About Contractors Liability Insurance

No matter how conscientious you are, accidents can still happen, and that thought drives the liability insurance market for contractors. Some states require a minimum amount of liability insurance, based upon the overall cost of the project, while other states don't regulate insurance requirements. Even if your state does not set an insurance liability standard, a lender or business owner may require proof of insurance before you begin the job.

Benefits

A liability insurance policy covers incidents that happen during the course of construction and, depending upon the policy, it may cover problems that occur for a specified time after the job is completed. This protects the contractor from lawsuits and personal loss. Insurance agencies gear their policy standards to state regulations. If your state requires that contractors offer a two-year warranty on their work, your liability policy will reflect two-year coverage.

Types

Not all liability insurance policies are equal, and it pays to call two or three insurance agents before choosing one. Some policies require coverage on all of your employees and you must gather proof of insurance from any subcontractors you hire. Other policies charge you for employees but also add a fee for subcontractors. Insurers usually reserve the right to perform an audit of your gross sales to determine your level of insurance liability needs.

Identification

Your payroll is the biggest identifier used to determine your premium rate but other factors can influence it. If you employee a lot of workers, your insurance company may charge a different rate depending upon each employee's duties. For instance, you may pay an office manager the same wage you pay a heavy equipment operator but your insurer will usually charge less to insure the office manager.

Misconceptions

Contractor's liability insurance does not cover poor workmanship but it will cover property damage that results from a contractor's work. In addition, bodily injury that results from your work may be covered, but if your employees are injured, your worker's compensation policy will pay the first claims.

Prevention/Solution

The cost of contractor's liability premiums are increasing due to claims from defective products. The fewer claims filed against your business, the less risk you pose to the insurance company and your rates will reflect that. Unfortunately, if other contractors have large claims, your rates may also increase. At least once a year, call other insurance agencies to compare rates and coverage. Don't hesitate to switch if you can save money.

Resources

• Find a contractor's liability insurance policy.