Many contractors believe that using subcontractors instead of employees removes the need for workers compensation. For insurance purposes, it often does not, and assuming otherwise creates two real exposures.
The audit exposure
When your workers comp policy is audited, the carrier reviews your subcontractors. If a sub cannot prove its own workers comp coverage, the auditor can treat that sub’s payroll as yours and charge you for it. So using uninsured or unverified subs does not avoid workers comp cost; it can add it, after the fact, in a surprise bill.
The liability exposure
Beyond the audit, an uninsured sub who is injured may look to you, and a sub’s faulty work can become your claim. Without proper risk transfer, the hiring contractor absorbs exposure that should sit with the sub. This is why your insurance, in effect, includes your subcontractors’ insurance.
What contracts require
On top of all this, general contractors and project owners frequently require you to carry workers comp regardless of whether you have employees, as a condition of the work. So even where the state would not force it, your contracts may.
What to do
Require each subcontractor to carry its own workers comp and adequate general liability, name you as additional insured, and provide verified certificates and endorsements before they work, kept current for the duration. Whether to carry your own workers comp depends on your state, your structure, and your contracts, and it is worth confirming rather than assuming.
A coverage review or subcontractor review sets the requirements and verifies what your subs actually carry, so an uninsured sub does not become your bill or your claim.