Walk onto any Australian construction site and you’ll find a chain of responsibility that runs from the principal client down through the head contractor and across multiple subcontractors. The electrician wiring the switchboard, the plasterer finishing the walls, the plumber roughing in the ground floor — every one of them answers to someone, and every one of them should be carrying their own insurance. In practice, knowing who is responsible for what can mean the difference between a claim that’s resolved smoothly and one that lands squarely on your balance sheet.
The uncomfortable truth is that many builders and subcontractors operate on assumptions. The head contractor assumes the sub has public liability. The sub assumes the head contractor’s policy picks up any gaps. When those assumptions collide with reality, the results are expensive — and they’re almost always avoidable.
This article breaks down exactly who is responsible for what insurance on Australian construction sites. It covers how subcontractor insurance obligations cascade, how to verify cover before a sub steps on site, what happens when a sub is uninsured, the difference between contractual and statutory obligations, and the practical steps head contractors can take to protect themselves.
The golden rule: never assume someone else’s insurance covers you. If the policy isn’t in your name and you haven’t seen a current certificate of currency, treat it as if it doesn’t exist.
Who Sits Where in the Insurance Chain
To understand who covers what, you need to see the structure clearly. On a typical mid-sized commercial or residential project, the insurance chain looks like this.
The principal sits at the top — the developer, the homeowner, the business owner paying for the work. The principal isn’t a contractor and doesn’t carry construction insurance, though they may hold property or liability policies of their own.
The head contractor is engaged directly by the principal to deliver the project. The head contractor manages the site, coordinates the trades, and holds primary responsibility for site safety and overall insurance.
Subcontractors are engaged by the head contractor for specific scopes of work — electrical, plumbing, roofing, concreting, plastering, painting. Each subcontractor operates as a separate business with their own insurance obligations.
In some cases, sub-subcontractors enter the picture — a subcontractor engaging a further layer of contractors beneath them. The insurance chain extends to this layer as well, even if the head contractor has limited visibility of those arrangements.
Each link in this chain carries distinct insurance responsibilities. When everyone holds the right cover at the right limits, the chain holds strong. When one link fails — an expired policy, an inadequate limit, a missing certificate — the people above and below can be dragged into a dispute, or worse, left holding the cost of a loss they didn’t cause.
What Insurance a Head Contractor Must Carry
As the party in control of the site, the head contractor shoulders the broadest insurance obligations. The minimum cover you need depends on your state, your contracts, and the type of work you do, but there’s a fairly consistent baseline across the country.
Public Liability Insurance
Public liability is non-negotiable for any head contractor. It covers third-party injury and third-party property damage arising from your building activities. If a passerby is injured by falling debris from your site, or if your excavation destabilises a neighbouring wall, public liability is the cover that responds.
For head contractors, minimum recommended limits start at $10 million. On commercial projects, government tenders, and larger residential developments, $20 million is often the contractual requirement. Check every contract you sign — the limit specified in the insurance clause overrides whatever you think is adequate. If the contract demands $20 million and you carry $10 million, you’re in breach before you’ve driven a single nail.
Contract Works Insurance
Also called construction all-risks, contract works covers the physical works in progress — the partially built structure, materials on site, and temporary works. If a storm flattens half-framed walls, a fire destroys stored materials, or a vehicle drives into your site hoarding, contract works insurance covers the cost of rebuilding or replacing.
Responsibility for contract works insurance should be spelled out in the head contract. Sometimes the principal arranges it. More often, the head contractor does. If the contract is silent, assume the obligation falls on you — and arrange cover accordingly.
Workers Compensation
Any head contractor with employees — site supervisors, labourers, apprentices, admin staff — must hold workers compensation in the relevant state. It’s a legal requirement in every Australian jurisdiction, and it’s not optional. If you operate across multiple states, you may need multiple policies.
Professional Indemnity (Conditional)
Not every head contractor needs professional indemnity insurance. But if your scope includes design, specification, certification, or advisory work — even if you subcontract the actual design to a consultant — you may need PI cover. Many design-and-construct contracts explicitly require the head contractor to hold PI, and not having it when it’s required can be an expensive gap.
Management Liability (Recommended)
Management liability covers claims against directors and officers for breaches of workplace law, OH&S prosecutions, and other statutory liabilities. For head contractors running large sites with multiple subcontractors, it’s a useful safety net that public liability doesn’t provide. It’s not mandated by law, but it’s worth considering if your exposure extends beyond physical site risks.
What Insurance a Subcontractor Must Carry
Subcontractors are independent businesses and need their own insurance. The head contractor’s policies don’t step in and cover a subcontractor for their own negligence. Here’s what every sub should have in place before they walk on site.
Public Liability Insurance
This is the baseline. A subcontractor’s public liability covers injury or damage they cause to third parties — including the principal, the head contractor, other trades on site, and the public. If a plumber’s work floods a completed floor and destroys joinery installed by the cabinet maker, the plumber’s public liability should respond.
Minimum limits for subcontractors typically start at $5 million and go up based on the project. Many head contractor agreements require subcontractors to match the head contractor’s own limit — often $20 million on larger commercial projects. A sub who carries $5 million but signs a contract requiring $20 million is personally exposed for anything between those two numbers.
Workers Compensation
If a subcontractor employs workers, they need their own workers comp. A sole trader working alone may not be legally required to hold workers comp for themselves, but voluntary cover is worth considering — a sole trader who can’t work for six months after a site injury has no income unless they’ve arranged personal injury or income protection cover.
Tools and Equipment Insurance
A subcontractor’s tools — the tiler’s wet saw, the electrician’s test gear, the plasterer’s mixer — aren’t covered by the head contractor’s contract works policy. If tools are stolen from site overnight or destroyed in a fire, the sub bears the loss unless they carry their own tools and equipment insurance. For many trades, the replacement cost of a full tool kit runs into tens of thousands, and that’s a business-ending hit if uninsured.
Vehicle and Plant Insurance
Subcontractors who bring vehicles, excavators, scissor lifts, or other plant to site need their own motor and plant insurance. The head contractor’s policy doesn’t cover subcontractors’ vehicles or equipment — and assuming it does can be a costly mistake.
Where the Chain Breaks: The Most Common Gaps
The insurance chain looks solid on paper, but in practice it breaks in predictable ways. These are the five scenarios that produce the most disputes and the biggest uninsured losses on Australian construction sites.
The Uninsured Subcontractor
A subcontractor turns up, does their work, causes damage — and only then do you discover they don’t have insurance. Their ABN checks out, their tools are real, their work looks fine, but their public liability policy lapsed three months ago or never existed.
As the head contractor, your public liability policy may not cover damage caused by an uninsured subcontractor. Some policies explicitly exclude claims arising from work performed by subcontractors who don’t hold their own insurance. Even if your policy does respond, your premium at renewal will reflect the claim — you pay for their failure.
A subcontractor who can’t produce a certificate of currency before starting work is a subcontractor who doesn’t start work. There is no grey area here.
The Silent Contract
A head contractor signs a subcontract agreement that says nothing about insurance. The sub causes damage, and the contract gives the head contractor no mechanism to hold them accountable. The head contractor’s insurer pays the claim, but there’s no contractual right to recover from the sub.
Every subcontract agreement should spell out: the types of insurance required, the minimum limits, the obligation to provide certificates of currency, and an indemnity clause making the sub responsible for losses they cause. Without these clauses, you’re relying on goodwill — and goodwill evaporates when the bill arrives.
Your Policy Excludes Subcontractor Work
Some public liability policies — particularly cheaper ones targeting sole traders — exclude liability for work performed by subcontractors. If you’re a builder who engages subs and your policy has this exclusion, you have a gap that your insurer won’t fill. Any loss caused by a sub’s work falls back on you personally.
When you purchase or renew public liability insurance, confirm in writing that your policy covers work performed by subcontractors. If it doesn’t, you need a different policy. This is not a detail to gloss over.
The Wrong Entity Is Named
A subcontractor hands you a certificate of currency, but the insured name doesn’t match the entity you’re engaging. Maybe the certificate names a related company, an old business name, or the individual rather than the company. If a claim arises, the insurer may argue the wrong entity was covered — and refuse to pay.
Verify that the name on the certificate matches the entity named in your subcontract agreement. If it doesn’t, ask for an updated certificate before work starts.
Cross-Border Workers Comp
An interstate subcontractor works on your project in Victoria but only holds a NSW workers comp policy. Their public liability may be national in scope, but their workers comp almost certainly isn’t. If one of their workers is injured on your Victorian site and the sub has no Victorian workers comp, determining who pays becomes messy — and the answer may not be in your favour.
If you engage interstate subcontractors, verify that their workers comp covers the state where the work is being performed.
Contractual vs Statutory Insurance Obligations
There’s an important distinction between what the law requires and what your contract requires — and ignoring either one carries consequences.
Statutory obligations come from legislation and regulation. In Queensland, the QBCC requires licensed contractors to hold public liability insurance with a minimum $5 million cover. In NSW, Fair Trading requires licensed builders to hold PL as a condition of their licence. These are legal obligations — fail to meet them and you risk fines, licence suspension, or cancellation, quite apart from the financial exposure of being uninsured.
Contractual obligations come from the agreements you sign. A principal’s contract may demand $20 million public liability even though your state only requires $5 million. A subcontract may require you to hold contract works insurance even if the head contract places that obligation on the head contractor. Contractual obligations are enforceable through the legal system — breach them and the other party can terminate your contract and pursue you for damages.
The gap between statutory minimums and contractual requirements catches builders out constantly. Meeting the statutory minimum doesn’t mean you meet the contractual requirement. Always read the insurance clause in every contract you sign and make sure your cover lines up.
Hold Harmless and Indemnity Clauses Explained
Insurance and contractual risk allocation are intertwined, and two clauses — hold harmless and indemnity — sit at the centre of that relationship. Builders encounter them in head contracts, subcontracts, and supply agreements, and understanding them matters.
A hold harmless clause is a promise by one party not to hold the other liable for certain losses. For example, a subcontract might say the sub agrees to hold the head contractor harmless for any injury to the sub’s employees. This shifts the financial risk from the head contractor to the sub — and the sub’s workers comp insurer may not accept it. Insurers generally resist attempts to contractually expand liability beyond what the law would impose, and a broadly worded hold harmless clause can create a gap between what the contract requires and what the insurance covers.
An indemnity clause requires one party to compensate the other for specified losses. A typical subcontract indemnity says the sub indemnifies the head contractor for any loss or damage caused by the sub’s work. This is standard and defensible — the sub’s public liability insurance should cover losses the sub causes. But if the indemnity goes further — requiring the sub to indemnify the head contractor for the head contractor’s own negligence — most public liability policies won’t cover it, because insurers don’t insure you for someone else’s mistakes.
Before signing any contract with a hold harmless or indemnity clause, run it past your insurance broker. A clause that asks your insurer to cover something they ordinarily wouldn’t is a clause that leaves you personally exposed.
Certificates of Currency: What to Look For
When a subcontractor hands you a certificate of currency, don’t just file it. Check it. A certificate that doesn’t stack up is worse than no certificate at all — it gives you false comfort.
Here’s what to verify on every certificate:
The insured name must match the entity you’re contracting with. If you’re engaging “ABC Plastering Pty Ltd” and the certificate shows “John Smith trading as ABC Plastering,” those are different legal entities and the cover may not apply to the company you’ve engaged.
The policy type should be public liability (and workers comp, if the sub has employees). A certificate showing only tools and equipment cover tells you nothing about the sub’s liability cover.
The policy period must be current. A certificate dated last year, or one expiring next week, needs follow-up before work starts. If a project runs beyond the sub’s policy expiry, diarise the date and ask for the renewal certificate before the expiry passes.
The limit of indemnity must meet your minimum requirement. If you require $10 million and the certificate shows $5 million, the sub is underinsured relative to your standard. They need to arrange a top-up before stepping on site, and the additional premium is their cost to bear.
The insurer should be licensed in Australia. An offshore insurer may not be subject to Australian regulatory standards, and you may have no access to the Australian Financial Complaints Authority if a dispute arises.
Keep copies of every certificate on file for the duration of the project and at least through any defects liability period. If a claim arises after practical completion — and it sometimes does — you’ll need to know which sub was responsible for which scope and whether they were insured at the time.
What Happens When a Subcontractor Is Uninsured
The scenario plays out more often than you’d think. A subcontractor causes damage — a fire from welding work, a water leak through three finished levels, a collapsed scaffold that injures another trade’s worker — and it turns out they have no insurance. Here’s what that means in practice.
The sub is personally and directly liable for the full cost of the damage or injury. That cost can easily run into six or seven figures. If the sub has no assets to pursue, you — the head contractor — are the next target. The injured third party or the principal won’t wait for you to chase the sub. They’ll claim against you, and your insurer will need to respond.
If your public liability policy covers subcontractor-caused losses, your insurer pays — but your claims history takes the hit, and your premium at renewal reflects it. Your insurer may then pursue the uninsured sub for recovery, but if the sub has nothing to recover, the loss sits on your policy.
If your public liability policy excludes losses caused by uninsured subcontractors — and some do — you may have no cover at all. The entire loss falls on your business.
This is why verifying subcontractor insurance before work starts isn’t an administrative formality. It’s the single most effective risk management step a head contractor can take. The five minutes it takes to check a certificate of currency can save you a hundred thousand dollars in uninsured loss.
Practical Steps for Head Contractors to Protect Themselves
Managing subcontractor insurance isn’t a one-off task. It needs ongoing attention through the life of the project. Here’s a practical workflow.
Before the project starts: Build insurance requirements into your subcontract template. Specify the types of cover required, minimum limits, and an obligation to provide certificates of currency before any work begins. Include an indemnity clause that makes the sub responsible for losses they cause. Have your insurance broker or lawyer review these clauses to make sure they align with your own policies.
During procurement: Ask every prospective subcontractor for their certificate of currency. Check the name, the policy period, the limit, and the insurer. File the certificate. If a sub can’t produce one, they don’t start work — no exceptions.
During the project: Track policy expiry dates across your active subcontractors. If a sub’s policy expires mid-project, ask for the renewal certificate before the expiry date. A subcontractor working without current insurance is a risk that lands on you.
At project completion: Keep records. If a claim arises after handover — and defects liability claims are common — you need to know which subcontractor was responsible for which scope and whether they were insured at the time.
For builders who want to streamline their own insurance arrangements, comparing quotes online can save significant time. Platforms like BizCover let you compare public liability and other business insurance quotes from multiple Australian insurers in one place, which is useful when you’re setting up cover for a new project or reviewing your existing policies.
Practical Steps for Subcontractors
If you’re a subcontractor, your insurance is your licence to operate. Without it, head contractors won’t engage you — and if they do, you’re exposed for every day you work uninsured.
Hold the right cover at the right limits. Don’t assume $5 million is enough. Check what the head contractors in your market require. On commercial projects, $10 million or $20 million may be standard, and a $5 million policy won’t get you on site.
Keep your certificates current and accessible. When a head contractor asks for your certificate of currency, being able to produce it in minutes makes you look professional. Fumbling for a week while the start date passes does the opposite — and may cost you the job.
Understand your policy exclusions. Does your public liability cover the specific trade work you do? Some policies exclude high-risk activities like demolition, asbestos disturbance, or work above a certain height. If your policy excludes something you do every day, you’re effectively uninsured for that activity.
Budget for insurance as a cost of doing business. A common mistake for new subcontractors is treating insurance as an optional expense to be minimised. That thinking leads to underinsurance — and underinsurance leads to personal liability when a claim hits.
Check the head contractor’s insurance requirements before quoting. If a head contractor requires $20 million public liability and you hold $5 million, factor the additional premium into your pricing. Don’t sign the contract and hope nobody notices.
State Licensing and Insurance Requirements for Subcontractors
While insurance obligations are primarily contractual, state licensing regimes create statutory backstops that affect the head contractor-subcontractor relationship.
In New South Wales, residential builders and subcontractors performing work valued over $5,000 must be licensed under the Home Building Act. The licence requires evidence of public liability insurance. The Home Building Compensation Fund (home warranty insurance) sits with the builder contracting directly with the homeowner, not with subcontractors.
In Victoria, the Victorian Building Authority requires registered building practitioners to hold appropriate insurance. Subcontractors performing domestic building work must generally be registered or licensed, and registration requires insurance. The Domestic Building Contracts Act imposes obligations on builders that flow through to subcontractor arrangements.
In Queensland, the QBCC is the most prescriptive. Licensed contractors must hold public liability with a minimum $5 million cover. The QBCC requires evidence of PL at licence renewal, and operating without it invites licence suspension. Head contractors on QBCC-regulated projects should verify a sub’s licence — it’s both a compliance check and a practical signal that insurance is likely in place.
In Western Australia, South Australia, Tasmania, the ACT, and the Northern Territory, licensing regimes differ in detail but share a common principle: holding a valid building licence generally requires insurance. Verifying a subcontractor’s licence is a useful proxy for verifying insurance, though it’s not a substitute for seeing the actual certificate of currency.
Frequently Asked Questions
Does a head contractor’s public liability policy cover subcontractors?
Generally not. A head contractor’s public liability covers the head contractor’s own liability — it doesn’t step in and cover a subcontractor for their own negligence. Each party needs their own policy. Some head contractor policies include a principal’s indemnity extension that may cover the head contractor for a subcontractor’s liability in certain circumstances, but this is an extension of the head contractor’s cover, not a substitute for the sub’s own insurance.
Can a head contractor insist on being named on a subcontractor’s policy?
Yes, and this is common on larger projects. It’s called being noted as an interested party. It doesn’t make the head contractor an insured under the policy, but it means the insurer will notify the head contractor if the policy is cancelled or not renewed. It’s a practical risk management tool that costs the sub nothing and gives the head contractor useful visibility.
What happens if a subcontractor’s insurance lapses mid-project?
The sub is working uninsured and is personally exposed for any loss they cause from the date of lapse. As the head contractor, if you allow them to continue working knowing they’re uninsured, you may also be exposed — your own insurer could decline to cover losses connected to the uninsured sub. Stop work until the renewed certificate is in your hand.
Do I need to verify sub-subcontractors’ insurance too?
From a risk management perspective, you should at least require your direct subcontractors to verify their own sub-subcontractors’ insurance and to flow down the same insurance requirements. Whether you personally collect those certificates depends on project size and risk. On major commercial projects, collect them all. On smaller residential jobs, requiring your sub to warrant that their sub-subs are insured may be enough — but make sure that warranty is in writing.
Is there a difference between subcontractor insurance for residential vs commercial work?
The insurance types are the same — public liability, workers comp, tools cover — but the required limits often differ. Commercial projects, particularly government and large private developments, typically demand higher limits ($20 million is standard) and may impose additional requirements like professional indemnity and contract works. Residential work, especially single dwellings, often accepts lower limits ($5 to $10 million), though this varies by builder and by contract.
What should I do if a subcontractor refuses to provide a certificate of currency?
Don’t let them on site. A refusal to provide a certificate is a red flag — they’re either uninsured, underinsured, or hiding something else. There’s no legitimate reason for a properly insured subcontractor to withhold their certificate. If they push back, find a different sub. The cost of replacing them is trivial compared to the cost of an uninsured claim.
Disclosure: This article provides general information only and does not take into account your individual circumstances. Insurance products are subject to terms, conditions, limits, and exclusions. You should read the Product Disclosure Statement (PDS) and target market determination (TMD) for any policy before making a purchase decision. Buildercover.au is an independent affiliate site that may earn a commission if you purchase insurance through a linked provider, such as BizCover. This does not affect the price you pay. For advice tailored to your situation, speak to a qualified insurance broker or financial adviser.