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Workers Compensation vs Builder’s Risk Insurance

Why do you need Workers Compensation for sub-contractors? While the benefits of Builder’s Risk and Workers Compensation are clear cut, one question remains: Is Workers Compensation your responsibility when it comes to sub-contractors?

Business owners purchase insurance to limit liability against different risks. It may tempt you to pick one policy over another to cut on costs. This may be detrimental if the policies are not interchangeable.

In this article, we will look at the benefits of Builder’s Risk and Workers Compensation, and why you may need both.

Workers Compensation Insurance

Workers Comp limits liability and financial responsibility for injury of a sub-contractor on he job.

Infografico de The laws that determine if a worker is a sub-contractor or an employee vary from state to state.

The laws that determine if a worker is a sub-contractor or an employee vary from state to state. So how do you determine the difference? Most states classify workers who receive a W-2 tax form as employees. Those who receive a 1099 form are classified as contractors.

However, depending on the state you need to get Workers Compensation insurance for those with the 1099 form. The worker is a subcontractor if:

  • You pay them
  • If you hire and dismiss them
  • You exercise control over performance and time of work.

What benefits does the policy offer to my business?

Medical coverage for occupational injury 

If a sub-contractor receives and injury while on the job, the insurer will cover:

  • Doctors’ fees
  • Physio therapy
  • Medical tests
  • Medication
  • Medical equipment e.g. prosthetic limbs

For example, a sub-contractor falls off a ladder while painting and breaks their leg. You will receive reimbursement for any expenses after lodging a successful Workers Comp claim.

Workers Compensation for sub-contractors compensates for lost wages

Your Workers Comp policy replaces the lost wages and will make sure that a sub-contractor doesn’t suffer financially during their recovery period.

Infografico de The laws that determine if a worker is a sub-contractor or an employee vary from state to state.

For example, the sub-contractor will receive a percentage of their regular wages during recovery.

Disability benefits 

Disability wages replace income lost due to injury. The sub-contractor is spared financial setbacks from unemployment.

Provides rehabilitation benefits

Workers Compensation for sub-contractors is beneficial to sub-contractors who would like to change jobs or switch careers after injury.

Your insurance caters to the costs associated with learning a new skill.

Builder’s Risk Insurance

Unlike Workers Compensation for sub-contractors, Builder’s Risk covers damages to a structure under construction. A basic policy will also include loss and damage to materials, equipment and temporary structures. However, some policies offer additional covers. This includes debris removal, loss of profit, damage of equipment, and temporary structures.

Infografico de Builder’s Risk covers damages to a structure under construction

Builders Risk covers:

  • Fire: It always pays to protect your business from the financial liability from damages caused by sudden fire. For example, electrical equipment catches fire due to faulty wiring. Furthermore, insurance will cover the repairs, cost or wages and damaged materials
  • Vehicle and aircraft damage: Working close to an airstrip or highway poses danger to your site. During periods of low visibility or slippery roads, vehicles may drive through your construction site.  For instance, bad weather conditions cause a helicopter to crash land on your building site causing widespread damage.
  • Coverage against theft or vandalism: Vandalism and theft of building materials or equipment is rampant in most job sites. For example, a painter may have to paint over graffiti.

Get coverage today

Workers Compensation for sub-contractors is just as important to your business as Builder’s Risk insurance. Their benefits are not interchangeable. We will help you secure both policies. Get in touch with our insurance agents at Contractors Liability call 888-819-1228. We can help.

Avatar for John Brown
Written by: John Brown
John has more than 25 years of experience in the insurance industry. He grew from a star insurance producer to owning one of the largest agencies in the country; he's a reference regarding contractor's insurance, commercial insurance, and builders' risk insurance.