When you’re a contractor juggling jobs, timelines, and teams, insurance might not always be top of mind—until it becomes a problem. Whether you’re a construction business or specialized trade contractor, one of the most common questions we hear from general contractors is: “Do I need to carry workers’ comp for my subcontractors?”
The answer is complicated. Because it depends on a few factors, however, the consequences of getting it wrong can be severe. In this blog, we’ll explore everything you need to know about the ins and outs of workers’ comp and contractor liability insurance.
Why It Matters
In many states (including South Carolina), general contractors can be held liable for injuries that happen to uninsured subcontractors while working on your job site. If your subcontractor doesn’t carry their own workers’ compensation insurance and someone gets hurt, you could be on the hook for medical expenses, lost wages, legal costs, and more.
Even if you think you’re protected, the state might see things differently.
How the State Defines Subcontractors
Every state has its own rules, but many consider a subcontractor to be a statutory employee under workers’ comp laws—especially if:
- They don’t have their own workers’ comp coverage
- They’re working under your direction or control
- They don’t carry business insurance as an independent entity
In these cases, you’re essentially their employer in the eyes of the law, and you may be held responsible if something goes wrong.
So, Do You Need Workers’ Comp for Subcontractors?
Here’s the rule of thumb: If your subcontractors don’t carry their own active workers’ comp policy, you may need to cover them under yours or not hire them at all.
Before you bring anyone to the job site:
- Request a certificate of insurance (COI) showing active workers’ comp
- Verify it’s up to date and matches their business name
- Keep a copy on file for your protection
What If They’re Sole Proprietors?
Some sole proprietors or small LLCs assume they don’t need workers’ comp. While certain states allow exemptions, that doesn’t necessarily protect you as the hiring contractor. If they get hurt and aren’t covered, the claim can still land in your lap.
What Are the Risks of Ignoring It?
Failing to verify or provide proper workers’ comp coverage can lead to:
- Hefty state fines
- Out-of-pocket injury claim costs
- Increased insurance premiums
- Legal liability or lawsuits
- Job delays or shutdowns
It’s a risk that’s just not worth it.
The Bottom Line
Yes—in many cases, contractors do need workers’ comp for subcontractors, or at the very least, need to verify that subs have their own coverage. Taking five minutes to confirm insurance now could save you thousands (or more) later. Whether it’s employee injuries or other third-party claims related to a subcontractor’s work, having the right insurance coverage in place can protect your business from costly lawsuits, project delays, and unnecessary risk.
Need Help Reviewing Subcontractor Policies? Reach Out to BME Commercial Insurance
At BME Insurance Group, we specialize in contractor insurance and can help you:
- Review and confirm your subcontractor COIs
- Ensure you’re compliant with state requirements
- Get contracting business insurance coverage that protects you without overpaying
Reach out today to ensure your next job is covered from all angles. From general liability insurance to commercial auto insurance and workers’ compensation insurance coverage options—we have your small business insurance needs covered.
