Tips for Purchasing Contractor Insurance

Working as a contractor involves many risks. There are certain factors and variables that you cannot completely control, and that is all part of the job. As a result, many contractors find themselves in a big mess when accidents and unplanned damages occur in the course of their work. Because of this, it is always a good idea to get extra protection by having a proper contractors insurance in place.

Have the proper Insurance Coverage

Contractor Insurance is an insurance policy that a contractor takes to cover the project under construction against any loss or damages that may occur during development. The policy may cover the project its self, workers, third party and the equipment in use.

Tips for Purchasing Contractor Insurance

1. Make sure your insurance carrier can comply with common industry endorsements.

Before you take out the policy, you need to make sure it complies with most of the project requirements you will run up against in the upcoming years. For example, some insurance companies claim they are experienced in writing contractor insurance but cannot actually add a common additional insured endorsement to their policies.

If you are trying to work with a company that has strict requirements and your insurance carrier cannot add a specific endorsement to the policy, you have a problem. You’ll either have to requote everything or turn down the project; in this example, both scenarios are bad.

It is important to choose an insurance company that is compatible with your goals as a business owner. If your insurance company cannot comply with where you want to go, then you might lose out on some opportunities.

2. Make sure you are classified correctly on your policies.

One of the issues that can lead to premium discrepancies between quotes is the misclassification of business operations. While a misclassified quote might appear cheaper when taking out the policy, the misclassification will likely be caught after your first-year audit, and you will probably be required to pay an additional premium.

In this scenario, it is always better to know what you are going to pay instead of leaving it up to the insurance company to change the rate to whatever they want upon inspection.

In addition to cash flow issues, misclassification can also cause coverage issues if there is a misrepresentation of what operations your business performs.

3. If something is suspiciously cheap, proceed with caution.

If you have some quotes and one is suspiciously lower than all the others, then approach it with some skepticism. I’m not saying a low rate might not happen legitimately sometimes (it does!), but there will frequently be an issue—with the coverage provided, an error on your reported payroll, or a misclassification.

Any of those errors will eventually be found out upon audit, and you might owe more than you would have if you selected the correct quote from the start.

4. If you subcontract out more than 25% of your labor, you need a specialty insurance carrier.

If more than 25% of your labor is performed by subcontractors, you most likely need an insurance company that specializes in that particular business structure.

If you have a large number of subcontractors and you are with a carrier that doesn’t like subcontractor use, it will not be a smooth process. You will have to deal with getting non-renewed, the insurance company will exclude liability for the subcontractors, or the insurance company will charge additional premium. Companies that use many subcontractors should choose insurance carriers do not mind subcontractors at all.

The best insurance company for contractors is the one that offers a fair price for a quality policy. Remember, the insurance company must have the size and expertise to help you comply with job requirements and pay claims when you need them to. Finding the best insurance company for your contractor business can be done quickly and painlessly, but you might want to reach out to a professional to help you choose.

You might also contact ONYX Insurance Brokers for more information. Contact or email us now!