Contractors - Are They Properly Insured

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Do you engage contractors in the operation of your business? If so, have you ensured that your contractors and sub-contractors are fully insured? Although hiring a contractor can be a convenient option for small business owners, the quality of their insurance could be a major factor if the unexpected does happen.

For example, if your contractor’s Professional Indemnity insurance only provides cover up to $500,000, and they happen to incur damages above that, then you may be left with a deficit that could ruin your business.

Another thing to consider when hiring contractors is that they have the appropriate insurance cover for the work they are doing. If you hire a tradesman you should expect them to have adequate professional indemnity, worker’s compensation, contract works, property damage and public liability insurance.

It is essential to periodically check your contractor’s insurance, so that you can be satisfied that they have the necessary cover.

What’s the difference between Employees and Sub-Contractors?
Often we like to think that there are firm distinctions between employees and sub-contractors. In practice, however, a worker can be deemed a sub-contractor for tax purposes, but an employee for the purpose of worker’s compensation.

The definition of an employee, and a sub-contractor, can differ between states and territories.
It is, therefore, prudent to seek legal advice for clarification if you are uncertain of the difference.

What are the compulsory types of Insurance?
There are three main types of insurance coverage that contractors need to have when making repairs to your business. They are worker’s compensation insurance, public liability insurance and property damage insurance.

It is important to note that worker’s compensation insurance is compulsory across Australia for all employees. This also applies to any sub-contractors your contractor hires.

By not ensuring that your contractor is fully insured, you could be putting you business at risk.

Get Something In Writing?
The last point is to get something in writing. Having a signed contract between yourself and the contractor, before any work commences, is the best way to legally secure both parties. It is also crucial to consult a lawyer to draft a contract that articulates both the chain of liability, and has a well-thought-out indemnity clause, in case of death, injury or loss.

No matter what the project, and however many precautions are put in place, there is always the risk of injury to other parties, as well as damages to property. If you are an employer or sub-contractor please do not hesitate to get in touch with us to find out more.


Conditions apply for each policy and the information expected from you for a policy to trigger. Coverage may differ based on specific clauses in individual policies. Please ask your broker to explain the additional benefits and exclusions pertaining to your policy.

The information provided is general advice only and does not take account of your personal circumstances or needs. Please refer to our financial services guide which contains details of our services and how we are remunerated.