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General liability insurance does a great deal in ensuring that contractors are not run aground by lawsuits that could come their way. But some contractors throw caution to the wind when getting one, often to their own chagrin. Here are seven most common mistakes contractors make when buying general liability insurance.
1. Failing to purchase general liability insurance
Although this piece is about mistakes made when buying, the first mistake made by some contractors is failing to buy insurance at all. This is often due to effort to cut costs, while hoping nothing goes wrong. Avoid this as it can wreck your business.
2. Buying from wrong company
Many contractors simply buy from inefficient companies. It is advisable to ensure that the company or agent you work with is familiar with your business demands and keeps in touch with daily development that could affect you. Ideally, it should have good reputation and be able to deal effectively with claims as they arise.
3. Failing to fully assess policy before buying
For some contractors, the mistake they make is failing to fully understand what they are buying. Your task is not done yet after finding the right company. You should take time to study what you are being offered before making a deal. Make sure there are no problematic provisions included.
4. Ignoring company rating
You have probably heard of insurance companies being rated. They are for a purpose, but some contractors often ignore or are unaware of them. These ratings reflect the ease and security of doing business with the companies. You could be putting your business at risk when dealing with a company having a rating lower than “B”.
5. Buying a Claims Made policy
A claims made policy is a type of coverage that only pays for claims officially made while it is still effective or during its extended period. This should be avoided as claims not made during the policy and extended periods will not be entertained by insurance companies.
6. Failing to ensure subcontractors have insurance
There are still those contractors who didn’t ensure their subcontractors have general liability insurance, perhaps, as a way of helping. Decisions like this can run you out of business should the subcontractor cause a problem on the job.
7. Trivializing exclusions
This is a costly thing to do, but some contractors are still guilty of it. You should always take time to read exclusions and see if any applies to your business. This will save you the cost of canceling and re-quoting your policy later on.