Subcontractor Insurance Australia: What Cover Do You Need?

Subcontractor insurance usually starts with public and products liability insurance, because builders may ask to see a certificate of currency before you start on site. After that, the cover you need depends on your tools, your ute and whether you employ anyone.

Public liability insurance is designed to cover claims that someone was injured or their property was damaged in connection with your business. Products liability insurance is designed to cover claims that a product you made, sold or supplied caused injury or damage after it left your hands.

The two are usually arranged together as public and products liability insurance. Public and products liability cover may include legal defence costs, compensation and any settlement you are legally liable to pay, subject to the policy terms.

Cover depends on the policy and insurer you choose. Check the policy wording and its terms and conditions for what is and isn't included.

Does the head contractor's insurance cover subcontractors?

A head contractor's policy is generally arranged for the head contractor's own business. Head contractors may ask you to hold your own public liability insurance and show a certificate of currency before you start. You may need to consider obtaining your own insurance even if you work on someone else's site.

Some projects are insured differently. On NSW Government projects, for example, the principal buys a single policy that is designed to cover the agency and the contractors engaged on the project (icare). Whether a policy like that includes your business, and for what, depends on that policy and the contract.

If you're told the project is insured, the details that matter are:

• Who is insured? Whether your business is named or described as an insured party.
• Which activities: Whether your work is included.
• The limit and excess: The most the policy may pay, and who pays the excess (the amount contributed to a claim).
• What stays with you: A project policy is commonly about the works and the project's liability, so your tools, your vehicle and your own injury are commonly insured separately.

A head contractor's certificate of currency shows that the head contractor holds a policy. On its own, it doesn't show whether your business is insured under it.

What do the insurance terms in a subcontract mean?

Subcontracts often use these terms.

• Principal's indemnity. An extension that "gives cover to a head contractor or client for the insured's negligent acts", using the same limit and terms as your policy.
• Principals named as insured. Head contractors or clients listed on your policy "share the same cover as the insured business" for liability caused by your work.
• Cross liability clause. This clause "lets one insured party claim against another insured party under the same policy", subject to the policy wording.
• Contractual liability exclusion. This exclusion "removes cover for liabilities you accept only because of a contract". If a subcontract asks you to take on more liability than the law would give you, the policy may not respond to the extra part.

Whether your policy includes a principal's indemnity, or lets you name a principal, varies between policy wordings. Always check with your insurance broker or the team at upcover.

What insurance should a subcontractor consider?

Each cover is subject to the policy terms, conditions and exclusions. Damage to the works themselves, such as a partly built structure, is a separate question from your liability. Whether a project policy or your own policy responds to it varies between policy wordings. Always check with your insurance broker or the team at upcover.

Our guide to what insurance tradies need covers each of these in more detail.

Do subcontractors need public liability insurance?

For subcontractors, the requirement to hold public liability insurance usually comes from the contract, the site, a licence or a council permit (business.gov.au).

Some trade licences set a minimum. Licensed electrical contractors in Queensland need at least $5 million public and products liability, plus other cover (WorkSafe Queensland). Registered electrical contractors in Victoria need at least $5 million public liability (Energy Safe Victoria). See our guides to public liability insurance in Queensland and Victoria.

Above any licence minimum, the subcontract sets any further minimum. The licences, councils and permits in our Queensland and Victoria guides set limits of $5 million, $10 million and $20 million or more. A subcontract can ask for any of these. Where a licence and a contract both apply, each has to be met.

An upcover team member or an insurance broker can talk through what those limits mean for a business like yours. Our guide to what level of public liability insurance you need explains the other factors.

Who covers you if you're hurt on site?

Workers' compensation is designed to cover workers. Whether it can cover the business owner depends on the scheme and your business structure. In Western Australia, for example, a company can ask for its policy to cover a working director, and WorkCover WA says sole traders and partners "are not working directors under the Act" (WorkCover WA). Other schemes have their own rules.

Personal accident and sickness insurance is designed to help protect your income if injury or illness stops you working. Benefits and waiting periods vary between policies. Our guide to personal accident versus workers' compensation compares the two.

What if you hire workers or your own subbies?

Safe Work Australia says "Under Australian law, employers must have insurance to cover their workers in case they get sick or injured because of work" (Safe Work Australia). Who counts as a worker, and any exemptions, depend on your state or territory scheme (business.gov.au). Our guide to whether workers' compensation is compulsory covers each state and territory.

If you pass work to your own subcontractors, whether your policy covers that work varies between policy wordings, so always check with your insurance broker or the team at upcover. Your policy is generally arranged for your own business, so your subcontractors may need their own cover.

What do contractor insurance claims look like?

The claims examples below come from upcover's general contractors page, so two are written from the head contractor's side. The first two and Trailer side swipe are claims made against the business. Tool Theft is a claim on the business's own tools of trade policy.

Important: These claims are examples only. Cover is subject to policy terms, conditions and exclusions. Policy wordings vary between insurers. Always refer to the policy wording and its terms and conditions for details. If you have questions about a particular possible claim or would like assistance about whether a certain claim might be covered it is always best to speak to an upcover team member or your insurance broker.

If you're concerned about a particular customer service or experience, you can always consider telling your insurer as soon as you become aware of an incident, complaint or circumstance that could lead to a claim. You don't need to wait for a formal demand. Also keep in mind that notifying of a claim late may affect your claim.

You can start a claim through the make a claim page. Admitting liability, incurring costs or agreeing to a settlement before you notify your insurer may affect your claim. Starting a claim does not confirm that your claim is covered; your insurer assesses it under the policy terms, conditions, exclusions and limits.

What do public liability and tools of trade policies commonly exclude?

Public liability exclusions commonly include, but are not limited to:

• liability arising from using a registered motor vehicle. Some policies include cover, with limits, for injury or damage while loading or unloading goods from a registered vehicle. Injury to other people caused by the vehicle sits with compulsory third party (CTP) insurance. CTP is a third party personal injury insurance that is often part of the vehicle registration fee (business.gov.au). Damage to other people's property may sit with commercial motor insurance, depending on the cover arranged
• dishonest, fraudulent or wilful acts by you. Dishonesty by an employee may sit under the crime or fidelity section of a management liability policy, designed to cover losses from employee dishonesty, where you arrange one
• the cost to redo, correct or improve your own work or fix defects, although the policy may respond to resulting damage to someone else's property
• claims from professional advice or services for a fee, which generally sit with professional indemnity insurance
• liability you take on only because of a contract (contractual liability exclusion)

Tools of trade exclusions commonly include, but are not limited to:

• wear and tear, or breakdown
• damage from a power surge
• theft from the open air or without forced entry, such as from an open job site (theft in open air exclusion)

Important: These lists are not exhaustive. Exclusions vary between insurers. Always refer to the policy wording and its terms and conditions for the exclusions that apply to you, and if you have questions you should speak to your insurance broker or the upcover team.

Whether a policy covers a client's property in your care, custody or control varies between policy wordings, so always check with your insurance broker or the team at upcover.

What should you check in the subcontract?

The insurance clauses in a subcontract usually cover four things:

• The insurance schedule. The covers and limits you are to hold, and whether the head contractor is to be noted on your certificate or named on your policy.
• The indemnity clause. Many subcontracts ask you to indemnify the builder for liability arising from your work. Your policy may treat some of that promise as liability you took on only because of a contract.
• Notice and duration. Whether you must tell the head contractor if your policy is cancelled, lapses or changes, and whether cover must continue after the job finishes.
• Licence conditions. Whether the work needs a trade or contractor licence. For New South Wales, see our guide to contractor licence requirements.

An upcover team member or an insurance broker can talk through the insurance clauses with you before you sign.

What should your certificate of currency show?

A certificate of currency confirms a policy is in force. Head contractors usually look at:

• The insured name, matching the business the contract names.
• The limit, meeting the limit the contract sets.
• The dates, covering the whole engagement.
• Any notation, such as the head contractor noted as an interested party.

A policy is designed to respond to the activities described on your policy schedule. If a customer makes a claim about an activity your schedule leaves out, the insurer may consider declining it if they were not aware of the activity and would not have accepted it as covered under the insurance policy.

What affects the cost of subcontractor insurance?

No single price applies to every subcontractor. Your price depends on the details you give the insurer, including:

• your trade and the work you do
• your turnover and number of staff
• whether you use your own subcontractors
• your claims history
• the limit you choose (the most the insurer may pay, subject to the policy terms) and your excess (the amount you contribute to a claim)
• the value of the tools, plant and vehicles you insure

The amount you pay may also include GST, stamp duty and fees. Paying monthly may add instalment charges. Our guide to what insurance tradies need links to a cost guide for each trade.

How upcover can help

upcover arranges insurance for contractors and subcontractors, including public and products liability, personal accident and sickness, tools of trade, commercial motor and mobile plant insurance. upcover works with 80+ insurance partners and can arrange quotes from a range of insurers.

• 70,000+ businesses covered across Australia
• 4.9/5 customer rating
• 80+ insurance partners

Get a quote for contractor insurance, or read our guide to contractors versus subcontractors.

Frequently asked questions

Does my builder's public liability insurance cover me?

A head contractor's policy is generally arranged for the head contractor's own business. Some project policies are designed to cover the contractors on the project. Whether one covers your business depends on that policy and the contract.

How much public liability insurance does a subcontractor need?

The subcontract sets any minimum, and some licences set one too, such as $5 million for licensed electrical contractors in Queensland. A subcontract can ask for more.

Does a subcontractor need workers' compensation insurance?

Employers must hold workers' compensation insurance for their workers. Whether the scheme can cover the business owner depends on the state or territory and your business structure.

Does the builder's insurance cover my tools?

A project policy is commonly about the works and the project's liability, so whether it covers your tools depends on its wording. Tools of trade insurance is designed to cover the tools and equipment you use for work.

What insurance documents can a head contractor ask for?

The subcontract sets out what the head contractor can ask for. A certificate of currency is the usual document. Some contracts also ask for the head contractor to be noted on it, or for licence evidence.

What happens if a subcontractor has no public liability insurance?

Head contractors may not grant site access without a certificate of currency, and a subcontract that requires cover may be breached. Without insurance, your business would meet any claim it is found liable for.

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_{Written by upcover's editorial team.}

_{This article provides general information only and does not take into account your objectives, financial situation or needs. It is not legal or tax advice. Contract terms, licence conditions and workers' compensation rules are set by the other party to the contract, regulators and each state or territory scheme, and can change, so confirm what applies with the relevant body. Insurance availability and cover are subject to underwriting and the terms, conditions, limits and exclusions of the relevant policy. Read the policy wording and its terms and conditions before deciding. For commercial motor vehicle insurance, also read the Product Disclosure Statement (PDS), Target Market Determination (TMD) and Financial Services Guide (FSG). upcover arranges insurance products with selected insurers and underwriters and does not compare all general insurers or insurance products available in the market.}