The short answer is: it depends on how the subcontractor is classified. But that classification matters enormously, both for the subcontractor’s own protection and for the main contractor’s policy to stay valid.
UK insurers recognise two types of subcontractor, and each comes with different insurance obligations. Getting this wrong does not just create gaps in cover; it can invalidate a claim entirely.
This article explains the distinction, what cover each party needs, and the mistakes that regularly leave contractors out of pocket.
Bona-Fide vs Labour-Only: The Distinction That Drives Everything
Bona-Fide Subcontractors
A bona-fide subcontractor (BFSC) runs their own 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 BFSC 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, most construction policies require this as a condition.
Labour-Only Subcontractors
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, UK law treats them as your employees, regardless of whether they have their own limited company elsewhere.
Their payments must be included in the wage roll figures declared to your insurer each year. You also 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 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.
Public Liability Insurance
This is the most critical cover for any subcontractor working on a construction site. 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 must 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 provision means the main contractor is recognised as an additional insured under your policy. 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, a direct employee, a casual labourer, or another subcontractor working under your direction, employers’ liability insurance is a legal requirement. The standard limit is £10 million, and the fine for operating without it is up to £2,500 per day, per uninsured worker.
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 contracts 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, groundworks, mechanical and electrical installations, structural steelwork, this cover is particularly worth having. Damage to specialist work can be expensive to reinstate.
Professional Indemnity Insurance
If your role involves any element of design, specification, or technical advice, as is increasingly common in design-and-build projects, professional indemnity cover protects against claims arising from errors or omissions in that advisory 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 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. Claims are brought against the main contractor first, regardless of who was actually at fault.
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 Cover
The subcontractor insurance question 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. Without it, the main contractor has limited ability to recover costs from your insurer.
Failing to declare labour-only subcontractors. If you bring in additional labour under your supervision and do not tell your insurer, those workers are uninsured. Claims involving them may be refused, and you face fines for trading without valid employers’ liability cover.
Letting a policy lapse. A policy that was valid when work started may not still be valid if a latent defect claim arises two years later. Some policies include run-off provisions; many do not. Checking renewal dates at the start of each contract year is part of sound risk management.
How Subcontractor Status Affects Your Premium
How you use subcontractors directly affects your premium. Labour-only subcontractors are treated like employees, so their wages 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 liability 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 reduces the rate applied to your policy.
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, 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, working at height, heat work, excavation, groundworks, that leave gaps in cover for exactly the situations where claims are most likely to arise.
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.
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 |
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.