NC building and construction contractors – Here’s just what those uninsured subcontractors will do to you and how you can prepare yourself to minimize

It is a fact of life in the construction business. Almost all construction contractors, from the general contractor all the way to the landscape contractor will occasionally have to hire an uninsured subcontractor. There are hidden costs to this arrangement but knowing them in advance can help you prepare for the costs and minimize the damages to your insurance program.

It’s helpful to understand, from the beginning, that insurance companies don’t like for their clients to hire uninsured subcontractors. The reason is that they feel that your control over a subcontractor is much reduced and therefore losses are more likely. If they are uninsured, then the exposure for those losses is pushed on to your insurance company. And that makes you a less attractive risk for your insurance company.

So hiring uninsured subs causes two big problems that can generate increased insurance costs for you. Both are things you can prepare for if you do your homework in advance. And by taking the steps I will outline below, you can possibly reduce the cost to zero for each of these problems. And remember, if you use a subcontractor that is insured, be sure to take the appropriate steps to obtain a valid certificate of insurance. To read more about what you need to know about insurance certificates, please click here.

The first problem that uninsured subs will cause for you is increased insurance premiums on your general liability insurance policy and your workers compensation insurance policy. This is a stealth increase because if you don’t take steps in advance to protect yourself, then by the time you find out how much your subcontractor costs you, the sub may be long gone and your chances or wringing it out of the him or her will be nil. If you are unable to produce a valid certificate of insurance on a subcontractor, then when your policy is audited by the insurance company at the end of the policy term, they will include as payroll, the full amount of cost that you paid to the uninsured subcontractor.

You can defend against this problem by withholding from the amount you pay the uninsured subcontractor an amount equal to or greater than the amount you will be charged by the insurance company at audit. To understand how much to charge, you should contact your agent and find out the rate per $1000 of payroll for the subcontractor’s classification on both workers compensation and general liability insurance. I would suggest that you add an amount over the rates you face to cover your administrative expenses of handling this transaction.

The second problem caused by uninsured contractors has to do with the insurance company’s reaction to finding out you have used them. As I mentioned earlier, insurance companies do not like for their clients to utilize uninsured contractors but their appetite for them will vary. Check with your agent first and find out just what percent of payroll or gross sales paid out to uninsured subs will be tolerated by your insurance company. Some may not tolerate any and still others may be willing to let you go as high as 50%.

It is important to know in advance how high you can go so that you don’t break your insurance company’s rules unknowingly. If they find out on audit that you have been using more uninsured subs than their underwriting guides allow, they may cancel your policy or take away discounts that will result in much higher rates for you. In this case it is better to ask permission first then to ask for forgiveness later.

Remember, when you deal with an uninsured subcontractor you are now allowing them to use your insurance for their risks. Over the long term this is not advisable because they could cause a loss that is so catastrophic it might destroy your ability to get insurance at all, or it may create a high experience modification factor on your workers compensation policy that might cost you a lot of money for the next 3 years. It is always best to deal with subcontractors that have their own insurance.

Clinard Insurance Group, in Winston Salem, NC specializes in helping small contractors of all types all across North Carolina. If you would like a second opinion on your business insurance or if you need help with your general liability policy or your North Carolina workers compensation policy, please feel free to call us, toll free at 877-687-7557 or visit us on the web at http://www.thecontractorshelper.com/.

Homeowners – Before That Contractor Starts Work, Get The Insurance Certificate

At Clinard Insurance Group in Winston Salem, NC, we make it a top priority to help our friends and clients with information that helps them protect their assets. One mistake many homeowners make is to let a contractor begin work at their home without first checking to be sure that this contractor has the right insurance protection for his or her business. There is a quick and easy way to do this and this practice is standard in most business to business (B2B) type transactions.

Before you let that plumber or landscaper or any type of repair worker begin a job at your home, you should first determine that they have insurance protection so that if someone is injured, or your property is damaged, you don’t have to file anything under your homeowners insurance policy. Simply ask them to have a certificate of insurance sent to you. This is a simple task, all the contractor will have to do is ask his insurance agent to email, fax or mail you a copy of this certificate.

Once you receive the certificate of insurance, what then? Well, there are a couple of things you want to look at closely. First of all, make sure that your name and address is .listed in the certificate holder section. And make sure that the certificate came from the contractor’s insurance agent and not from the contractor himself. This will increase the odds for you that the certificate is genuine and that the listed insurance coverage is actually in force. Believe it or not, there is an active market selling fake insurance certificates, I have even seen them for sale on ebay.

These certificates break down the insurance protection by policy type, so there will be a section for General Liability Insurance, Workers Compensation Insurance, Business Auto Insurance and Umbrella Insurance. Next you want to check and be sure that there is a policy number showing in the General Liability Insurance Section and in the section for Workers Compensation Insurance. These are the policy types that will be most important to homeowners..

Once you have verified that your contractor has these two types of policies in place, take a quick look at the limits of coverage. A North Carolina workers compensation policy will pay claims based on the statutory regulations so you won’t really need to worry about the limits there. But in the general liability insurance section, you want to be sure that the amount of coverage showing is high enough to satisfy you. Think about the worst case scenario of damage that this contractor could do to you, your family or your property and make sure there is enough of a limit there to pay for that loss.

Many homeowners just hire contractors to work in their home without giving insurance any thought at all. But some contractors cut corners and may not have enough insurance or any insurance at all. If they cause you a large loss to your health or your property, you may find yourself with no recourse. At Clinard Insurance Group in Winston Salem, NC, we want all of our homeowner clients to be safe from an un-insured contractor. If you have a certificate of insurance and are not sure how to read it, please contact us by calling, toll free 877-687-7557 or visit us on the web at http://www.clinardinsurance.com/ and we will help you understand exactly what the certificate your contractor gave you covers.

The source information for this article was pulled from http://www.insuranceanswerguy.com/.