As a contractor, there are numerous steps that you need to take before venturing out into the world of business. The most fundamental of those steps include coming up with a business plan, getting adequate funding, and paying for insurance.
A lot of contractors usually don’t see the necessity of insuring their business, especially since they don’t have the resources available to them to spend on insurance as big firms do.
However, you’ll find that the risks contractors face in their line of work are similar to those carried by well-established construction firms. Anything can happen on a worksite leading to body injuries and damage to either property or equipment.
As such, it’s imperative that a contractor invests in some sort of contractor insurance. Contractor insurance is a general term encompassing different insurance policies that protect contractors from litigation and claims arising from unforeseen damages at the project site.
So how does a contractor know what policy is good for them and how do they go about buying the insurance cover? Read more below for a few tips outlining what contractors should consider when buying insurance.
1. Know the Insurance Policies Available
An insurance cover can run well into the thousands of dollars so you must familiarize yourself with the kinds of insurance coverage available. This will help you make a well-informed decision on your investment.
There are plenty of different insurance covers available in the market that are styled to suit the needs of contractors. However, there are a few that are standard with most contractors. They include:
- General liability insurance.
- Builder’s risk.
- Worker’s compensation.
General liability insurance is perhaps the most important of them all. It will protect your business against claims that arise from client property damage, bodily injury due to negligence on your part as the contractor, as well as your legal fees.
If you have employees working for you, then worker’s compensation insurance will help in case an employee gets hurt while on the job. However, the compensation coverage assigned depends on the nature of the work your employees are engaged in. For instance, a roofer’s insurance rate will be higher than that of someone doing painting or flooring.
As for the builder’s risk insurance policy, it helps protect contractors from having to pay for materials and tools that get stolen, lost, or damaged during a project.
2. Understand Your Risks
Every contractor faces different risks depending on their specialization. Therefore, you must understand what you’re protecting yourself against before you pay for insurance.
For instance, a painting contractor should be worried about being sued if an accident happens on site and some paint spills on the floor. A concrete contractor should be concerned about damaging some of their expensive machinery while at work.
In both scenarios, if the contractors had general liability insurance, then the insurance provider should take care of the expenses. Carefully evaluate the risks you are likely to face in your industry and buy the appropriate insurance coverage to protect you against them.
3. Consider How Long You Want Your Cover to Be Active
Most insurance providers provide coverage over a certain time frame. This means claims should only be made during the period in which the policy is in effect.
Your insurance provider will not cover any claims made after the period agreed upon expires or before it is in effect. Therefore, as a contractor, you need to consider how long you want your policy to last?
If you project that you’ll be having a wide number of projects across the year, you can take a policy that’s two years long. If you’d like to pay for insurance for a particular project, then you need to consider how long you’re going to be working on the project. Insurance providers have packages ranging between a day to months, and years.
4. Work With an Industry-Specific Insurance Provider
As a contractor, you want to work with an insurance company that won’t give you a hard time when you file for a claim. As such, you should try and work with a top-rated insurance company that has a fair amount of experience in working with contractors in your line of work.
Try and do some digging on A-rated insurance providers. Such companies usually have reliable coverage, good working terms, and prompt claim payouts.
After you narrow down your search, the next step will be to get in touch with sales agents from the insurance companies and ask for quotations on different policies so you can select the one that best suits the needs of your business.
5. Consider the Cost of Your Insurance Policy to Your Business
So far, so good! Now that you’ve received quotes from your ideal insurance providers, take some time and go through them with precision. You’ll find that some of these companies provide the same terms but vary significantly in price.
If you buy the first insurance policy you get, then it’s highly likely that you’re going to be wasting money that you could otherwise spend on a different function of your business.
You also need to consider the deductible and the policy limit. A deductible is an amount you’re supposed to pay in the event a claim is filed. The insurance provider then pays the rest of the claim amount as per the policy limit.
Prioritize Coverage over Insurance Costs
If you were wondering whether contractors need insurance, the information highlighted above should help you understand why they do, and how they can get it. Depending on their kind of work, the contractor may need various insurance policies.
Learning more about the different kinds of insurance available, what they cover, and how much they cost will help you protect your business better. You will also get more business from your clients since they will have an extra level of confidence when hiring you.
As a contractor, you might have a thin budget and it can be tempting for you to buy the cheapest policies on the market. This can, however, expose you to much greater financial risk when it comes to filing for claims. Be sure to visit Farmer’s Brown today for the best deals in contractor insurance.