This is by far the most common circumstance we encounter. You run a company that outsources all of its work. Great! That is a successful business strategy that many organizations can use. Your subsequent query relates to insurance. How much—if any—do you actually need? Since everyone is covered by insurance, will the cost go down? What further class codes are required for the policy? all appropriate inquiries. I'll address them and provide a little extra value in my blog.
Do You Need How Much Insurance?
That is a challenging query. It all comes down to the agreements you have in place with the parties you do business with. For instance, Target can require your business to carry particular limits on your general liability, workers compensation, and business auto policies if you have a contract with them to wax their floors. You have the contract even though your business isn't performing any of the work. It might be in your best interest to demand that your subcontractors carry the same coverage limitations as you do. After all, you would want your subcontractors' insurance to handle the claim if something were to happen (assuming you have the proper contract written with your subcontractors).
Will the price drop now that my subcontractors are covered by insurance?
Possibly! The ideal strategy is to explain your business model to your insurance broker, who will then explain it to the underwriter. The underwriter may decide to give a different rate if they discover that the necessary processes and contracts are in place. By demanding the appropriate endorsements from your subcontractors, your business has allowed the underwriter to understand that your subcontractors are bearing all of the risk.
Which Class Codes Should Be Included in the Policy?
The quickest response might be all of them.
Everything in working with subcontractors boils down to how much liability is being transferred. Roofing Company A may have a different class code on their policy than Roofing Company B, which permits the subcontractor to work totally on their own, if Roofing Company A uses subcontractors but has two of its employees working with the subcontracts.
