So you tendered for a sub-contract and have just been notified that you have been awarded the contract on behalf of the main contractor.
The main contractor has taken all the risk to ensure that unforeseen hazards are insured against, but where does that leave you, as the sub-contractor?
Here are some of the things you will need to consider …
If you cause any damage when working on site, who is liable for the excess?
You quoted a great price, calculating your minimum profit, and now find out that you are liable for the excess. This potentially will not only negate any profit, but take you deep into negative territory.
Most bigger contractors prefer a low premium and high excess since they can cover the costs of the excess if they need to claim. As the sub-contractor, you may be liable for the excess and need to pay the main contractor an amount that can range between R15 000 and R50 000 per claim.
You may not have the capital necessary for this type of excess.
Fortunately, excess buy-down cover will protect you if you find yourself in this type of situation.
How it works
You need to find out from the main contractor who is liable for the excess if a claim arises and how much it will be.
Should you find out you are liable and you are ready to take site, you can get cover for the payment of the excess. This type of product is called an “excess buy down” and means that, instead of paying for the full excess, you pay only for a small percentage or an agreed amount while your insurer pays the difference on the outstanding amount.
Excess buy down gives you the peace of mind knowing that, if your company causes unforeseen damages, you can still complete the work without making a loss on the project.
You can take out cover for each project you undertake as a sub-contractor.