Do You Have the Right Contractors Insurance?
A general contractor’s job is dangerous. Along with risking life and limb to carry out your client’s wishes, a single mishap could mean losing everything if the unthinkable were to happen. Studies show that approximately one out of ten construction workers are injured each year while on the job. For this reason alone, having contractors insurance is invaluable.
However, potential injury is just the tip of the iceberg. As a construction professional running your own Limited Liability Company, you’re not considered to be an “employee”, and because of this, you aren’t covered by the insurance policies owned by the companies you work for. This is why it is essential to get insurance specifically created for businesses that work on a general or subcontractor basis.
The fact is that many financial institutions won’t even approve contractors to work on projects unless they have valid contractor accountability insurance. Are you a general contractor or subcontractor looking for legal and financial protection while running your business? Do you want to reduce the risk of losing your business due to legal woes? Need a guaranteed safety net against unfortunate on-site incidents?
What follows is an overview of important information about contractors insurance, and how to use it to protect your business interests.
Who Needs Contractors Insurance?
All professional contractors who work in the construction technology field benefit from having contractors insurance.
These include, but are not limited to, general contractors and subcontractors who specialize in the following areas:
As a general contractor, when you take over a work site, you assume total responsibility (and more importantly, liability) for any problems that occur during your tenure. Because you are self-employed and face all of the risks associated with completing the project alone, having adequate coverage is absolutely imperative.
It’s important to note that having contractors insurance isn’t always necessary. However, many contractors find it easier to source and secure work contracts if they have comprehensive coverage. This is because the company doing the hiring gets a guarantee. The contractor is held financially and legally responsible for any issues that arise from doing the work outlined in their contract.
What are the Benefits of Contractors Insurance?
Having adequate and comprehensive contractors insurance is typically expensive. However, the benefits are numerous and far outweigh the costs associated with protecting your business.
Here are some of the most important ones:
- Protect business assets: Having comprehensive coverage ensures that the assets of your business cannot be seized, sold and used to repay debts in any lawsuit brought by a disgruntled customer.
- Defective product protection: Protects you from liability and financial loss if a manufacturer or subcontractor provides a defective product while working on your project.
- Materials theft protection: Protects your business from financial loss by theft of construction materials.
- Property damage protection: Reduces financial losses and risks associated with property damage while working on a job site. This can include damage related to inclement weather, damage to adjoining properties and damage done by subcontractors.
- Damaged materials protection: Protects you from losses associated with materials being damaged during transportation to the job site.
- Protection against bodily injury: Bodily injury coverage prevents you from being held liable for any physical damage done to one of your subcontractors or general workers. This protection also covers any other member of the public who happens to come to the job site while a project is in progress.
- Workers compensation: Offers protection to both the employer and employee and pays for any medical expenses and wage benefits necessary as a result of injury or loss while working on a project.
- Completed products claims: Protects you from loss after a job is complete. For instance, if you or a subcontractor install counter tops for a homeowner and the counter tops end up injuring the individual in the months following the project, this insurance option covers any resulting damages.
- Personal and advertising injury claims: This coverage protects you from problems related to advertising your business offerings, such as copyright infringement and any potential damages related to competing with other service providers in your industry.
Contractor Insurance Coverage Options
There is a wide range of coverage options for contractors insurance depending on the type and scope of the trade in question. For example, an electrical subcontractor and a landscaping subcontractor working on the same project each face a completely different and unique set of possible mishaps while on the job. The electrician may need coverage that addresses potential fire hazards, while the landscaper may need coverage that prevents them from being sued for damaging pipelines and concrete paving.
Most construction professionals can benefit from having some or all of the following coverage options, which boost the level of protection offered by a contractor’s insurance policy:
- General liability
- Accident liability
- Sickness liability
- Professional indemnity
- Surety bonds
- Pollution liability
- Builders risk
- Inland marine coverage
- Workers compensation
- Property liability
- Contractors protective liability
- Owners protective liability
- Products operations coverage
- Accomplished operations coverage
- Commercial vehicle coverage
- Tools and equipment coverage
- Life insurance
The complexity that surrounds figuring out optimal coverage is why it is important for contractors to consult with an experienced insurance broker in order to determine what type of coverage is necessary based on the specific circumstances.
Tips for Selecting Contractor Insurance Coverage
When you’re ready to look for quality insurance coverage, use the following tips to assist with the selection process:
- Figure out the kind of coverage you need
The first step to finding the right coverage options is outlining what you need to cover. Sit down and think about the types of risks associated with your line of work and how each one would affect your business if it were to happen.
Also, consider any requirements stipulated by your state or licensing authority regarding the types of coverage you need to work legally. Find out if there are any warranties you are required to give customers after completing a job, and if it is necessary, choose an insurance product that will accommodate this.
- Figure out what kind of coverage you don’t need
Along with figuring out the kind of coverage you do need, it’s important to figure out the kind of coverage you do not need. Doing this step keeps you from wasting precious resources on coverage that won’t benefit you or reduce the level of risk you assume. For example, if you’re a subcontractor who works alone there is no need to select a workers compensation option for your coverage, since you don’t have any staff members.
- Determine your insurance limits
To know how much insurance coverage you need to have, do a simple valuation of your business. Consider everything you own such as tools, equipment, vehicles, etc. The amount that you come up with is the minimum level of insurance you should get coverage for.
This is important to ensure that you are adequately covered for whatever may happen. There is always a risk of a low-priced job leading to high-cost damages.
- Choose basic but essential coverage options, such as:
General liability insurance – Offers coverage for employer’s liability (or public liability insurance), which protects you from random misfortune that can lead to financial loss.
Indemnity coverage – Prevents you from being held liable for mistakes made during a project due to your own fault or that of one of your subcontractors.
Income protection – Replaces part of your usual monthly income if you should become sick or get injured while working on a contracted project.
- Consult with an experienced insurance professional
After you establish the basic requirements for your construction insurance coverage, it can be difficult to determine other options that provide the best protection for you and your business. Consult with a professional insurance agent who can give you the guidance and direction you need to choose the right coverage options for your unique position.
A quality agent will also help you get quotes, compare your options and put together a fully-customized solution to give you value for your money and the risk reduction you want.
Finding suitable and comprehensive insurance for contractors is a significant cost to your business operation. However, paying for a high level of protection and security upfront saves you time and money when the inevitable happens. The statistics don’t lie.
At some point you will run into a situation that could lead to significant financial loss or a complete breakdown of your business. That is, unless you protect your interests with the coverage you need to stay afloat if a worst-case scenario should ever happen.
Do you need help finding the best coverage options for your general or subcontractor business? Speak with one of our licensed agents about your contractors insurance options and to get a free quote.