As a contractor, what are the worst situations that could happen to you or your business?
- A client might deny you the opportunity to place a bid, due to lack of appropriate insurance
- If regulations in your State require you to possess insurance, you may face hefty fines, or risk losing your business license
- An accident or incident while on the job may cause physical harm or other forms of damage to clients or third parties.
- Your workers may sue for compensation of unpaid work, if a client contract is breached.
These are only some of the scenarios contractors face on a regular basis. To keep yourself grounded amidst all these concerns, it is important to remind yourself that you are a small business owner. You have invested a significant amount of money to start up your business, let alone run it. Regardless of whether you take on larger projects or not, you’ll need to protect your business in whatever ways you can.
Claims against your business, if it is uninsured, are expenses that you will have to pay out of pocket. Even the most established businesses would be crippled by major claims against their business. Even if you win the case, the legal fees to defend the case are simply too much for most contractors to afford. By obtaining insurance coverage, you are transferring these risks against your enterprise to an insurance company.
In your line of business, you are faced with risks. Some are obvious, while others are totally unforeseen. These unforeseen circumstances are what you should be shielding your business against by obtaining the forms of coverage that apply the most to you. General contractors often need to meet insurance requirements surrounding liability claims, like property damage or theft, as well as workers compensation. But there are a few others that should at the very least be considered, in order to practice effective risk management. The six types of insurance we suggest you look into when creating your own insurance plan are listed below.
Professional Liability – This type of insurance is mostly used by consultants, architects and design and build contractors to protect themselves against claims made by clients. Contractors who do this work alongside their work in the trade take on this policy to obtain full coverage in regards to customer dissatisfaction, design flaws and failure to prperly execute plans.
A professional liability policy also covers you against negligence on your part while undertaking your duties. Let’s say that a contractor paints on a wet wall. Within minutes, the paint starts to peel off. Your negligence on not checking if the wall was fit for painting cost the client money and time, especially if they had to temporarily suspend their business availability to take on construction projects which require your services. In this case, the claims raised will be addressed by the professional liability insurance policy.
General Liability – If your company is deemed legally responsible for bodily injuries or damages to client property, you should expect to bear the financial costs associated with those incidents. General liability coverage protects you in such cases, as it transfers the costs associated with these claims away from your business.
Suppose you are roofing a client’s home and one of your tools that you left unsecured drops onto the windshield of your client’s car parked close by. In this case, your general liability is what will handle the claims that will be raised.
Workers’ compensation – Worker’s compensation insurance offers benefits and protections for workers injured on the job. Their medical expenses and their wages are covered by this kind of insurance.
In the construction industry, an accident can place your employees at very high risk of hospitalization. During this time, they are incapable of working hence no income. With a worker’s compensation policy, your employee’s will receive the peace of mind they need in order to work effectively and safely.
Commercial auto insurance – The insurance coverage we have spoken of thus far protect third-party property for the most part. Commercial auto, however, focuses on the automotive property of the insured itself. While this is not specific to contractors, it is a very important policy for contractors who need to use vehicles to transport tools and employees as part of their project. If in the line of duty you need an excavator, such equipment has to be commercially insured. The commercial auto policy is designed to address damages caused by the vehicle or damages made to the vehicle itself.
Inland Marine Insurance – Inland Marine insurance is designed to protect contractors’ property. Damages to your property, plus loss of tools and other working materials, will be compensated by Inland Marine Insurance. A contractor without their tools cannot achieve much since most of their work is done with them. Therefore, having this type of protection acts as a kind of commercial property insurance that the insured can use to keep their business assets in working order.
Umbrella Insurance – Umbrella insurance is simply extra liability insurance which works by providing extended liability coverage beyond the limits of other liability covers.
The difference between umbrella insurance and excess liability insurance is that the latter only extends one insurance policy at a time. Your excess liability can be attached to either your professional liability policy or general liability policy, but it cannot be attached to both. If you have both of these policies, taking on an umbrella insurance policy extends the limits of both of them.
Contractors must be well insured for the smooth running of their business. A well-insured contractor is appealing to clients, because the certificate of insurance proves to them that they will be compensated promptly and professionally, in case something goes wrong. Workers also are likely to remain in their construction business longer when that business is well-insured. In case they are in an accident, they can rest easy knowing the medical bills will be taken care of, in addition to income replacement for the days they are unable to work.
If you are a contractor wondering how to avoid going overboard on business insurance you don’t need, while receiving the contractor’s insurance you do, contact us at Farmers Brown Insurance Agency! We will advise you on everything you need to know, as well get you fast and affordable insurance plans for your business.