Running a contracting business is a complicated game. Your entire life revolves around safety, security and risk management as much as it does construction and property improvement. Lawsuits are a fact of life in today’s litigious climate, and knowing what kinds of insurance to buy can make or break your business. It is very easy to make critical errors when setting up your policy. Here are several mistakes to avoid when shopping for a contractors insurance policy.
The Wrong Agent
The most critical mistake you can make is choosing an agent or broker that does not suit your needs. Make sure that the broker has tools to deal with the specific type of coverage you require. They should specialize in construction policies and the risks inherent in that type of work. General companies are not always your best bet.
Claims-made policies, which trigger at the point when a claim is made rather than when an incident occurs, have been around since the mid-1980s. They offer lower up-front and ongoing costs. However, if they are not used correctly they can cost you. If you do not follow specific rules regarding when you can bring a claim, you can end up losing vital coverage.
Understanding the details of claims-made coverage can be helpful. However, if you do not grasp the intricacies, you are much better off obtaining traditional occurrence-based coverage in most cases. Even though the ongoing costs may be higher, the flexibility in coverage will be much greater and it can save your skin in the long run.
Every insurance company receives a rating that is just like a grade in school, from A through F by Standard and Poor’s. If your company has a rating lower than “B,” reconsider your association. This indicates a risk of the company going out of business, and also may restrict your ability to perform city, county or state jobs.
Never, ever assume that your policy allows subcontractors under your liability coverage. In fact, many insurers do not allow this. Know whether or not your policy will cover subcontracts or whether these independent workers need to carry their own liability. In fact, it is generally good business practice (and in many cases, a legal requisite) for such workers to carry their own policies, regardless of whether yours will attach to their work.
Certificate of Insurance
A certificate verifies that you have necessary coverage. However, far too many contractors fail to thoroughly check this verification when presented. Make sure that the policy date is current. Check into the insurer to be sure that they are in business, have a good rating and cover the work needed. Be sure that any additional insured endorsements or exclusions do not leave you in the cold. Be sure all of the details are in place and nothing is left out.
In the end, it is important when purchasing insurance that you cover every last detail. If you have any questions or need further information about purchasing contractor’s insurance, we are here to help. Give us a call today!