Liability insurance for contractors protects the policyholder from outside litigations. It offers coverage against mistakes that take place when providing a service as an independent contractor. Although mainly used in the construction business, it can also be adopted in other manufacturing, wholesale, retail, and restaurant sectors.
Do Contractors Need Liability Insurance?
Independent contractors need liability insurance. This is because of a variety of reasons. It depends on the risks, contract, and type of business. Based on your analysis, contractors may also opt for errors and omission insurance.
But since the rate of litigation is rising in the US, it’s better to protect yourself and your business from potential risks arising from those litigations.
When selecting contractors’ liability insurance, you need to look for a few things. Here, they are:
The Sector of the Liability Insurance Package
The first thing you need to look at is the sector. If you’re involved in the construction business, look for packages catering to construction contractors. Similarly, if you’re a plumber contracted to fix leakage in a building, opt for packages meant explicitly for your business. Similarly, painters and home renovation contractors should look for specific insurance types.
But, general liability insurance for contractors covers every type of contractor irrespective of their sector. But specificity goes an extra mile in providing the exact coverage you need.
Type of the Insurance package
When purchasing a liability insurance package, check the package. It’s worth mentioning that not every insurance policy covering contractors against damage lawsuits is called liability insurance. There are Errors and Omission Liability Insurance that protects against negligent professional service. You may then find Directors and Officers Insurance or D&O Insurance that provides protection, especially to directors and nominated officers of a firm. This ensures they’re not sued for the damage.
There are options like customer injury protection type, customer property damage protection, libel and slander protection type, and products-completed operations insurance in liability insurance itself.
It would be best to discuss with your independent agent selecting the correct package for your contracting business.
Price and Premium
The next thing you should look at is the price. Since there are different types of liability insurance packages, prices tend to vary too. Generally, packages that have more coverage cost more. On the other hand, packages with lower coverage have a lower price tag.
While the lower-priced package might sound appealing, you shouldn’t go for it simply because it’s cheaper. Take into account your business model, sector, and what could go wrong. If there’s a chance of a disaster for the client because of your negligence, higher-priced packages are worth the investment. They will cover you against high-value litigations.
You should also ensure that the package fits within your budget without hurting your bottom-line.
Modifications to the Existing Insurance Package
Business insurance is different from personal insurance, as businesses are highly dynamic. The needs and requirements keep on changing from time to time. Therefore, it’s better if your insurance package can be changed accordingly.
Today, you might be a 10-person contracting agency. But in the future, you may double up to 50 or reduce the number to 5. Therefore, a package for a 10-Person Company might not suit the needs of a 50 or 5-person Company. You might end up overpaying or underpaying.
Also, by bundling your insurance policies, you often save money while increasing coverage. So it’s better if liability insurance for contractors offers dynamic options rather than static.
Terms and Conditions, Disclaimers
Finally, you should check all the terms and conditions mentioned in the policy. The policies are notorious for being multi-pages long. But you need to take the pain to go through them all. In case that’s not possible, you can ask your lawyer to go through it.
By protecting your contracting business against litigations, you’re mitigating high risks that can potentially take down your company. Irrespective of which sector you’re in, you should get liability insurance sooner rather than later.