Does Your Contractor Actually Have Insurance?
By Bailey Reed
“The contractor has it covered.” It is one of the most common phrases in business, and it is almost always said in good faith. A certificate of currency arrives by email, it gets filed, and the work goes ahead. For most jobs, nothing goes wrong and the certificate is never looked at again.
The difficulty arises on the rare occasion something does go wrong. That is when businesses discover what a certificate of currency actually proves, what it does not, and who ends up wearing the loss when a contractor’s cover falls short. A few simple checks before work begins can make that discovery far less expensive.
What a certificate of currency confirms
A certificate of currency confirms that a policy existed on the day the certificate was issued. That is genuinely useful information, but it is narrower than most people assume. It does not confirm that the premium has been paid, that the policy will still be in force next month, that the cover suits the work being performed or that a claim would actually be paid.
Treat the certificate as the starting point of a conversation rather than the end of one. It tells you which insurer to ask and which policy to ask about. It does not tell you the answer.
Expiry dates and mid-project lapses
Check the expiry date against the expected duration of the work. A certificate that is valid when the contract is signed may expire midway through a project, and policies do lapse. A contractor under cashflow pressure may let a renewal slide, and there is no obligation on anyone to tell you when that happens.
For longer engagements, it is reasonable to ask for an updated certificate at each renewal of the contractor’s policy. Established contractors are used to this request and rarely object to it.
Which policies to check
Public liability is the policy most people think of, but it is not always the only one that matters. Depending on the work, it is worth confirming workers compensation for the contractor’s employees, contract works or construction cover where the contractor is building or installing something of value, professional indemnity where the contractor is providing design or advice and motor cover where vehicles are central to the job.
It is also worth checking that the contractor’s stated business activity matches the work you are engaging them for. A liability policy issued to a carpenter does not automatically extend to demolition, roofing or work at height if those activities sit outside what the insurer agreed to cover.
The exclusions that shift risk back to you
Policy exclusions are where cover most often falls short of expectations. Common examples include exclusions for hot works such as welding or grinding, limits on work above a certain height or below ground, exclusions for damage to the very property being worked on and conditions requiring particular precautions that were not taken on the day.
When a contractor’s policy excludes the loss, the claim does not simply disappear. Injured parties and damaged neighbours look to whoever else was involved, and that is often the business that engaged the contractor. This is why your own liability cover, and how it treats contractors, matters just as much as theirs.
Who pays the excess?
Even when a contractor’s policy responds, someone has to pay the excess, and excesses on trade liability policies can be substantial. Whether that cost can be passed on, absorbed or disputed usually comes down to what the contract says. If the contract is silent, the question tends to be resolved slowly and unpleasantly. It is a small clause that is worth agreeing before work begins.
A simple pre-engagement checklist
None of this needs to be complicated. Before a contractor starts work, it is worth confirming:
A current certificate of currency, with an expiry date that covers the expected duration of the work
That the policy type and the insured business activity match the work being performed
Workers compensation arrangements for the contractor’s people
Any exclusions relevant to the job, such as hot works, height or depth limits
A written contract that addresses insurance, excesses and responsibility for damage
An updated certificate at each policy renewal for longer projects
If you engage contractors regularly, it is worth building these checks into a standard process rather than treating each engagement as a one-off. And if you are unsure how your own policies respond when a contractor is involved, that is a conversation we have with clients often. Five minutes before the work starts is considerably cheaper than the alternative.
This article is general information only and does not take into account your objectives, financial situation or needs. Please speak with your broker about your specific circumstances.
