Insurance Subcontractors Need Before Signing a Construction Contract
What Insurance Do Subcontractors Need Before Signing a Construction Contract?
In today’s construction industry, subcontractors are often required to sign detailed and sometimes onerous contracts before starting work. These agreements, especially those issued by Tier 1 builders, government bodies, and large commercial developers, can transfer significant risk onto you as the subcontractor.
Before you sign anything, it’s crucial to ensure you have the right insurance cover in place to protect your business, your workers, your machinery, and your financial security.
Below is a practical guide to the essential insurance policies subcontractors should have before agreeing to any construction contract.
Public Liability Insurance (Mandatory for All Subcontractors)
Public Liability Insurance protects your business if your work causes accidental injury to another person or damage to their property. This is the insurance most commonly required in subcontractor agreements.
However, and this is the part many contractors miss, not all Public Liability policies cover contractual liability.
Why this matters:
Construction contracts often include clauses such as:
- Indemnities
- “Hold harmless” agreements
- Liability assumed even when you’re not at fault
- Responsibility for all incidents on site
- Damage caused by other subcontractors
If your policy does not cover these expanded liabilities, your insurer can refuse to pay.
Before signing any contract:
✔ Check if your Public Liability includes Contractual Liability extensions
✔ Review height and depth limits
✔ Check underground services exclusions
✔ Ensure the policy limit meets contractual requirements ($10m, $20m, etc.)
Contract Works Insurance (Often Required for Builders & Trades)
Most construction contracts require subcontractors to carry Contract Works Insurance, especially for works involving structure alterations, renovations, civil works, or new builds.
More info: Contract Works Insurance
What Contract Works Insurance Covers:
- Damage to the project under construction
- Materials on site
- Fire, storm, theft, vandalism
- Collapse, accidental damage
- Tools and equipment (if added)
If your subcontract includes responsibility for the project works until handover, you must ensure your policy reflects that requirement.
Contractors Plant & Equipment Insurance
Civil construction businesses, earthmovers, plumbers, and builders often use:
- Excavators
- Skid steers
- Loaders
- Tippers
- Trailers
- Attachments
- Small plant & tools
These items are expensive to repair or replace, and construction sites are high-risk environments for theft and accidental damage.
Plant & Equipment Insurance covers:
✔ Theft
✔ Accidental damage
✔ Rollovers
✔ Transit damage
✔ Breakdown (optional)
✔ Hired-in plant obligations
If your contract states you are responsible for damage to hired machinery, this coverage is essential.
Workers Compensation (Required for Any Business With Employees)
If you employ staff, even just one labourer, you must hold Workers Compensation insurance.
Contracts often require proof before you can begin work onsite.
Management Liability Insurance
(Subcontractors Often Overlook This)
Many construction contracts include obligations around:
- WHS compliance
- Employment practices
- Subcontractor management
- Regulatory adherence
Management Liability Insurance protects the business owner and directors from claims relating to:
✔ WHS breaches
✔ Employee claims
✔ Mismanagement allegations
✔ Fines & penalties (where insurable)
This is becoming increasingly important as regulators crack down on construction safety.
Professional Indemnity Insurance (If You Provide Any Advice or Design)
If you provide or modify:
- Plans
- Engineering drawings
- Construction advice
- Surveying
- Design input
- Specification changes
…then you may be liable for errors in that professional advice, even if you’re not a “designer.”
Professional Indemnity Insurance protects you from:
✔ Design errors
✔ Incorrect advice
✔ Project losses caused by your guidance
✔ Legal costs defending a claim
Contract Review: Why It’s Essential Before You Sign
Before signing any construction contract:
- Read all indemnity and liability clauses
- Check insurance requirements
- Send a copy to your insurance broker for review
- Ensure your policy limits and coverage match contract terms
- Confirm your Public Liability includes contractual liability
Morgan Insurance Brokers can review your contract and insurance to ensure there are no dangerous gaps.
Final Thoughts: Protect Yourself Before You Sign
Subcontractor contracts are becoming more complex, and many include hidden clauses that shift significant liability onto you.
Before signing, ensure you have the correct insurance in place, especially Public Liability with Contractual Liability Insurance cover and Contract Works Insurance.
Getting this right can be the difference between a smooth project or a financially devastating claim.
Need Help Reviewing Your Contract or Insurance?
Morgan Insurance Brokers specialises in construction insurance and can ensure your policy aligns with your contract obligations.
