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Insurance is a crucial part for all construction contractors, no matter whether you’re tiling bathrooms or excavating. As we all know, insurance bears the burden of specific losses that could be suffered by a contractor during a project. But, why pay more than you have to?
And yet — and this is something all business owners worry about — how can you be sure that cheap insurance is good insurance?
The risks of a cheap deal
It is risky for a contractor to operate without insurance, whether it be a construction company or an individual contractor or subcontractor. There are several ways in which unexpected damage might occur that could lead to unexpected expenses and, in some cases, legal complications where such damages are not insured.
The law even mandates that a contractor possesses certain insurances. However, even if the law did not make any such demands, it is only wise that every contractor seeks out contractor insurance that is affordable for where they are.
In the search for affordability, especially with the COVID-19 impact, two things are pertinent:
- the types of contractor insurance, and
- what influences the cost.
In reading this to the end, you will know what to look out for when it comes to choosing the right insurance.
What are the types of Contractor Insurance?
There are several types of insurance coverage for contractors. Here are 4 of the most important:
- General Liability Insurance, which covers small business risks such as property damages, bodily injuries to third parties, medical expenses that were incurred due to bodily injuries, and personal or advertising injury. Personal and advertising injury is not a commonly sought claim under insurance, and it has to do more with issues relating to copyright, libel, and slander.
- There are also more specific insurance coverages such as Contractors Professional Liability Insurance or Errors and Omissions (E&O) that covers contractors from mistakes made in the course of a contract. This is usually gotten by contractors involved in building and design, and it also covers mistakes made by hired third parties such as architects, vendors, etc. Professional Liability Insurance is currently valued at 42030 million USD globally, according to Market Growth Reports.
- There is the Workers Compensation Insurance, which serves specifically to deal with injuries or losses that workers may suffer.
- There is also Commercial Property Insurance for the physical location or building of a contractor. Any contractor with a physical building should get one; it covers damages to the property and whatever equipment or tools that may be stored in the building.
Other types are Commercial Auto Insurance, which specifically insures against any vehicular accident during a project, and Excess or Umbrella Insurance, which deals with severe catastrophes.
How is the cost calculated?
Several factors determine the cost of insurance coverage. These factors include but are not limited to:
- Number of employees.
- Your location
- The sort of service that you offer
- Number of vehicles
- Revenue level
- The previous rate of claims
It must be noted that the more revenue, vehicles operated, or employees you have, the more the cost of your insurance coverage. The same applies to previous records of claims sought against you.
Do your homework and compare quotes
In conclusion, to answer the question that this article asks, it becomes clear that contractor insurance is always the right answer. And yes, cheap insurance can be good insurance if you don’t cut corners.
So: choose an insurance company that knows the construction industry, works with well-known carriers, and has good online reviews. This way you’ll get proper coverage at the cheapest rates — and no nasty surprises when it comes time to claim.
