Contractor Liability Insurance 101: What You Need to Know

Businesses that outsource work can save on contractor liability insurance by taking a few proactive measures. Here are insurance insights on lowering monthly costs while maintaining essential coverage.

What Is Covered by General Liability Insurance?

Most businesses need general liability insurance to protect their assets. Without adequate liability coverage, the owner can end up paying out of their own pocket for legal fees. Any physical establishment runs the risk of someone tripping and falling, and then suing the organization for unsafe conditions that caused their injury.

There are many other ways a business can get sued. If customers are disappointed or injured by your products or services, they can file a lawsuit and try to win a settlement. Using copyrighted material without permission from the owner can also make you liable for copyright infringement. Your company can also get sued for wrongfully advertising its products.

General liability insurance covers the costs of attorneys, court filing fees, and settlements. Imagine getting sued because you joked about your competitor on social media, who then wins a defamation case against your business. Instead of you paying thousands of dollars out of your savings, your business insurance will pay for it.

Cost of General Liability Insurance

What you pay for insurance costs depends a lot on your type of business, how it operates and where it’s located. The number of employees you have and insurance claims filed against your business in the past are also important factors that affect insurance costs. High-risk facilities, such as those with dangerous machinery capable of causing serious injuries, will have to pay higher insurance costs. Also, if your business is located in a high-crime zone, it will attract higher insurance premiums.

Some insurance brokers charge a fee for setting up your insurance policy, ranging from $300 to $500.

Another factor that can affect your insurance cost is how much coverage you carry. Usually, large companies pay the most for insurance because they have more employees. Every business with employees must carry workers compensation insurance. Large companies are also more likely to carry a wide variety of coverage endorsements, which are extensions to a standard plan.

Tips to Consider While Buying Contractor Liability Insurance

  1. Separate commercial from personal insurance: Get commercial and personal insurance from different insurers, so that you don’t mix up the two while paying premiums or making a claim.
  2. Ask your broker about hidden fees: Find out the total charges you can expect to pay each month. Don’t wait for surprises to disrupt your carefully-planned monthly budget.
  3. Know whether you need a ‘Claims Made’ or a “Per Occurrence” policy: Claims made policy covers you only during the policy term. Any claim that arises after the expiry of the policy will not be covered. Per occurrence policy covers you regardless of when you report the claim. Thus per occurrence policies are more expensive than claims made policy.
  4. Know the insurance ratings of prospective insurers: Insurance agencies are rated by two firms: AM Best and Standard & Poor’s. Sometimes clients and other contractors require at least a B-rated insurance agency for coverage.
  5. Make sure your broker recommends an insurer licensed in your state: Your coverage can get wiped out if your insurer goes bankrupt. However, if the insurer is “admitted” in your state, the insurance industry will bail them out.
  6. Understand policy exclusions: A policy may have certain exclusions in which specific events are not covered.

Businesses with minimal risks pay lower insurance costs.  If you are looking for contractor liability insurance and have any questions about the policy, contact the experts here at Artisan Insurance Solutions, and we will assist you.

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