The contracting business is a high-risk industry, wrought with plenty of possibilities for injury and property damage while on the job. Accidents can happen anytime and without warning. Because of these hazards, you’re going to need a robust risk management strategy that will protect you and everything you’ve worked hard for from financial jeopardy.
Considering everything that’s at stake, contractors insurance should be at the core of your business’ risk management strategy.
Contractors insurance is a combination of two types of insurance policies: general liability insurance and worker’s compensation insurance. General liability protects your business from an incident where it has caused accidental harm to another person or property. This typically includes medical bills, legal fees, property damage, advertising injuries, and settlements and judgment arising out of third-party injuries. Worker’s compensation insurance, on the other hand, provides medical care to employees injured on the job and compensates them for lost wages.
Important Facts About Contractors Insurance Claims
Both general liability and worker’s compensation insurance are particularly important in safeguarding your business against a variety of situations that could potentially trigger an insurance claim.
Because it is in your best interest to understand and acquaint yourself with the details and features of your policy, here are essential facts about contractors insurance claims that you need to know about.
Insurance companies usually rate your business for contractor’s insurance using letters – A, B, C, and D, with “A” as the highest and “D” the lowest. The insurer generates these ratings based on the number of claims you have filed, which will also reflect on your policy copy.
Most clients consider ratings below “B” as unsatisfactory, which means that getting a “C” might prevent you from winning bids.
Policy Period/Extended Coverage
The policy period of your contractors insurance starts on the day it is activated and ends on the indicated expiry date. You may, however, purchase extended coverage, which will stretch out your policy’s validity for 60 more days after it expires.
In case something happens and a claim is filed within that sixty-day window, you can rest easy knowing that the insurance company will still honor the claim, and you won’t have to pay for anything out of pocket.
Have you ever wondered why your premiums increase year after year?
According to statistics, there are very few to no claims filed against contractors insurance in the first year, but the number of claims tends to climb in the following years. Because it costs the insurers more money to protect your business each succeeding year, they have implemented step increases, which is basically an incremental rise in the cost of your premiums.
Understanding step increases and how much they’ll cost you in the long term will allow you to manage your company’s insurance budget better. If you’re still shopping around for contractors insurance, comparing the step increases of different providers will help you find more affordable insurance options.
Hiring subcontractors for specific jobs is a common practice among general contractors. But since subcontractors are usually excluded from the coverage of your contractors policy, it would be best if you only hire those with their own insurance. If you sign up uninsured contractors and they get involved in job-related accidents or mistakes, your claim might get rejected.
Ideally, your subcontractor’s insurance policy must have the same limit as yours. You should also verify the details of their insurance with the provider before hiring them.
Exclusions and additional insurance
Insurance policies are not all-inclusive, which means that there are incidents that won’t be covered. These exclusions are usually listed on the first or second page and are cataloged by numbers.
To better protect your company against risks and unexpected events that may come your way, you can also purchase any of the following additional insurance options:
● Professional Liability Insurance
Your company may have both general liability and worker’s compensation insurance, but these policies won’t protect you in case of design or build-related problems, or when claims resulting from construction delays arise.
As most general liability insurance excludes coverage for professional services, having professional liability insurance will provide you the extra protection you need against design, build, and delay issues.
● Builder’s Risk Insurance
This specific type of property insurance protects the building during construction, and may also include coverage for construction materials, labor costs, and temporary structures on site.
Contractors invest a lot of money into equipment and supplies, which leaves them financially exposed should something go wrong during the construction. Also, incidents such as fire, theft, vandalism, and natural disasters pose threats and could cause devastating losses to the company.
Builder’s risk insurance will help you almost immediately recover from these losses to prevent further delays in the completion of the project.
● Automobile Insurance
Construction projects often involve several vehicles driving to, from, and around the site. These vehicles are prone to damage and have the potential to cause accidents.
If your company owns dump trucks, light trucks, vans, cars, etc., that are used for business purposes, having automobile insurance entitles you to a claim in case of crashes, theft, and other covered perils. Moreover, the liability component of your auto insurance policy will protect your business from claims and lawsuits if one of your vehicles is found at fault in a crash or property damage.
Choosing a contractors insurance provider
A lot of companies offer construction insurance, but not all of them understand the needs of contractors in-depth. If possible, choose to work with insurers that focus exclusively on the construction industry. These companies and their agents have a better grasp on the nature of the contracting business and should be able to help you determine which inclusions you need and which ones you don’t.
Still, it is your responsibility always to read, check, and fully understand the terms of your contractors insurance to avoid any misconceptions about what’s covered and what’s not. You don’t want to file a claim, only to find out that it is not included in your policy.