Many small contractors secure a general liability policy and hope for the best. Unfortunately, hopes are sometimes met with severe disappointment when they find out what their policy doesn’t cover. Third-party bodily injury and property damage? Yes. Everything else? Not so much.
Specialized work needs specialized coverage
If you’re an excavation or trenching contractor, equipment used for digging work is your most valuable asset. But the risk associated with the operation of this equipment is also much higher compared to many other contractors. An insurance policy that covers only general liability won’t replace a trench box collapsed and destroyed in a cave-in, or a chain trencher that’s come in contact with a gas line.
Finding affordable excavation insurance that specifically covers these scenarios can also drive costs down. For example, you’ll spend less if you store your heavy equipment in a lot away from where regular people can access it – and a policy that protects you from equipment theft everywhere in the U.S. but doesn’t include theft from an unsecured yard is pointless.
Peace of mind and a cosigner on a bond are two different things. For the latter, you need full-spectrum protection that understands what you do and is underwritten to support your business requirements.
The policies that actually close the gaps
It starts with general liability. No one lets you on their job sites without coverage. Add in heavy machinery, multiple crew members, and variations in project types, and you’re left with significant risk.
Workers’ compensation is designed to cover medical costs and lost wages should a member of your crew get hurt on the job. Required by most jurisdictions if you have employees, workers can make mistakes or work while distracted, even if you have a team you trust. Your Experience Mod Rate, which directly impacts your base premium, compares your company’s history of claims to the industry average. The fewer incidents you have the better.
Inland marine insurance is often overlooked by small operators. It protects your tools and equipment while in transport or at a site. If you’re moving gear between a residential work site on Monday and a commercial site on Thursday, and a trailer full of your gear is stolen overnight, your standard property policy doesn’t cover the loss without inland marine.
Commercial auto insurance is mandated for trucks and other heavy vehicles most companies use for hauling. Personal auto policies won’t cover you if your truck is in use for your business, and it’s too late to get the right policy in place once something has gone wrong on the road.
Completed operations and the liability you might not see coming
One of the most misinterpreted clauses in construction insurance would have to be completed operations coverage. It’s the protection you have that covers claims which come after you have finished and handed the work over to the client. A retaining wall that begins to show structural flaws eight months after the completion of work, a drainage issue that pops up the next spring – and out come the liability claims long after you thought it was all done and dusted, and you had the check in the bank.
Contractors have been wiped out because they assumed that once a job was signed off that was it, left in the past. And completed operations coverage wasn’t actually a part of general liability insurance, was it? Sure, it more often than not is. However, the indemnity caps and how long the coverage will last for won’t be the same from one policy to another. So, the important thing is to read what yours says.
A Business Owners Policy – a BOP – is a convenient way for smaller outfits to bundle general liability and property coverage in a single package at a fraction of the cost of buying each separately. It isn’t the right solution for every contractor situation, but if you still are in the early stages of building up your risk profile as a contractor it’s certainly one to look into the details of.
Subcontractors are part of your risk profile
When you assign work to subcontractors, the liability of risks accompanying their work is in your hands. The sub might not have the proper policy limits, and if something goes awry, your policy would have to cover the claim. But it’s a problem you can easily avert.
Make sure to have each of your subcontractors present a certificate of insurance, confirm the limits are current and appropriate for the work, and provide you with evidence of their workers’ compensation policy. It’s also common for the subcontractor’s general liability policy to name the contractor as an additional insured. Nothing about this process costs the sub, but it provides you with real coverage.
A straightforward pre-work checklist – certificate on file, limits confirmed, comp verified – may take ten minutes and eliminate a large risk from your coverage.
Safety investment pays back in premium costs
Viewing OSHA compliance as a daunting, costly headache is fair. Required training, written programs you may never look at, and the Q&A nature of all audits – it’s tempting to view it all as “just another thing you have to do.” But compliance with many regulations would need to happen whether OSHA existed or not and its tracking and reducing keeps important numbers down.
