It’s sad but true. Most California Contractors are either overpaying for insurance they do not need or they are paying unnecessary fees. This is true for both Workers Compensation and General Liability Insurance. Why? It’s simple. Most brokers are lazy and simply auto renew their clients without searching out the newest insurance options. Of course, there are always exceptions to the rule.
With our 20+ years of helping contractors navigate their insurance options and our experience serving on the Insurance Committee for the Building Industry Association, we want to share with you some helpful tips and simple guidelines on how to save yourself some time and money and avoid overpaying for your insurance coverage.
As a contractor, it’s important to have the right insurance protection. You can get sued just as easily as any other small business owner, and liability claims can be very expensive. If you don’t have coverage, and a client sues you, you’ll have to pay the costs out of pocket. And that can be enough to potentially put you out of business.
What Does General Liability Business Insurance Cover?
Commercial general liability insurance helps pay for medical expenses and legal costs if an incident at your business leads to a lawsuit.
How Much Does General Liability Insurance Cost?
Companies in higher risk industries pay a higher cost compared to lower risk businesses. For example, construction companies are likely charged a higher rate than consulting companies. Other factors that can affect your insurance cost include your company’s:
- Years of experience in your trade
- Your Company Location
- Company Size
- Insurance claims history
Insurance Buying Tips for Contractors:
1. Don’t call your personal insurance agent for business insurance.
In most cases, your auto and home owner insurance broker will not understand the construction industry and will not have the direct access to the most competitive contractor insurance carriers.
2. Ask your broker what fees will be charged for putting a new policy in place.
NOTE: Typical broker fees can range between $300 to $500
3. Review your need for a “Claims Made” or a “Per Occurrence policy.
Claims Made Policies only cover you if you have the policy while you are insured with that carrier. If a claim comes up after your policy period expires, and you did not renew the insurance, there will be no coverage. Per Occurrence Policies protect you no matter when the claim is actually reported. As an example, if you are an electrician and do work that damages someone’s house but is not noticed for three years, you would be covered under a “Per Occurrence” policy.
4. Ask your broker what the Insurance Rating is of the insurance company they are recommending to you:
Insurance companies are graded by their ability to pay claims and stay in business. The ratings are done by two major companies: AM Best and Standard & Poors. The reason you want to ask about this is that your clients and other contractors you work for may require a specific carrier rating in order for you to work with them. If your insurance company has a bad year, they could go out of business leaving you with no insurance and there may or may not be any refund of premium. In the event you have a big claim, this could be a disaster. We typically recommend that you go with only B rating or higher insurance companies for California.
5. Find out if the insurance carrier being recommended is Admitted or Non-Admitted .
The safest bet is to purchase a policy from an Admitted insurance company in your state. This type of policy means that if the company goes bankrupt that the rest of the companies that are admitted in your state will bail them out and you will have insurance coverage even though your company has gone bankrupt. Essentially, there is almost no risk of you being stuck without insurance if you have paid. A Non-Admitted Company means that the insurance company is not admitted in the state you are buying insurance in and if they go “belly up”, you are left holding the bag. If you have an “A” rated “non-admitted” carrier, they still have very strong financials and the chance of them going bankrupt would be very little.
6. Know your Exclusions.
You will not be covered for any claims that arise out of work that is not listed on your declarations page. This is important. As an example, if you are a carpenter and your client asks you to install a light switch or perhaps fix a small leak under the sink and you make a mistake and the home floods or catches on fire as a result of that switch you installed, you would not be covered. So, the lesson here is to make sure your policy protects you for your Class Code and any other type of work you may do.
Contact A Construction Insurance Advisor Today and Discover why thousands of contractors rely on The Contractors Resource Center for all of their Insurance Needs. CLICK HERE Or, call Kevin at: 530.320.3617.
NOTE: All clients are entitled to Legal Consultations with our Construction Law Attorneys at any time.