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How Subcontractors Increase Your Workers Compensation Premium
By Randy Sieberg, CIC, ARM, CRM

What is a subcontractor? Generally accepted as an individual or business who performs part or all of the described work under anothers contract. In other words, another business you hire to do work for you.

Here's an example of how a subcontractor can increase your workers compensation premium. You hire a subcontractor to perform a job. He completes the work and you are presented with an invoice. Your office manager pays the subcontractor. At the end of your workers compensation policy period the insurance company auditor audits your books. He identifies the work performed by the subcontractor and asks to look at the certificate of insurance the subcontractor provided you. You can't find one. Your audit comes out and guess what? You get to pay for the subs work comp while on he and his crew were on your job. Sound familiar? This actually happens everyday.

The most basic way to head off this problem is to make sure you have current certificates of insurance for each of the subcontractors that you used during your workers compensation policy period. Also make sure the certificates show workers compensation coverage is being provided. You'd be surprised how many small contractors carry general liability coverage but no workers compensation coverage. Certificates of insurance must cover the period when the subcontractor worked for you. Be aware, this may require certificates covering different policy terms for the subcontractor.

With a little knowledge of how the certificate process works and a committment to only working with subs who carry valid workers compensation insurance you can eliminate the negative effect uninsured subs may have on your workers compensation cost!

This article is brought to you by WorkCompConsultants.com, an independent workers compensation consulting firm dedicated to helping employers prevent and resolve work comp issues.