Workers compensation insurance pays medical bills and replaces wages when an employee gets hurt at work. For general contractors, the system carries a second layer of responsibility: you can become liable for a subcontractor's injured workers if that sub fails to carry proper coverage. BLS reported 1,075 construction fatalities in 2023 and over 163,000 nonfatal injuries requiring days away from work.

This guide walks you through each step of reading, verifying, and managing WC insurance documentation from your subs.

Step 1: Request the Right Certificate

The ACORD 25 (Certificate of Liability Insurance) is the standard form that shows a sub's insurance coverage. Workers compensation appears in Section B of the certificate, separate from general liability and auto coverage.

When you request a certificate, specify these requirements in writing:

Certificate must show WC coverage for the state(s) where work occurs
Your company named as certificate holder
30-day advance notice of cancellation or material change
Waiver of subrogation endorsement if your contract requires it

Send the request before the sub mobilizes to the job site. Never allow work to begin without a current certificate on file.

Step 2: Read the Workers Compensation Section

The WC section of an ACORD certificate contains specific fields you need to check.

Policy number. This identifies the active WC policy. Write it down and use it when calling the carrier to verify coverage.

Policy effective and expiration dates. Confirm the policy period covers your project timeline. If a 14-month project starts in March 2026, a WC policy expiring in December 2026 will leave a gap. Flag it now.

Statutory limits indicator. WC Part One shows "statutory" rather than a dollar amount. This means the policy pays whatever benefits state law requires. If this field shows anything other than "statutory" or "X" in the statutory box, the certificate may be fraudulent.

Employers liability limits. Part Two shows three dollar amounts:

Each accident limit (commonly $100,000 or $1,000,000)
Disease policy limit (commonly $500,000 or $1,000,000)
Disease each employee limit (commonly $100,000 or $1,000,000)

Certificate Field	Where to Find It	What to Verify
WC carrier name	Section B, insurer column	Licensed in your state
Policy number	Section B, policy number	Matches carrier records
Effective date	Section B, date columns	Before project start
Expiration date	Section B, date columns	After project completion
Statutory indicator	Part One checkbox	Marked "X" or "Statutory"
EL each accident	Part Two, first line	Meets contract minimum
EL disease policy	Part Two, second line	Meets contract minimum
EL disease employee	Part Two, third line	Meets contract minimum

Step 3: Verify Class Codes Match the Work

Class codes on a WC policy must match the actual work the sub performs on your project. This step catches two problems.

Underclassification. A demolition contractor classified under a lower-risk code pays less premium but may face claim denials. If their carrier discovers the misclassification during an audit, the carrier can retroactively charge additional premium and potentially void coverage for the audit period.

Mismatch with scope. A sub might carry WC for electrical work (class code 5190) but bid on both electrical and general framing (class code 5403) for your project. If a worker gets hurt doing framing, the WC carrier may argue the injury falls outside the covered classification.

To verify class codes, request the sub's policy declarations page. The dec page lists every class code, description, and estimated payroll allocation. Compare those codes to the scope of work in your subcontract.

Step 4: Check the Experience Modification Rate

The EMR tells you how a sub's claim history compares to similar companies. Request this number directly from the sub or from their insurance broker.

How to interpret EMR for subcontractor evaluation:

An EMR of 0.85 means the sub's claims run 15% below the industry average for their class codes. Their safety record is solid. An EMR of 1.25 means claims run 25% above average, signaling higher injury frequency or severity.

Track EMR over three years, not just the current year. A single large claim can spike the EMR temporarily. A three-year trend reveals whether safety is improving or declining.

EMR Value	Industry Comparison	Suggested GC Response
0.70-0.85	15-30% fewer claims than average	Approve with standard terms
0.85-1.00	Near or at industry average	Approve, verify safety program
1.00-1.20	1-20% more claims than average	Require detailed safety plan
1.20-1.50	20-50% more claims than average	Add safety monitoring costs to contract
Above 1.50	50%+ more claims than average	Decline the subcontractor

Step 5: Confirm No Excluded Officers or Partners

Many small subcontractors exclude owners from their WC policy to save on premiums. The average savings for excluding one officer is $3,000 to $8,000 annually, depending on the class code and state.

This creates a gap. If the excluded owner works on your site and gets injured, no WC coverage applies. They may file a third-party negligence lawsuit against you instead.

How to check for exclusions:

Request the policy endorsement pages (not just the certificate)
Look for endorsement WC 00 03 08 (Sole Proprietor exclusion) or WC 00 03 10 (Partners exclusion)
Cross-reference excluded names against the sub's on-site personnel list
Add contract language stating all on-site personnel must be covered under WC

In New York, executive officers of corporations cannot opt out. In Florida, officers of construction companies can only exempt themselves by filing a specific form with the state. Each state has different rules. Know the rules for your project's state.

Step 6: Coordinate with Your Own WC Carrier

Your WC carrier needs to know about your subcontractor management practices. Two coordination points matter most.

Subcontractor payroll reporting. If a sub lacks WC coverage, your carrier may add the sub's payroll to your policy and charge you the premium. This happens during your annual audit. If you cannot produce valid WC certificates for your subs, your carrier assumes the worst.

In 2024, NCCI reported that construction GCs paid an average of $14,200 in additional audit premiums for subs whose WC coverage could not be verified. Keep every certificate filed and accessible for your annual audit.

Your coverage territory. If your subs work in states not listed on your own WC policy, your coverage may not respond if you become the statutory employer. Confirm your policy's "other states" endorsement covers every state where your subs operate.

Step 7: Set Up Ongoing Monitoring

Verification is not a one-time event. WC policies can be cancelled mid-term for non-payment of premium, change in ownership, or carrier non-renewal.

Build a monitoring calendar with these checkpoints:

At contract signing: Collect and verify initial WC certificate
30 days before policy expiration: Request renewal certificate
Quarterly: Spot-check 20% of active sub certificates for cancellation
At project closeout: Confirm WC coverage remained active through final work date
Annual audit: Compile all sub WC certificates for your carrier's audit

Automated compliance platforms handle these checkpoints without manual tracking. We built SubcontractorAudit to monitor WC certificates in real time, flag expirations 30 days out, and alert you to mid-term cancellations within 24 hours of carrier notification.

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Frequently Asked Questions

How much does workers compensation insurance cost in construction? WC premiums in construction range from $3.10 to $35.50 per $100 of payroll, depending on the class code. A roofing company (code 5551) pays the highest rates, while a GC performing only project management (code 5606) pays among the lowest. The national average construction WC rate is approximately $7.50 per $100 of payroll.

Can I start a project without verifying a sub's workers compensation? Technically, some states do not require verification before work begins. Practically, allowing an uninsured sub on your job site exposes you to statutory employer liability, potential OSHA fines, and contract violations with your project owner. No GC risk management program should permit this.

What is the difference between workers compensation and employers liability? Workers compensation (Part One) pays statutory benefits to injured workers regardless of fault. Employers liability (Part Two) covers lawsuits from injured workers who allege employer negligence beyond what WC provides. Both appear on the same WC policy but serve different purposes. GC contracts typically specify minimum limits for both.

How often should I verify a subcontractor's WC coverage? At minimum, verify at contract signing and again before each policy renewal date. Best practice is continuous monitoring through an automated platform. WC policies can be cancelled mid-term with as little as 10 days notice in some states. A quarterly spot-check catches most gaps, but real-time monitoring catches all of them.

What does "statutory" mean on a workers compensation certificate? "Statutory" means the WC policy pays whatever benefits state law requires, with no preset dollar cap. Each state sets its own benefit levels for medical treatment, lost wages, permanent disability, and death benefits. The term appears in Part One of the WC section because benefit amounts vary by state and injury type.

Do I need workers compensation if all my workers are subcontractors? If your subcontractors are genuinely independent contractors with their own WC policies, you may not need to include them under your WC policy. However, if any worker is misclassified as a sub when they function as an employee (controlled schedule, provided tools, single-client relationship), you owe them WC coverage. Misclassification penalties in construction range from $5,000 to $50,000 per worker depending on the state.