Contractors of all types and sizes manage their business in the face of significant risk. On a daily basis, there is the potential for the unexpected. Although few contractors forget to follow on-the job safety procedures, some make a bigger mistake of allowing a lapse in insurance coverage, which could lead to large out-of-pocket payouts or even bankruptcy.
How does a Lapse in Insurance Coverage Happen?
Regardless of their specialty, contractors have a lot on their hands at all times. Missed payments may occur, but they can be avoided by setting up a scheduled auto payment system.
Other contractors may purposefully allow their insurance to lapse during slow times of the year as a strategy to cut costs. Or, they may intentionally cancel their insurance, because they believe they will not need the protection. Either way, a period of time without insurance is considered a lapse, which can have serious consequences.
The Penalties at Risk
While you may think that allowing a lapse in insurance coverage will save you money, this couldn’t be less true. Since most states, cities and municipalities require minimal levels of insurance, contractors who lack this basic protection may face monetary loss or worse, even before an accident occurs.
- Steep fines
- Legal costs
- Criminal charges
Insurance Policies You Should Keep Current
Contractors have many different types of policies to choose from but when push comes to shove there are a few that should always remain current.
Contractors General Liability Insurance
General liability is an insurance policy that offers protection against third-party claims of property damage, injury or bodily harm, loss of life or limb and/or negligence. It is a state requirement for most contractors, including sole proprietors.
Workers’ Compensation Insurance
Workers’ Compensation Insurance can cover all of the following areas: injuries or loss of limbs, diseases like emphysema or repetitive motion, work mishaps, medical treatment, rehabilitation, lost wages (up to two-thirds of employee’s salary), death and liability insurance for the company for all lawsuits filed by injured employees.
Inland Marine Insurance
Inland Marine Insurance compensates businesses for its assets that are lost or damaged in transit. Coverage includes property in transit, such as tools, mobile equipment and even buildings that are under construction. If your business frequently transports equipment, tools and supplies to and from your worksite, Inland Marine Insurance will help protect its value.
Whether your lapse in insurance coverage is an oversight or intentional, signing up for coverage will help save you money and aggravation in the long run.