Contractor Liability Insurance

The contractor business can be one of the most profitable businesses. However, it is marred by limitless risks from the start of a project to the end. Since the construction industry is one of the most demanding and aggressive sectors, it exposes the business to risks that can even force a shutdown. From struggling to meet project deadlines, dealing with workers’ issues to property damage, failure to have contractor liability insurance is a risk a contractor cannot afford. That’s where contractor liability insurance comes in. But before we even dive further, let’s understand what contractor liability insurance is. 

What is Contractor Liability Insurance?

This is an insurance policy that provides coverage for contractor businesses and employees against unexpected perils that occur in the line of duty. Depending on the insurance providers, the insured perils can be property damage, bodily injury and personal injuries to third parties. In most contractor businesses, contractors are mandated to have contractor liability insurance before they commence any project, whether residential or commercial. 

What does contractor liability insurance provide coverage for? 

1. Damage claims

 In case of damage claims, contractor liability insurance should cater to claims made. For instance, your employees may accidentally damage your neighbour’s property. Also, this insurance policy should compensate your customer if they cannot use the property during the construction period. 

2. Injury claims

Contractor liability insurance provides coverage for expenses that may arise due to injuries that occur in the course of work. For instance, if a person falls and is injured, this insurance should cater for any expenses including medical fees and court-awarded compensation. Where death arises due to work injuries, contractor liability insurance should cater for funeral expenses. However, this does not normally provide coverage for injuries incurred by the business owner or employees. 

3. Product claims

In contractor businesses, you may get claims of damages caused by equipment installed by your workers. Contractor liability insurance will address these claims and compensate where deemed necessary. 

4. Personal and advertising

These are injuries arising from malicious prosecution, false arrest, copyright infringement, wrongful eviction, publication of false information as well as activities that violate a person’s right to privacy. 

Even with the wide coverage, contractor liability insurance does not provide coverage for: 

• Intentional damage to third parties
• Vehicles
• Damage to projects during construction
• Lost or stolen equipment 
• Injuries incurred by employees during the construction

Does contractor liability insurance have add-ons? 

Yes, contractor liability insurance has optional add-ons. These will help safeguard your business against perils that are not covered under general contractor liability insurance. However, these optional add-ons depend on different insurance providers. Here are some contractor liability insurance add-ons. 

• Contractor tools- Construction tools are vital. At the same time, they are expensive to acquire and maintain. Contractor tools add-on safeguards your contractor equipment from damage, theft and even repair. 
• Business income extension- This provides coverage for income lost due to the suspension of contactor projects. This could be due to the damage of equipment or other issues that constrain your income. 
• Installation coverage- Accidents may happen just when you are installing expensive home equipment for your client, such as a bathtub. This coverage protects you from such damages and helps you cover the costs associated with the replacement or repair of damaged home equipment. 
• Employment practices liability insurance- Contractor businesses are prone to employment liability claims. Your employees may take legal action against your business due to issues such as retaliation, wrongful termination, harassment or discrimination. Since the legal fees can be hefty, employment practices liability insurance add-on comes in handy in covering the legal expenses. 
• Inland marine- This provides coverage for shipping products and materials when they’re shipping by truck or train. 
• Data breach coverage- Data breach coverage safeguards your contractor business from stolen or lost business information that is sensitive. The coverage can cater to the management of public relations, notifying the affected parties or good faith advertising. 

What are the benefits of contractor liability insurance? 

Before you ignore contractor liability insurance, let’s see how your business will benefit from the coverage provided. 

• It may be a requirement by law- In many locations, you must have contractor liability insurance to operate contractor businesses. 
• Your client will require you to have it- Without contractor liability insurance, most clients will not give the go-ahead for the initiation of a project. This coverage assures them that the project will be completed even if some hiccups occur along the way. It also protects them against paying for damages caused by a contractor. 
• You will be protected against injury and property damage claims. These are the most common risks involved in contractor businesses. 
• You will be assisted in covering damages and costs if you are sued after the court has passed a judgement
• You can use the insurance policy to cater to witness fees, attorney fees and even court expenses. 
• You will enjoy the peace of knowing your contractor projects and workers are protected
• It will help your company grow without hindrances that come with running a project, no matter how big or small it is. 

What is the cost of contractor liability insurance?

The cost of contractor liability insurance is not a universal figure. As such, the cost is determined by various factors including:

• Your coverage needs- Contractor businesses have different insurance needs. For instance, one business may opt to go for several add-on coverages while another will not. 
• Your location- Some locations may be more prone to some risks than others. For instance, a contractor with a project in a location that is more prone to dangerous weather conditions will pay more than that in a safer location. Also, some locations are more insecure than others, hence adding to the cost of contractor liability insurance. 
• Claims history- Insurance providers will use your claims history in determining the cost of your contractor liability insurance. Businesses with more claims mean that they are at a higher risk to insure than those who barely make claims. 
• The number and complexity of contractor machinery- Contractor businesses with heavier and expensive machinery will remit higher premiums given the high cost of repair or replacement. 
• Number of employees- A contractor business that has many employees is more prone to risks such as damage to other parties’ properties. 

How can you reduce the cost of your contractor liability insurance? 

• Bundle your insurance policies- By purchasing insurance policies from one insurer, you will get better rates as opposed to buying each coverage from different insurers. 
• Avoid making unnecessary claims-The role of insurance is to provide compensation if the insured perils occur. However, making too many claims may make you seem riskier to insure, hence raising the cost of your contractor liability insurance.