As originally posted in a blog by Builders Mutual
The Ultimate Gamble: Failing to ask for your Sub Contractor's Insurance
Not long ago, general contractors (GCs) would have been hard-pressed to build a house if they required their subcontractors to use fall protection. Subs would simply work for a less stringent GC. Fall protection, although practical, was anything but popular. Nowadays, the unpopular has become the norm. If you stop by a job-site, you will find workers protecting themselves with harnesses, Safety Boot® Guardrail Systems, WallWalkers® and other types of safety equipment.
What is seemingly unpopular these days on the job-site? Requiring subs to have insurance, specifying minimums for limits, and requiring that they periodically provide proof of such coverage. Many GCs have concerns about losing subs if they mandate insurance requirements. Nevertheless, GCs who fail to require their subs to carry adequate insurance open their businesses to great financial risk.
The Dangers of turning a blind eye
What if water damage ruins the recently laid hardwood floors because of the plumber’s mistake? What if the electrician accidentally burns down the nearly completed house? Their limits of insurance will suggest whether the claim will be paid in full or in part, if covered at all. Who pays the difference? “Typically, the GC will be responsible for paying either the difference or covering the loss completely if the sub has no insurance coverage,” states claims expert Ken Bunn. These types of unnecessary risks can be avoided by GCs who clearly specify and enforce insurance requirements for their sub contractors.
At a minimum, subs should have policies for workers’ compensation, general liability, and auto (if they have owned, hired, or non-owned vehicles). More specifically, GCs should ensure that their subs are carrying appropriate minimum limits. Typically, limits of $1 million per occurrence and $2 million aggregate are adequate for general liability.
As a GC, you should work with your agent to determine if your requirements should be higher. Think about the price range of the homes you are building and ask yourself, “How much damage can my subs do?” If you build $2 million homes, then you definitely need your subs to carry higher limits. In your subcontractor agreement, you should require that your company is named as an additional insured on the subs’ general liability policies. For answers to all of your coverage questions, contact your insurance agent in addition to discussing with legal counsel as needed.
Proper Certificate review
How can general contractors be certain their subs carry the recommended insurance? Certificates of Insurance(COIs) offer this peace of mind. If you refuse to pay subs until they provide a COI, you leave your company at considerable risk. Do not let a sub start a job without a COI! Your superintendent should call you or your office to verify that you have a COI on file for all subs before any project begins.
For subs with whom you have long, established relationships, update your records once per year with a new COI 30 days prior to the policy expiration. Make sure you obtain a certificate of insurance for each “project.” This may protect you in case of cancellation of insurance during the project.
For new subs with whom you have just begun working, require a COI before the sub begins. It is best to ask for the COI directly from the agent. Then, every 30-45 days, call the agent of record to verify coverage and request a new COI. Pay close attention to any late notices and notices of policy cancellation you may receive. Follow up immediately to confirm the status of the policy.
When you have the COI in hand, look for a binder or policy number. If you see “TBD” in that field, call the agent (also listed on the COI) to request the actual policy number. Check for the policy expiration date, and be prepared to request another COI prior to expiration. Remember to check for coverage on auto, general liability, and workers’ compensation and be sure the proper limits of coverage are in force. While this might seem overwhelming, there are a variety of vendors available that specialize in helping you manage all of your subcontractor certificates.
Bottomline: don't gamble on insurance
Before long, your subs will not think twice about carrying the insurance you require. Until then, you may be a bit unpopular for specifying insurance requirements, but you will sleep well knowing you have mitigated your company’s financial risks and confirmed coverage is being provided for all who are on the job-site.
Snotherly Insurance offers Contractors Liability Insurance & Workers Compensation for General Contractors as well as their Sub Contractors.
This original article posted by Builders Mutual can be found by clicking here
The small business owner also known as the Facilitator, Leader, Decision Maker, Risk Taker, invoice payer, shall the list of titles continue?
As a business owner one must embrace numerous responsibilities and be prepared to take on roles and tasks which may be essential to running your business. These specific duties will most likely be in addition to and outside of your standard business operations; however, the role of insuring your small business should not be a task that an entrepreneur should forego alone. In fact, failing to choose the most accurate insurance for a small business could result in financial ruins in the event of a loss or claim. Hence, in this post we review 5 advantages small business owners receive by choosing a local insurance agency for their commercial business insurance needs.
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Everyone just loves automated voice answering systems don't they? Especially when an insurance dilemma such as a possible audit, inspection, claim or accident occurs. The advantage of having a local insurance agency for your small business to contact for assistance when these difficulties arise are beneficial for every small business owner. Additional services that a local insurance agency can and may provide for a commercial business policy includes servicing (such as issuing certificates of insurance for vendors, land lords, banks, DMV) monitoring billing and payment activity, and even consulting when changes such as additions or decreases to the policy are needed.
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A business requires a tremendous amount of work, time, stress and focus to run successfully. Any small business owner could risk losing everything by neglecting to purchase the accurate and necessary insurance coverage's. Simply purchasing a policy online directly from an insurance company can be compared to steering a boat into an uncharted waters. It is critical to have an insurance professional available that is responsible as well as reliable in understanding your small business. Additionally, when questions, claims or problems that are insurance related emanate in your small business, entrepreneur's tend to prefer an assigned and approved individual (aka an agent) to resolve the task at hand instead of a random customer service representative (whom may be unfamiliar with the business as well as the business owner) that a direct policy purchase will provide.
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Alongside the service, recommending the accurate protection, and potentially saving your business time and money, most local insurance agencies desire to see their insurance customers thrive. Not only do we as an agency desire for fellow small business owners to grow and be successful in their business ventures, we also strive to support our local business customers when possible. It is not uncommon to find Snotherly Insurance agents dining at our insurance customers restaurants, shopping at their retail stores and even recommending our contracting customers to fellow friends, neighbors and family members whenever possible.
Consider this: Behind the majority of successes can be found a team of professionals available to aid when necessary. Michael Jordan had Phil Jackson, Michael Phelps is coached by Bob Bowman, even Batman had Alfred and Robin. As a business owner it is essential to have a team of trustful and knowledgeable professionals available when needed to aid you in your small business. A local insurance agent whom specializes in commercial business insurance can be a vital key to any business team. Furthermore, the above 5 factors easily illustrate why every commercial business owner should consider purchasing their insurance policy through a local and trusting insurance agency.
So, what next? Before purchasing a policy through a direct carrier, asses these advantages and contact a local insurance agency for your small business insurance needs today.
Snotherly Insurance Agency specializes in Commercial Business Insurance throughout North Carolina including office insurance, restaurant insurance, contractors liability insurance, professional liability insurance and workers compensation.
Snotherly Insurance can be reached at email@example.com for further questions or tips.
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