For many tradies, subcontractors are a normal part of doing business.
They help you:
- Take on bigger jobs
- Manage workload
- Scale your operations
But they also introduce one of the biggest and most misunderstood insurance risks in the trade industry.
And it’s something we see all the time:
- A claim happens
- A subcontractor is involved
- The policy doesn’t respond the way the tradie expected
The result?
Out-of-pocket costs, denied claims, and serious financial stress.
Here are the 5 biggest insurance mistakes tradies make, with a focus on subcontractor risk, and how to fix them.
1. Assuming Subcontractors
Are Automatically Covered
The Mistake
Many tradies believe:
“If they’re working under me, they’re covered under my insurance.”
But in most cases, this is not automatically true.
Whether subcontractors are covered depends on:
- How your policy is structured
- How the subcontractor relationship is defined
- Whether they are declared to your insurer
The Risk
If a subcontractor:
- Causes property damage
- Injures someone
- Makes a mistake on-site
…you could be held liable, but your insurer may:
- Limit the claim
- Deny the claim
- Or pursue recovery against the subcontractor
Leaving you stuck in the middle.
How to Fix It
- Clearly disclose to your insurer that you use subcontractors
- Confirm whether they are covered under your policy
- Ensure your policy is structured correctly for your business model
2. Not Checking Subcontractors
Have Their Own Insurance
The Mistake
Many tradies assume subcontractors “must have insurance”, but never verify it.
The Risk
If your subcontractor:
- Has no insurance
- Has lapsed insurance
- Has inadequate cover
…and something goes wrong…
The liability can fall back on you as the principal contractor.
This is one of the most common causes of major claim issues.
Real-World Scenario
A subcontractor damages a client’s property.
- They don’t have valid public liability insurance
- The client sues the main contractor
- The main contractor’s insurer investigates and identifies the subcontractor involvement
Depending on the policy, the claim may:
- Be reduced
- Be disputed
- Or create legal complications
How to Fix It
- Always request a Certificate of Currency (COC) from subcontractors
- Check:
- Policy limits
- Expiry dates
- Type of cover
- Keep records, don’t rely on verbal confirmation
3. Not Declaring the Type
of Work Subcontractors Do
The Mistake
Even if subcontractors are declared, many tradies don’t specify:
- What work they perform
- The level of risk involved
The Risk
Insurance policies are based on risk classification.
If your policy says:
- “General carpentry”
…but your subcontractor is doing:
- Structural work
- Roofing
- Electrical
…you may have a mismatch between:
– What the insurer thinks you do
– What’s actually happening on-site
This can impact how a claim is assessed.
How to Fix It
- Be clear about the scope of work performed by subcontractors
- Update your insurer when your operations change
- Don’t “simplify” your business description to reduce premiums
Accuracy matters more than cost.
4. Using Subcontractors to Scale,
Without Updating Insurance
The Mistake
As tradies grow, they often:
- Take on more jobs
- Use more subcontractors
- Increase project size
But their insurance stays the same.
The Risk
Growth changes your risk profile.
More subcontractors =
- More exposure
- More variables
- More potential points of failure
If your policy doesn’t reflect this:
- You may be underinsured
- You may have coverage gaps
- Claims may not align with your actual operations
How to Fix It
Review your insurance when:
- You increase subcontractor usage
- You take on larger contracts
- Your revenue grows
- Your business structure changes
Your insurance should evolve with your business.
5. Relying on Verbal Agreements Instead
of Written Contracts
The Mistake
Many tradie-subcontractor relationships are based on:
- Trust
- Verbal agreements
- Informal arrangements
The Risk
When something goes wrong, lack of documentation creates problems:
- Who is responsible?
- Who had control of the work?
- Who is liable?
Without clear agreements, disputes can escalate, and insurance claims become more complex.
How to Fix It
- Use written subcontractor agreements
- Clearly define:
- Scope of work
- Responsibility
- Insurance requirements
- Include clauses requiring subcontractors to maintain their own insurance
The Bigger Problem:
Subcontractor Risk Is Often Invisible, Until Claim Time
Subcontractor risk doesn’t usually show up:
- When you take on the job
- When work is being completed
It shows up:
At claim time and that’s when it becomes expensive.
This is why so many tradies say:
“I thought I was covered.”
What Insurance Should Tradies
Using Subcontractors Have?
If you use subcontractors, you should review:
Public Liability Insurance
Ensure it:
- Reflects your use of subcontractors
- Has appropriate limits ($10M–$20M depending on work)
Contract Works Insurance
Important for:
- Larger projects
- Jobs involving multiple parties
Management Liability (for larger operations)
Can assist with certain disputes and legal exposures.
Quick Subcontractor
Risk Checklist
Before your next job, ask:
- Have I told my insurer I use subcontractors?
- Do all my subcontractors have valid insurance?
- Have I seen their certificates of currency?
- Does my policy reflect the work they do?
- Do I have written agreements in place?
If any answer is “no”, there’s a gap.
Tradie Insurance Australia:
Get It Right Before Claim Time
Subcontractors help you grow your business.
But without the right insurance structure, they can also increase your risk significantly.
At Bunker Insurance, we work with tradies across Australia to:
- Structure insurance correctly for subcontractor use
- Identify hidden risks
- Avoid claim-time surprises
- Make sure your policy actually responds when it matters
Talk to a Broker
Who Understands Tradies
Subcontractor risk is one of the most common, and most costly, insurance issues we see.
Book a chat with a Bunker Insurance advisor today and make sure your business is properly protected, not just assumed to be.
