be differences, but I think that industry wide employees are based on Payroll and sub-contracted work is based on Total Cost, BUT this assumes that you've done a proper job of documenting that the subs are truly sub-contractors, e.g. certificates of insurance for both General Liability and Workers' Compensation. Because lacking documentation will result in the Total Cost of sub-contracted work to be picked up and charged for as employees. Thus an unexpected large audit billing for the prior term insurance policy.

First answer by Bgbg13. Last edit by ID0000000000. Question popularity: 244 [recommend question]