What Happens if General Contractor Goes Without Insurance

Liability insurance is made for any type of industry, helping to protect those involved when it comes to being sued. In the contracting world, having general contractors insurance can protect a contractor and their subcontractors from costly claims related to accidents or mishaps on-site. General contractors insurance pays out entities when an accidental death or injury takes place on-site. So, not having this kind of coverage can be detrimental to all involved including the person or agency who hired the uninsured contractor.

While subcontractors aren’t legally required to carry liability insurance, it’s important to understand what happens when a general contractor goes without insurance in terms of legal issues and ramifications on their business operations.

Unlicensed and Uninsured Contractors

There are a number of issues related to not carrying general contractors insurance on a construction job. From injuries to shoddy workmanship to issues with sewer or water lines, there are a number of instances where insurance is a must-have. Ultimately, any and all issues, no matter how rare or random, are the responsibility of the general contractor in question.

If someone hires an unlicensed and uninsured contractor who ends up busting a sewage line, the person who hired them is responsible, not the contractor. If a worker gets hurt on-site and there’s no workers’ compensation set up through the general contractor, the person who hired the contractor is on the hook for medical bills and lost wages.

For contractors, failing to get insurance can end up costing them their business and seriously hurt their operations. If they are known to have operated without insurance, this means they cannot be trusted as being responsible for their work. Contractors rely on good reviews and word of mouth, so being known as an irresponsible party will only keep possible clients at bay.

Claims can, in turn, be made against general contractors who operate without insurance, ending up costing them more than just medical bills or payout for one claim. Licenses can be taken away and businesses could, in fact, be closed, plus the long-term mark of being known as a contractor once operated without a license or insurance and ended up in legal trouble will do nothing to help a contractor get back on their feet in the industry.

It’s important to know the risks and why general contractor insurance is important. Working with the right agent can help alleviate the stress around future issues with various claims.

- Doug Myrick