How Worker’s Compensation Affects Your Bond Capacity

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Worker's Compensation helps lower the cost of your Surety Bonds
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Congratulations, you just won a new construction project. Now, one of the many tasks required before you get started is to meet the worker’s compensation requirements outlined in the contract. Unfortunately, this isn’t always the clearest part of the contract. On larger projects, there are typically no problems. The contract outlines the minimum requirements and who is responsible for providing worker’s comp. However, not all contracts are equal. With smaller jobs, the contract could be as simple as a handshake. If you rely on your subcontractors to provide their own workers’ compensation, it could lead to issues down the road. Even worse, you could be denied the surety bonds you need.

Everyone Needs Worker’s Compensation

The relationship between contractors and subcontractors has always been a balancing act. This is why states highly regulate this relationship. Almost every state and the District of Columbia require some sort of worker’s compensation package when contractors and subcontractors work together. These policies require that the subcontractor hold worker’s comp for their employees. If they don’t have the required insurance, the contractor must supply it. Either way, every contractor and subcontractor must have some coverage provided by someone. If you don’t, the contractor’s insurance will surely charge a premium for any uninsured subcontractor employees. This is the case whether there’s an injury or not.

This is pretty standard for large projects. The caveat comes when a small subcontractor comes in without any employees. Your insurer may allow this if the subcontractor signs and agrees that worker’s comp is not part of the deal. However, if they hire a laborer for the day, things get dicey. It’s the contractor’s obligation to make sure that laborers have worker’s compensation for the day. The question we hear a lot is if your commercial general liability can cover any injuries. Unfortunately, this is not the case.

Safety is a Big Concern for Surety Bond Underwriters

Not only do underwriters check your past job performance, your ability to complete the job, and your financial status, they’ll also check your safety record. This is because a serious injury could stop a project all together or at the least delay it. These delays could affect your ability to complete the project. Having a healthy track record of a safe work place can help reduce how much you pay for your surety bond. Additionally, the inverse is true, and a checkered past could cost you money in the long run. Making sure all of your employees and the employees of your employees have proper worker’s comp is a great step to show your company’s commitment to safety. Always be sure that your construction site is well guarded and safe, and you can be sure to get the best deal on your next project’s surety bond.

If you just won a new contract and need to make sure your business is in compliance, give Safeline Surety Bond a call today. Our underwriters work with the top markets and our friendly agents can let you know what you need to stay in compliance.

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