Does every sub's certificate cover the months they worked for you?

A remodeling contractor, more than $1 million a year, most of the work done by subs. In January I went down his sub list with him, one name at a time, for 1099s and certificates of insurance.

One sub had no certificate at all. Another had one that had expired. A third looked fine. There was a certificate on file. It covered October onward. He had paid that sub for work before October.

The third one is the one people miss. Having a certificate is not the question. The question is whether it covered the dates the sub was on your job.

Here is why it matters. Your workers’ comp and general liability carriers audit you, usually every year or every other year. They ask for your payroll and for every sub you paid, with a certificate for each one. Any payment to a sub without coverage for that period gets treated as if the sub worked under your policy. You pay premium on it.

That bill shows up after the year is over, when the money is already spent. It can be tens of thousands of dollars. I have seen one come in at $80,000.

You can’t fix it after the fact. A certificate dated today does not cover last spring. So the work is up front.

What to do before year end:

1. Get a certificate before the first payment, not after the first invoice.
2. Check what it covers. Workers’ comp, general liability, auto. Make sure it’s the coverage your carrier asks for.
3. Write down the start and end dates. Certificates expire, and the subs you use every year are the easiest ones to forget.
4. Ask for a new certificate the week the old one ends.
5. Keep them in one folder, named by sub, where you can find them when the auditor calls.

In QuickBooks Online, go to Reports and run Expenses by Vendor Summary for this year. That is the list your auditor starts from. Next to each sub, write the dates on their certificate. Any month you paid them that the dates don’t cover is a gap to close now.

If your certificates have gaps like these, start the 5-minute intake.