Are you an underinsured General Contractor? One of the biggest dangers to your contracting business is not having adequate property damage insurance as a general contractor. Effectively this means your business is underinsured and at risk.
What is underinsurance?
Being an underinsured General Contractor means that your current insurance coverage is not enough to cover a full expenses claim.
Underinsurance is more common among people trying to reduce the cost of their premiums. While this can lower your overhead costs, it opens you up to a significantly higher financial burden when you claim.
Insurance helps to significantly mitigate or eliminate the financial costs to you when a claim occurs and not enough insurance means that your insurance policy may no longer be effective in doing so.
The risks of underinsurance
Underinsurance opens you and your business up to a variety of risks:
1. Legal liability
Most states in the US require you to be adequately insured and will set out an expectation of how much coverage you should have. For example, in California, all contractors are expected to have General Liability insurance with at least $1 million in coverage.
Being underinsured may not only open you up to financial liability but also legal liability. In most cases, the premium cost is far less than the price of the fines involved if you are underinsured.
2. Personal bankruptcy
Most small businesses, including general contractors, are run as either a sole proprietorship or a single-member limited liability company. Any liability incurred from your business will also apply directly to you as the business owner.
Property damage insurance and other insurance policies not only protect your business from financial harm but also protect you as the owner. If you operate with limited insurance, you put your personal assets at risk in the case of a large settlement.
3. Reputational harm and loss of customers
Customers will often require contractors to have adequate insurance in place as part of any work contract. These requirements often include a minimum coverage requirement.
If you own an underinsured General Contractor business, you risk losing the customer entirely. Furthermore, obtaining insurance can take up to several weeks, so you cannot leave it until the last minute.
Aside from the loss of work, this can also harm your reputation as it could quite quickly get out in the industry that you do not have enough insurance to protect your business and your clients.
Research has shown that up to 35% of general liability claims resulted in a lawsuit. If your business does not have adequate property damage insurance, this can lead to severe repercussions legally.
While you can save money by having a smaller insurance policy, the risk incurred is not worth it.
Are you an underinsured General Contractor? Find out now!
Never underestimate your insurance requirements and certainly don’t put your business at risk by being underinsured. Our advisors are standing by to guide you every step of the way. Whether you are applying for a new insurance policy or additional coverage, call Contractors Liability at 866 225 1950 for all your property damage insurance requirements. Find out if you are an at-risk, underinsured General Contractor.