Do subcontractors need their own insurance? The short answer is that it depends on how the subcontractor is classified. That classification matters enormously, both for the subcontractor’s own protection and for keeping the main contractor’s policy valid.
UK insurers recognise two types of subcontractor, and each comes with different subcontractor insurance obligations. Getting this wrong does not just create gaps in cover; it can invalidate a claim entirely.
This guide explains the distinction, what insurance subcontractors need, what main contractors must check, and the mistakes that regularly leave contractors out of pocket.
Bona Fide vs Labour-Only Subcontractors: The Distinction That Drives Everything
What Is a Bona Fide Subcontractor?
A bona fide subcontractor (often shortened to BFSC, and sometimes written as a bona fide sub contractor) is someone who runs their own independent business. They work under their own direction, supply their own tools and materials, invoice for completed work, and take responsibility for the quality and safety of what they deliver. A specialist groundworker, a mechanical and electrical contractor, or a piling firm brought in for a defined scope of work are all typical examples.
Because a bona fide subcontractor operates independently, they are responsible for their own insurance. The main contractor is not required to hold employers’ liability for them. However, main contractors must verify that any BFSC they engage holds adequate cover before work begins, as most construction policies make this a condition of cover.
What Is a Labour-Only Subcontractor?
A labour-only subcontractor (LOSC) works under your direct supervision. You provide the tools, the materials, and the day-to-day instructions. They follow your schedule and your methods. For insurance purposes, they are treated as your employees, regardless of whether they trade through their own limited company.
Their payments must be included in the wage roll figures declared to your insurer each year, and you need employers’ liability cover for them, just as you would for any directly employed worker. Failing to declare them correctly is a disclosure failure that can invalidate a claim.
What About CIS Status?
A common source of confusion is the Construction Industry Scheme. Being registered for CIS with HMRC is a tax matter and does not decide how a worker is treated for insurance purposes. A CIS-registered subcontractor who works under your direction, with your tools, is still labour-only in the eyes of your insurer.
What Insurance Does a Bona Fide Subcontractor Need?
As a bona fide subcontractor, you are running a business. The contracts you take on, the risks you create on site, and the liability that follows you if something goes wrong are yours to manage. These are the core subcontractor insurance covers to consider.
Public Liability Insurance
This is the most critical cover for any subcontractor working on a construction site. Subcontractor public liability insurance pays out if your work causes injury to a third party or damages their property. It covers legal defence costs and any compensation awarded.
Your indemnity limit should be at least equal to the limit on the main contractor’s policy. If you carry £1 million and the main contractor holds £5 million, and your work causes £3 million in damage, the main contractor’s insurer may be left covering the shortfall, and will pursue a recovery against you. Many main contractors now refuse to engage subcontractors who cannot evidence matching limits.
There is also a specific clause to look for: the indemnity to principal clause. This means the main contractor is recognised as an additional insured under your policy for claims arising from your work. Without it, a claim caused by your work may fall entirely on the main contractor’s own cover, even though you were at fault.
Employers’ Liability Insurance
If you engage anyone to work with you, whether a direct employee, a casual labourer, or another subcontractor working under your direction, employers’ liability insurance is a legal requirement. The legal minimum is £5 million, although £10 million is standard across the construction industry, and the fine for operating without it is up to £2,500 for every day you are uninsured.
Many sole-trader subcontractors assume they do not need this cover. That is only true if they genuinely work alone with no one else under their control on site.
Contractors All Risks Insurance
Contractors all risks insurance covers physical loss or damage to the works in progress, your materials, tools, and equipment. While it is not always a contractual requirement, many subcontracts place responsibility for the works on the subcontractor carrying them out. If a section of completed work is damaged before handover, CAR cover pays to put it right without a dispute about who bears the cost.
For subcontractors working on high-value scopes such as groundworks, mechanical and electrical installations and structural steelwork, this cover is particularly worth having. Damage to specialist work can be expensive to reinstate. Our guide to the benefits of contractors all risk insurance explains what it covers in more detail.
Professional Indemnity Insurance
If your role involves any element of design, specification, or technical advice, as is increasingly common on design-and-build projects, professional indemnity cover protects against claims arising from errors or omissions in that work. A subcontractor who specifies the wrong materials, signs off an incorrect calculation, or provides negligent technical guidance can face claims that a public liability policy will not cover.
What the Main Contractor Needs to Check
Having your own policy in place is not enough. Most construction insurance policies include a subcontractors clause that makes checking and recording your subcontractors’ cover a condition of your own policy. If a claim arises and you cannot show you complied with this, your insurer may refuse to pay or reduce the settlement.
In practice, this means:
- Getting a copy of each BFSC’s certificate of insurance before they start work
- Confirming their public liability limit is at least equal to your own
- Confirming their policy includes an indemnity to principal clause
- Recording renewal dates and updating your files when policies renew
- Including insurance requirements in your subcontract agreements
A subcontractor insurance register, a simple spreadsheet with policy details, limits, and renewal dates for each BFSC on your books, is the practical way to meet this obligation and avoid gaps at claim time.
Your own cover also needs to extend to the subcontracted activities. A common misunderstanding is that if a subcontractor holds their own policy, the main contractor’s cover does not need to respond to their work. Both policies need to be adequate, because claims are usually brought against the main contractor first, regardless of who was actually at fault. Our guide to general contractor insurance requirements covers the main contractor’s side in full.
For added protection, contingent public liability insurance covers situations where a subcontractor’s policy fails to pay, whether due to non-disclosure, cancellation, or a restrictive exclusion the main contractor was unaware of.
The Mistakes That Invalidate Subcontractor Insurance
Subcontractor insurance is an area where practical misunderstandings regularly lead to uninsured losses.
Assuming the main contractor’s policy covers you
As a bona fide subcontractor, it does not. You are an independent business and the liability for your work sits with you.
Not checking indemnity limits
If your public liability limit is lower than the main contractor’s, your insurer will only pay up to your limit. The difference becomes a dispute between the main contractor, their insurer, and you.
Missing the indemnity to principal clause
This is easy to overlook when buying cover. Ask your broker specifically whether this clause is included.
Failing to declare labour-only subcontractors
If you bring in additional labour under your supervision and do not tell your insurer, those workers may be uninsured. Claims involving them may be refused, and you risk fines for trading without valid employers’ liability cover.
Letting professional indemnity lapse
Public liability is normally written on an occurrence basis, so it responds to incidents that happened while the policy was in force. Professional indemnity is different. It is written on a claims-made basis, which means the policy in force when the claim is made is the one that pays. If you let your PI lapse or stop trading, a claim about design work you did years ago may not be covered. Run-off cover exists for exactly this reason.
How Subcontractor Status Affects Your Premium
How you use subcontractors directly affects your premium. Labour-only subcontractors are treated like employees, so their payments are included in your declared wage roll and increase your employers’ liability premium.
Bona fide subcontractors are handled differently. Their payments may still factor into public and products liability premium calculations, but insurers assume they hold their own cover and that claims from their work can be passed back to their insurer. This usually means a lower rate is applied.
Declaring this split accurately matters. Presenting your workforce as predominantly bona fide when a significant proportion are labour-only is a non-disclosure that insurers will examine closely if a claim arises.
Getting Covered as a Subcontractor
The starting point is understanding what your contracts actually require. Most main contractors specify minimum public liability limits and will ask for your certificate before you set foot on site.
Trades insurance packages combine the core covers of public liability, employers’ liability, contract works and tools into one policy, which is often the most practical route for sole traders and small subcontracting firms. For larger or more specialist operations, a contractors combined policy may be more appropriate.
Speaking with a specialist construction broker before buying cover is the most reliable way to make sure the policy you hold will actually respond to the work you carry out. Generic trade policies sometimes carry exclusions around high-risk activities like working at height, heat work, excavation and groundworks, which leave gaps in exactly the situations where claims are most likely. If that applies to you, our guides on groundworks insurance and roofers insurance are worth a read.
Not Sure Which Category Applies?
If you are uncertain whether someone working with you is bona fide or labour-only, work through these questions:
- Do they supply their own tools and materials?
- Do they work to their own method and schedule, without day-to-day supervision from you?
- Do they invoice for completed work rather than being paid hourly or daily?
- Do they carry their own insurance?
- Do they take financial responsibility for errors in their work?
If the answer to most of these is yes, they are likely bona fide. If they work under your supervision, use your equipment, and you direct their daily activity, treat them as labour-only for insurance purposes and make sure they are included in your employers’ liability declaration.
If there is any doubt, raise it with your broker before the project starts.
Subcontractor Insurance Obligations at a Glance
| Bona Fide Subcontractor | Labour-Only Subcontractor | |
| Carries own public liability | Required | Not required |
| Covered by main contractor’s EL | No | Yes, legally required |
| Included in main contractor’s wage roll | No | Yes |
| Responsible for own work quality | Yes | No, main contractor is responsible |
| Needs indemnity to principal clause | Yes, strongly recommended | N/A |
Frequently Asked Questions
Do self-employed subcontractors need insurance?
If they are genuinely bona fide, yes. They should hold their own public liability as a minimum, plus employers’ liability if anyone works under their direction. If they are labour-only, they should be covered under the main contractor’s employers’ liability policy.
What level of public liability should a subcontractor have?
At least the same limit as the main contractor’s policy. For commercial work this is commonly £5 million or £10 million, while domestic work may only require £1 million or £2 million.
Can a main contractor’s insurance cover subcontractors?
It covers labour-only subcontractors under the employers’ liability section. It does not replace a bona fide subcontractor’s own cover, although the main contractor’s public liability will still need to respond to claims about the overall project.
Speak to a Specialist Before Something Goes Wrong
Subcontractor insurance is an area where the details matter. The wrong classification, a missing clause, or a limit that does not match can turn an otherwise valid claim into a dispute, or leave you personally liable for costs that should have been covered.
Construction Insure has been arranging insurance for contractors, subcontractors, and developers for over 30 years. Whether you need guidance on liability cover, contractors all risks, or putting together a compliant subcontractor process, get in touch with the team today.