Workers Compensation Insurance – What About Your Safety Program

Workers compensation insurance for many industries, especially those in construction such as painting contractors, HVAC companies, electricians, landscapers and plumbers just to name a few, can be a huge piece of the insurance budget. In addition, with workers compensation insurance in NC, your policy is experience rated, which means your losses follow you around for years and add to the cost of your particular policy. So why don’t more contractors embrace safety training?

The answer of course is complicated but one of the biggest reason you see so little safety training in the small contractor’s world is that either the contractor doesn’t understand how much it can impact his bottom line, or if he does, he just doesn’t know where to start. This is where company selection can be crucial to the small contractor. There are some companies out there that specialize in workers compensation insurance and don’t deal in any other types of policies. One of the advantages of using these types of companies is that often they will provide you with lots of safety training tools for free.

These tools can range from helping you meet posting requirements in your shop to advice and help with safety services and even helping you develop and create a true, on the job safety training program for all of your employees. One example of a company that does this very well is Summit Insurance. Take a quick look at the offerings that they have on their web site by clicking here. You can see that they are fully engaged with their clients to help them find ways to reduce accidents and downtime associated with injuries.

Let’s face it, when you have a workers comp claim it will cost you money on your policy eventually. But more importantly, think of the immediate costs of stopping work to get your injured employee to the doctor and the downtime associated with waiting on an employee to get back to work. A large percent of accidents that occur on construction sites are preventable with better education and better rules enforcement. If you are already spending money on a work comp policy, you should ask yourself what your insurance company is doing to help you reduce and prevent accidents. Remember, there is much more to the workers compensation policy than just the rate, or the bottom line price. As you can see, there are huge hidden costs in the process and you need to hire a workers comp company that will help you manage those huge hidden costs.

Clinard Insurance Group is a NC insurance agent who specializes in helping small contractors and construction trades all across North Carolina. We understand your difficulties and we speak your language. We have developed specialty programs for all different types of small contractor groups including a landscapers insurance program, and electricians’ insurance program, a special insurance program for painters, an HVAC insurance program, a plumbers insurance program and many others. If you need help with your business insurance, please call us toll free at 877-687-7557 or visit us on the web at www.thecontractorshelper.com.

This article was pulled and written from source information, all of which may be found in its entirety at www.InsuranceAnswerGuy.com.

Construction and Building Contractors – How should you define an Independent Contractor?

It’s really the nature of the business in construction. Whether you are a brick mason, a carpenter, a painter, a plumber, or even a landscaper, from time to time you will find yourself in the position of needing to hire a subcontractor. But how you define an independent contractor and the way the law and the insurance industry define this term might be very different. It is important for you to get this right, not only for your workers compensation and general liability insurance, but also for the protection of your business and perhaps your personal assets. And here is a clue – you don’t get yourself off the hook simply by providing a 1099 instead of a W2.

It is very important that you handle the interaction of your general liability insurance policy and your workers compensation insurance policy with your subcontractors. I have covered strategies of this type in previous blogs, whether it be the impact on your insurance audits, or the increased risks that subcontractors add to your business. This article is not intended to tackle those areas. Instead, here I want to really focus on the definition of an independent contractor so that you don’t make the mistake of treating an employee as an independent contractor and increase your business risks as a result.

While there is no clear basis for making the determination of who is an employee and who is an independent contractor in the eyes of the law, here are a few relevant factors that you should consider.

Who sets the hours of work? If the employer does, then it is more likely that the worker will be determined to be an employee. Does the employer provide training for the job? If so, this points more to an employer/employee relationship. Is the worker paid by the job, or paid by the hour. Hourly workers are much more likely to be viewed as employees. Can the person work for more than one firm at a time? If not, perhaps they are really an employee. Who furnishes the tools or materials needed for the job? If it is your company, then you may be dealing with an employee, rather than an independent contractor. Is the work part of the regular business of the employer? This one seems a bit vague but if you are hiring people to do the regular and usual work of your company, then they are most likely employees.

At Clinard Insurance Group, in Winston Salem, NC, we specialize in helping all types of construction contractors with their general liability insurance, workers compensation insurance and all other business insurance needs. We want our contractors to be informed consumer and help them run their business using best practices that help reduce risks to their assets. If you are in the construction business and would like help with your business insurance needs, please visit us on the web at www.TheContractorsHelper.com, or call us, toll free at 877-687-7557.

The source information for this article was drawn from articles which can be found at www.InsuranceAnswerGuy.com.

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/.

Contractors – 5 Tips For Getting The Best Audit Outcome On Your General Liability And Workers Compensation Insurance Policies

All building contractors working in North Carolina who carry either a NC general liability insurance policy or a NC workers compensation insurance policy, or both, probably know that these insurance policies are subject to an annual audit. What few contractors understand is that they have the power to stack the deck in their favor when it comes to that audit. And since some of the audit process is subjective, this can mean money in your pocket if you are a building contractor. Here are 5 tips that will put you on the road to more successful insurance audits.

Let me start by emphasizing that insurance auditors are people just like any other. If you grease the path for them and make their job easier, then they are much more likely to cut you some slack in the audit process and this can end up saving you a lot of money. So, what are those 5 tips?

Tip # 1 – Have Those Insurance Certificates Ready. I just can’t preach this enough. Do not allow any subcontractors on to your job site until they have provided you with a current certificate of insurance. And more than that, be sure that the limits on their general liability insurance policy are at least equal to your own policy limits. And if you have a workers compensation policy, make sure that their certificate shows that they have one as well. Last of all, check the policy dates on the certificate to be sure that they are current and active. If any policies will run out while these subs are still on the job, make sure that you also obtain an updated certificate. Put copies of all of these certs in your audit file. If the auditor shows up at your office and you don’t have your certs ready, he will charge you for the subcontractor payroll and leave it up to you to fix it later. And usually, fixing it later takes a lot more of your time.

Tip #2 – Take Some Time To Study Your Classifications. First of all, take the time with your agent to understand all of the classifications on your general liability insurance policy and your workers compensation insurance policy. Make sure that you understand the nuances of each class code and that your policy is set up accurately. If you are going to fudge the gray area between two similar classifications, understand that you might not get it past the auditor and you should have funds ready should you fail.

Tip #3 - Have The Audit Done and Ready To Hand Over. Once you have done your homework on your classifications, set up a spreadsheet to dump the payroll for each employee each week into the correct classification. You will want to keep a spreadsheet for both the workers compensation and the general liability policies. If you have done this correctly, you will be able to hand that spreadsheet over to the auditor and essentially all of the auditor’s work is done. This is more likely to keep them from digging around in your books to find new problems to share with the underwriters that can cost you in increased premiums.

Tip #4 - Keep The Overtime Payroll Separate. The NC workers compensation insurance policy allows you to avoid paying premiums on the extra overtime pay. But, to keep from paying work comp rates on this payroll, you must have it segregated. I suggest that you add a column on the work comp spreadsheet that you are keeping to show the amount of payroll that is overtime bonus and deduct it from the total payroll for each classification.

Tip #5 - Always Schedule the Audit for Friday Afternoons. This one may sound a little goofy but it works. If the auditor shows up at your office on Friday afternoon, and you can put all the information in his hands with up to date spreadsheets and copies of all subcontractor certificates, then he is more likely to accept your figures and get on home for the weekend. The less time he spends digging around in your books and your operations, the less likely he is to find a surprise that the underwriter doesn’t like which means higher insurance costs for you.

At Clinard Insurance Group, in Winston Salem, NC, we specialize in helping all kinds of contractors with their insurance needs, from general liability insurance and workers compensation insurance to commercial auto insurance and equipment insurance. If you would like help with your commercial insurance program, please feel free to call us, toll free at 877-687-7557 or visit us on the web at www.thecontractorshelper.com.

The information for this article was pulled from source information found at www.insuranceanswerguy.com.

Contractors – Prepare For The Impact Of Your Uninsured Subcontractors

Uninsured subcontractors are often just a necessary evil in some types of construction jobs. But if you are the contractor who is hiring extra help, and this help is uninsured, you should know what you need to do on the front end to be sure that this cheap labor option doesn’t turn out to be the most expensive help you’ve ever hired. Understanding exactly how uninsured subs will affect your general liability insurance policy and your workers compensation insurance policy is key to reducing your risks and your costs. At Clinard Insurance Group in Winston Salem NC, we specialize in helping all kinds of contractors with their construction insurance policies. And we want to make sure that all of our insurance clients avoid the nasty surprises that often come along with hiring uninsured subcontractors.

There are really three ways that the subcontractors that you hire that have no insurance policies in force can hurt you. The first is the classification audit trap. The second is the insurance coverage punch, and the third is the out of control large loss problem. Let’s take them one at a time.

First up is the classification audit trap. Two of the main insurance policies for contractors are the general liability policy and the workers compensation policy. The North Carolina general liability policy and the North Carolina work comp policy both compute the premium due by using payroll as the rating basis. If you hire a subcontractor to work for you, you can provide a certificate of insurance for that subcontractor and anything that you have paid that subcontractor will not be charged against you as payroll at the end of your policy term when the policy is audited by the insurance company. Likewise, if you can’t provide a certificate of insurance for that sub, then you are going to have to add the entire job cost paid out to that sub as payroll. You can protect yourself against this going in by withholding an amount for insurance from the payment you make to the sub. But, beware, the general liability policy and the workers compensation policy both have different rates for different kinds of work. If you are a carpenter and you hire a roofing contractor to work for you to do roofing work, you won’t be protected from the audit trap by using the rate shown on your policy. That’s because the rate for the roofer is much higher than that for a carpenter. If you are unsure of what to withhold, either demand that your sub get insurance, or call your agent to find out what the correct amount per $100 of payroll should be withheld. As you can see, this is a tricky business and if you don’t pay attention to the details and do your homework, you will get burned and will be overpaying for your general liability and workers compensation policies.

Now let’s take a quick look at the insurance coverage punch. Hiring an uninsured subcontractor is a big no no from the insurance company underwriter’s viewpoint. This is because the underwriter immediately assumes that you don’t have the same control over a subcontractor that you do over your own employees. This means that losses are more likely from an uninsured subcontractor. The underwriter will view your uninsured subs as big liabilities that make you a less attractive risk to the insurance company. This means that when your audit comes in with uninsured subs listed, the underwriter will be less generous with discounts and you may actually see your rates go up for all of your insurance policies from you commercial auto to your general liability to your workers compensation policy. Once again the real message to you is that you should not hire uninsured subs.

Last of all, we have the out of control large loss problem. While you might want to argue against it, statistically is it true that you have less control over your subcontractors. And that not only means that they are more likely to cause losses on your policies, it also means that they are more likely to generate losses which are not covered by your policy. Does your policy have an exclusion for the type of work they are doing? Will the losses they cause exceed your coverage limit? The answer to both of these questions could well be yes. Ask yourself why your uninsured subs don’t have insurance protection. Is it because they are deemed uninsurable by underwriters? If so, why are you letting them have a free ride on your policy at the risk of damaging your ability to purchase insurance in the future?

The truth is that hiring an uninsured contractor to work on your projects is risky and in some cases just plain costly. If you can avoid this type of practice you will be better off from and insurance standpoint every time. At Clinard Insurance Group in Winston Salem, NC, we work hard to make sure that our contractors understand the ins and outs of their policies and the best practices they should put in place. If you have any questions about workers compensation insurance, general liability insurance or any other business insurance policy, please feel free to call us, toll free, at 877-687-7557 or visit us on the web at http://www.ClinardInsurance.com.

The source information for this article was drawn from the informative blogs at www.insuranceanswerguy.com

Contractors – Don’t Forget Those General Liability Insurance Certificates

I work with contractors every day, helping them with their general liability and workers compensation insurance policies and I am struck by how many of them have heard of insurance certificates but how few really understand why they need them. If you have anyone working on your job site without first having given you a certificate of insurance, you are probably increasing both your insurance costs and your liability exposure. Here is a quick guide on what you need and why you need it when it comes to certificates of insurance.

As you probably know, your general liability and workers compensation policies are both rated based on the payroll your contracting business generates each year. And if you don’t know it already, you will soon: That payroll is audited each year and your insurance policy premium is adjusted to reflect the actual payroll you incurred that year. So, the last thing you want to do is have that payroll number inflated by a subcontractor that you hired to help you out with a job that was a little bit outside of your specialty.

Let’s take an example. Let’s say you are a carpenter. You are hired to handle a kitchen remodeling job for one of your clients. In the process there is some minor plumbing work to be done and to help out your client, you find the plumber and just sub the work to him and you bill your client for his services. That’s all good business but you must remember to get that certificate of insurance from you plumber before he sets foot on your job site. Why? Two reasons really.

First of all, that certificate of insurance will tell your insurance company that your subcontractor (in this case the plumber) did have insurance so the cost of the plumbing work won’t be added to your total payroll at audit time. This will save you a lot of money in insurance premiums.

Secondly, you can take a moment to make sure that this plumber has the correct coverages with high enough limits to protect you. Look at the certificate carefully and make sure that your subcontractors are carrying limits at least as high as yours. Next, make sure that the certificate is showing both workers compensation and general liability insurance coverage. If not, you will be on the hook for the premiums for the missing insurance policies for your sub contractor. Last of all, take a moment to make sure that there are no exclusions or policy coverage limitations spelled out in the certificate. If your subcontractor has an excluded coverage and your policy covers it, you might find yourself on the hook for extra premium at audit time.

Many contractors remember to ask for certificates from the other contractors working on their job site. But a large number don’t take the time to read the certificate and check to make sure that it meets all the criteria they need to protect themselves from an extra premium at audit or a large loss charged to their own policy. If you are a small contractor and would like help understanding your insurance certificate or your insurance coverage, be sure that you are dealing with an agent who specializes in contractors liability and workers compensation insurance policies. At Clinard Insurance Group in Winston Salem, NC, we insure many, many artisan contractors all of North Carolina and we can help you understand how to set up your policy correctly and keep your insurance audit premium surprises to a minimum. Feel free to call us for help, toll free at 877-687-7557 or visit us on the web at http://www.clinardinsurance.com/.

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

What Would You Do With An Extra $343 In Your Pocket?

Our research indicates that on average we save our new clients $343 on each policy that that bring to us when they switch from their current insurance company. We specialize in helping people with their home insurance and their car insurance of course, but we also help small contractors and small businesses with their general liability and workers compensation insurance as well as helping automotive repair shops and used car dealers with their garage insurance. So we got to thinking. What will all of these clients of our do with the $343 that they each saved?

Here are a few ideas. Let’s say you are a gadget person. You could get yourself a new iphone and still have about $40 left over for dinner. Of course you would use one of those tricky new iphone apps to pick out the restaurant you want to visit. Already have an iphone? Well besides oozing with cachet, you could now purchase about 150 or so cool apps for your phone.

Not into electronic gadgets? I know, you can visit your nearby retail clothing store and pick out 4 or 5 tops and 4 or 5 cool pants or skirts to go with them. And still have a little money in your pocket to share with those pesky teenagers of yours.

Are you a golfer? Well if so, you could purchase 11 dozen Calloway golf balls with your personal name engraved on each one. I’m a terrible golfer and lose balls on every outing but that would last someone like me a couple of years! And hey, if you do play golf, don’t forget to up your liability on your homeowners policy in case one of those golf balls hits someone as it careens out of bounds.

At Clinard Insurance Group in Winston Salem, NC, we work hard to provide all of our clients with the very best insurance coverage at rates that give them a chance to spend some money on things that they enjoy. We know paying for insurance is unpleasant and we want to do our best to make sure that you have the protection you want and need without overpaying for it. If you would like top notch, professional advice with no fee at all, give us a call at 888-787-6557 or visit us online at www.clinardinsurance.com.

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

What Happened to the Grace Period On My Insurance Policy?

Over the years at Clinard Insurance Group, helping people with their insurance needs, I have heard this question many times. It doesn’t matter if they are talking about auto insurance, home insurance, general liability insurance or workers compensation insurance, people still assume that there is some magical grace period that allows them to pay their insurance payment after the due date. I’m not sure exactly where the terminology comes from but I think I have an idea where the concept arose.

In NC, if you don’t pay your insurance policy when it is due, then the insurance company cannot just cancel your policy that day. The law requires that they give you a legal notice of cancellation. The time frame for this notice varies by policy type but it is generally around 15 days. So, if your policy is due on the 5th of the month and you don’t pay the bill on time, then somewhere around the 10th of the month or so, the insurance company will send out a notice of cancellation on your policy. This notifies you that if your money is not received by a certain date (here is the legal notice time frame), then your coverage under that policy will cease.

I think this notice period is what has led some people to believe that there is a “grace period” which allows them to pay their premiums after the due date. But paying late and relying on this legal notice time frame is a dangerous practice for several reasons.

First of all, the insurance company doesn’t have to accept your money after the due date and they can let the cancellation stand. If you have had a loss during this time, you might not even be protected since in some cases (particularly on policy renewal dates) the notice of cancellation states that the effective date for when protection ends is the same as the original payment due date.

Secondly, there is a growing trend among insurance companies to charge hefty fees for payments that are late. Some companies charge as much as $35 to reinstate your policy after a cancellation notice has been issued. These changes tell me that the insurance industry has decided that as times are hard and people are letting some bills slip a bit, they want to be first in line. So if you are having some cash flow issues and think you might want to pay your insurance bill a little late, be sure that you understand all of the late penalties and fees that will apply. You might choose to prioritize the insurance bill closer to the top of the pile.

There is a sure fire solution to prevent a late payment on your insurance policy and thus prevent lapses in protection and costly late fees. Most all insurance companies can now take your payment on a monthly bank draft. This means that they will draft the money from your checking or savings account on the due date automatically. Of course this will fail if there is not enough money in the account to pay the bill, but for protection from forgetting or misplacing an insurance bill, this one could save you a lot of money. At Clinard Insurance Group in Winston Salem, NC we try and make this option available to any an all of our clients who might be interested. If you would like to know more about the specific fees your company charges for late payments, or if you would like to have your policy set up on bank draft, please call our office at 877-687-7557 or visit us on the web at www.clinardinsurance.com.

The source information for this article was drawn from www.insuranceguy.com.

The General Liability and Workers Compensation Insurance Policy Audit Trap – A Cash Flow Disaster

If you are business owner or the manager of a business, then you probably have some working knowledge about general liability insurance and workers compensation insurance. At Clinard Insurance Group in Winston Salem, NC, we specialize in insuring contractors and other small businesses who need these types of policies. And we have found time and again how many small businesses are seduced into the cash flow nightmare I call “the audit trap”.

For most contractors, their general liability and workers compensation insurance policies are rated based on payroll, and in some cases gross receipts as well. Since the exact amount of payroll or receipts is unknown to the insurance company when the policy is first written, the policy holder has to give the insurance company an estimate of the total payroll for the coming policy year. Many contractors and small businesses are tempted to “low ball” this estimate to reduce the total premium on their policy. While this strategy can work well if the company plans ahead for it, just shooting in the dark with low estimates can create a cash flow disaster.

Here’s why. Let’s say your actual payroll on for your company is $500,000 per year. And let’s also assume your general liability rate is $5 per $1000 of payroll. This means your policy costs would be $2500. Now let’s assume you start your policy with a low ball estimate of $250,000. This means your new policy is issued at a cost of $1250 instead of $2500. Looks pretty good so far. But now jump ahead 15 months and the insurance company has now performed an audit of your payroll and found that your actual payroll during that policy term was $500,000. So they send you a bill for the additional premium due of $1250. Now that wasn’t really unexpected, but if you didn’t budget for this, it could put a crimp in your cash flow. But here’s the kicker. The insurance company will now increase the payroll on your renewal policy and send you another bill for $1250 due right away. Suddenly you have to come up with $2500 to square yourself with the insurance company. And that can make for a real cash flow problem.

Again, if you plan for the audit and reserve funds to make the payment then you can gain a cash flow “float” advantage by low balling your payroll and gross receipts estimates. But more often than not, the business owner fails to implement a plan to reserve these funds and instead faces a cash flow crunch at audit time.

At Clinard Insurance Group in Winston Salem, NC, we specialize in insuring small contractors located all over the state of NC. If you would like help with your general liability or workers compensation policy, please give us a call, toll free at 877-687-7557 or visit us on the web at http://www.clinardinsurance.com/.

Source material for this article was taken from the site: http://www.insuranceanswerguy.com/.

Contractors: 4 Key Tips To Consider When Buying General Liability Insurance

General liability insurance is one of the first types of policies you will need if you are starting a new business. At Clinard Insurance we are seeing many new small business startups. Starting your own company is popular these days with the layoffs we are seeing in our economy. The best choice is often to pursue something that you love doing and so we are seeing lots of people starting new businesses around their building skills. But just because you love to build things doesn’t mean you know the best way to protect yourself and your company from lawsuits.

Here are some tips for pitfalls that you should avoid when buying general liability insurance.

Choosing the right agent. The first place people generally go for their business insurance is the insurance agency that handles their home and auto insurance. In some cases this will work out well. But the risk is that your current agent may be licensed to sell you general liability insurance on your new company while really possessing very little experience in evaluating the hazards and risks of your specific type of company. I would suggest that you go out there and look for an agent that specializes in insuring other small businesses like yours. Ask your competitors who they used. At Clinard Insurance we have a niche specialty in small contractors and we speak their language and understand their needs. If your agent doesn’t specialize in your business, I suggest you find one who does.

Claims Made or Occurrence Policy Type: Construction claims made policies became popular in the mid 1980’s and have been around ever since. The promise of these policies were lower rates, but at what long-term damage? In some instances there is no cost savings. Claims made polices for a contractor are the worst possible policy you can buy. Let me explain: Claims made policies allow you to make claim on your policy only during the year they are in force. Contractors have claims down the road, not always just in the same year as the project is built!

Also, if you want to leave that company and go to another company, you will have to purchase additional insurance to cover you for the next 10 years… that’s right, 10 years! Why? Because the law allows customers to file a lawsuit for construction problems for up to 10 years after the project was completed.

An Example:
You build a new room addition, everything goes well and you and your customer are very happy with the final outcome… 4 years later your customer calls you and says that the roof is leaking and water came in the house and ruined his new $25,000 grand piano. He expects you to repair the roof, the drywall, wallpaper, carpets and, of course, replace the grand piano….

A claims made policy will not allow you file a claim 4 years later unless you stayed with that same company the whole time. If you intend to change companies after you have had a claims made policy, you must make a decision. If you want to have protection for any claims that have not occurred yet, but will in the future, you will have to purchase “tail” coverage. This coverage will extend the time in which you can file a claim. And tail coverage is not cheap.

If you decide not to buy the “tail” you will not be able to report a claim against the claims made policy. And to make matters worse, some companies do not offer the 10 year extension.

So…. When your claims made policy comes up for renewal, you must decide:

Ø Do I leave the company and pay the additional insurance for coverage for the next 10 years, or go without protection.
Ø Do I stay with the same company? Their prices on the new year may stay the same or go up sharply.
Ø Do I switch to another company who has better rates and coverages?


This limits the marketplace for you, and makes it harder to accept a better bid from another insurance company. Claims made policies may work in other industries, but for Contractors they are a disaster. Take time after reading this report to see if your current policy is either an occurrence form or a claims made form…..

Insurance Company Rating It is up to you to do the due diligence and ask your agent about the financial health of the company from whom you are buying your general liability insurance. As the previous tip implied, sometimes the claims may be very much delayed and you need to know that your company can pay a claim for you 10 years from now. Use only A rated or higher insurance companies to protect your business.

Exclusions, Understand Them Clearly Be sure to take the time to ask your agent about the policy exclusions and what they may mean for you. Here are some exclusions that contractors should consider when purchasing a general liability insurance policy:
Pesticide, Herbicide and Fungicide Exclusion, Employment Practices Liability Exclusion, X.C.U exclusion, Contractors Warranty Exclusion, Professional Liability Exclusion, Asbestos, Independent Contractors. If you don’t know exactly what these mean for you on your policy, contact your agent and get the help you need to understand it clearly. This may change the way you run your business.

Subcontractors Be sure that you understand just how your policy treats subcontractors. Are you covered if they have no insurance or not enough for the loss? How much coverage should you require of your subcontractors? How often should you obtain certificates of insurance? How can you be sure that the certificate of insurance is legitimate. (I have seen fraudulent certs for sale on ebay before). If you are not clear about the answers to these questions vis-à-vis your business and your general liability policy, you should call your agent right away and get the answers you need to sleep well at night.

As you can see buying general liability insurance is not a simple as calling your agent and asking for a quote. You need an experienced professional that understands the policy forms and your business. At Clinard Insurance we specialize in helping small contractors navigate the dangerous waters of the insurance world. If we can help you further, or if you would like more information about Clinard Insurance Group, please visit our web site.

Source information for this article was pulled from the Insurance Answer Guy.