General contractors provide material and labor for various projects associated with trades. This is not as simple as it sounds. The ways in which your job can get extremely complicated include:
- The denial of your bid on a project, due to lack of insurance
- Your business permit might be disavowed because of lack of contractor’s insurance as per regulations
- Accidents or damages which involve a third party may put your small business in trouble. You may be sued for liability and expected to pay for legal fees, medical costs, or more in favor of the plaintiff.
- Your subcontractors may be injured during work. In addition, they will still need their pay for the time they are recuperating. An incomplete policy may leave you in a precarious financial predicament.
These are some of the unfortunate situations business owners may find themselves in. The contracting business, is a significant investment in terms of material, equipment, and workforce. Even if you work as an independent contractor, these investments still apply. As such, you’ll need solid risk management strategies to cushion your business against any form of liability.
Liability payouts against businesses and companies begin at thousands of dollars, some of which extend into the millions or more. No business entity can afford to make this kind of payout on their own. Transferring this responsibility to an insurance company by taking up all the necessary insurance coverage is therefore vital.
Though an initial cost at first, your business owners policy is a long-term savings plan for your business, assuming the risk of having to pay for medical expenses, advertising injury, and property damage is high in your trade. Your general liability coverage will pay for these costs when you cannot.
Discounts on your next renewal from your insurance agency are not unheard of. After all, every penny counts in business. If you have a relatively clean accident record, or a bundling of services through a single provider, the benefits go a long way in easing your operation costs. Even if you spend $1000 or more in premiums, you are entitled to up to $1,000,000 in coverage, as per the policy limit agreed upon.
However, the question still remains: What are your coverage needs for the various types of contractors out there? Below are six types of insurance recommended to all general contractors.
Professional liability – This policy is designed for all professionals who need financial cushioning when it comes to failure in executing their duties on a satisfactory level. Negligence or omission can result in a financial loss for clients. If you identify as a professional, the outcome of your services is always your responsibility to uphold. A doctor that misdiagnoses a patient or a contractor whose final result on a project is not up to an acceptable standard are both liable for lawsuits against their practice.
General liability insurance – A general liability policy is designed to compensate third parties whenever bodily injury, personal injury, and property damage affects them financially. If you are a restaurant owner and one of your waiters spills hot coffee on a client’s laptop while serving them, you will have to cover the costs for the replacement. Similarly, if a client trips over a misplace piece of equipment on your project site or on your premises, you will need to accommodate their recovery financially.
Professional liability insurance and general liability insurance are complementary liability covers, but they still have important exemptions to keep in mind. For example, general liability does not cover legal fees associated with criminal court proceedings.
Worker’s compensation – Workers’ compensation insurance pays for medical bills and wages for employees who have been injured at work. If an accident occurs or one of your employees is hospitalized due to long-term effects attributed to work, their medical bill will be in full. For the days they are away from work, their wage will also be paid. It also covers disability, provided that the injury is tantamount to a lifelong diagnosis. Employees who benefit from this coverage waive the right to file lawsuits against their employers, however, they do have the right to sue if benefits are owed or unfairly revoked.
Commercial auto insurance – Contractors transport material, equipment, and personnel to different sites for work. All vehicles used for commercial purposes require this policy. It is designed to cover theft, as well as damages to the vehicle or damages made by the vehicle. However, there are limitations to the coverage. Insurance companies can refuse to honor a claim if the vehicle is insured for private use yet used for commercial purposes, and vice versa.
Builder’s risk – This policy is designed to protect buildings, material, and tools from damage or theft. The perils insured under builder’s risk include vandalism, fire, wind, theft, lightning, and explosions. Excluded perils include earthquakes, employee theft, water damage, penalties, government action, and warfare. For a more comprehensive list, you should contact your service provider, especially if your business needs demand knowledge of every variable.
Umbrella Insurance – An umbrella protection extends your policy limits on every type of insurance you have. It provides extra liability risk inclusion not given by other policies, such as slander, copyright infringement or libel.
Umbrella insurance and excess liability insurance work in the same way. The only difference is that excess liability insurance only extends the limit for one individual policy. You can have either your professional liability or general liability limits extended, but not both. Umbrella insurance extends all your liability limits at the same time, which makes it the best option if you have multiple insurance needs.
Insurance is one of the key risk mitigation strategies contractors must adopt. While some insurance policies are required by law, optional policies provides additional coverage to your business. Combining insurance and other risk mitigation strategies ensures smooth operation for your business in nearly every circumstance. It also transfers liability risks to an insurance company protecting you from the financial burden of third-party claims.
Insurance costs a fraction of the benefits it provides. So, if you are a contractor looking for expert advice on insurance for your business, get in touch with an insurance agent at Contractor’s Liability. We are a team of insurance experts providing great customer service to contractors just like you. If you need a free quote, we can get that for you in a flash. If you need proof of coverage via a certificate of insurance, we can provide those as well! Most importantly, if you need coverage that you don’t have, we can work with you to find a plan that balances your needs with your budget. All these services are available to you when you access our website, here.
Many small businesses fail because of a single claim made against them. That shouldn’t have to be your fate. When you work with Contractors Liability, it won’t be.
