Every contractor or firm that hires independent contractors needs to be ready to deal with accidents in the workplace. Ideally, all construction workers should each carry contractor insurance to control coverage. Here are some essential facts about contractor insurance.
Guide to Contractor Insurance
There are various types of coverages for contractor insurance, which may cover tools and equipment, as well as structural damage, also known as Builders Risk insurance. Basic contractor insurance policies provide payments to repair or replace items damaged by certain events and unavoidable damages caused by the contractor’s crew. All tools worth over $1,000 should be listed with the insurer under covered items in the event of a disaster.
Another type of policy for contractors is insurance in case of injury. Most construction injuries are accidents that occur from unforeseen scenarios. It’s advantageous for any contractor to carry a certain amount of liability coverage to pay for medical and legal bills. In most states, big companies are required to carry workers’ compensation insurance, which covers lost wages and medical costs.
Reviewing Contractor History
When you hire a contractor, it’s vital to review the company’s history and confirm it has valid licensing and insurance. You can request an insurance certificate then check with the listed agents to verify its authenticity. The builder must be adequately insured to avoid surprise expenses if the worker falls and is injured on the job.
Your review should include a look at the company’s background with legal disputes. Find out if the company has been fined for any significant violations. Make sure the workers have gained appropriate training and certification so that you can be confident you’ve hired an experienced, competent team. The problem with hiring a company that lacks these credentials is that they might not follow standards and building codes, leading to damage and higher expenses.
Every contractor needs to carry liability insurance, which shows that the company understands the business’s risks. Trying to cut corners and avoid paying liability insurance is a red flag that indicates a lack of social responsibility. Since General Liability insurance has its limits, each contractor needs to customize their plans to ensure that accidents do not cause multi-million-dollar legal problems.
If the contractor works with subcontractors, get documentation that their insurance covers each construction worker. Don’t allow workers who lack insurance to be part of your project, as it could come back to haunt you if a worker gets injured and looks for someone to sue.
What Does Contractor Insurance Cover?
Contractor insurance is unique for every policy. Coverage types are grouped into three main tiers: essentials, recommended coverage, and large projects. The bare essentials include General Liability, Products & Completed Operations Insurance, Equipment Coverage, and Workers’ Compensation. Firms that own real estate should carry Property Insurance, while those that own vehicles should have Commercial Auto Insurance.
Beyond the essentials is what makes each policy different. Smaller companies often do not need as much coverage as larger companies. Recommended coverage for second-tier policies may be “Required by Contract.” Such a scenario indicates that the contractor may need to purchase additional coverage to meet the buyers’ requirements. Additional coverage may be necessary to extend limits for liability.
Sometimes Hired & Non-Owned insurance is needed to cover vehicles rented by the contractor. Leased Equipment Coverage protects leased equipment to a certain level. Companies that hire many employees may need to carry insurance for employment practices if an employee files a legal complaint against the company for various reasons.
Tier 3 coverage for large products applies to manufacturers that allow dangerous work conditions, such as working near hazardous chemicals. Such companies should get pollution insurance added to their existing General Liability policy. This type of policy can cover victims who are exposed to toxic substances in the transportation of waste materials. Some general policies already include this coverage up to $25,000, but many large contractors increase that coverage.
Companies that provide construction consulting or hires subcontractors should have Errors and Omissions Insurance, also known as Contractors E&O. This policy, just like it indicates, covers contractors for their mistakes or oversights. This coverage is needed in case a subcontractor installs something improperly, which the main contractor is held responsible for repairing the damage.
Additional Insured and Independent Contractors
Part of being a contractor involves additional insureds, which are people or entities added to a policy to limit their liabilities involved with a project. It helps to find a carrier that allows for multiple additional insured endorsements to comply with certain project requirements. Construction firms that pay their workers as independent contractors who file 1099 forms may sometimes find themselves in a gray area with insurers as to whether the workers are employees.
In some cases, a 1099 independent contractor may be categorized as an employee in an injury case, which means the employer may be held responsible for medical bills. It’s important to never assume all workers are automatically covered or that a contractor doesn’t have to worry about looking out for the safety of its subcontractors. Talk to your insurance agent about the consequences of “uninsured subcontractors” and what your options are if you hire a contractor that subcontracts 100 percent of its work.
Use this contractor’s insurance guide as a starting point to create a list of questions for your insurer. For easy and convenient construction insurance services, contact the experts at Artisan Insurance Solutions to get the right coverage you need today.