The 2 Most Common Problems With Contractors Insurance, And How To Fix Them

joetheplumberA lot of contractors run into major issues with their insurance policies after an issue has already begun. Here’s a real life example: Joe the Plumber is working on a job and everything is going well, then suddenly, a pipe ruptures and causes some minor flooding. Joe the Plumber, isn’t really worried about the potential of having to come out of pocket for this accident, that’s what his contractors insurance is for, right? Come to find out, that Joe the Plumber’s insurance carrier has a water damage exclusion on his policy. Therefore, Joe will have to pay for the water damage caused by the accident.

This sounds a little out there, doesn’t it? But it happens more than you think. Here are two of the most common problems with contractors insurance policies, and how to avoid them.

  1. Not having proper endorsements to satisfy insurance requirements

  2. A lot of times contractors will have to depend on an insurance policy to provide them with proper endorsements needed to fulfill insurance requirements needed for a job after the policy is initiated. For example, a roofing contractor may need to provide a general contractor he is working for with a “your work” wording endorsement. If that roofing contractor is insured with a carrier that cannot provide that particular endorsement, he is at risk at losing that potential job. A good insurance broker will lookout for that potential requirement before providing the roofing contractor with a particular insurance proposal. Ensuring that your insurance broker knows the ins and outs of the industry is important. This will in effect save the contractor money from preventing the contractor to starting and paying for a policy that he doesn’t need, and likely, will cancel to reinitiate with the proper endorsements the contractor will need.

  3. Common policy exclusions

  4. A common policy exclusion for a plumbing contractor is the water damage exclusion. Several cut rate insurance carriers that insure plumbers include a water damage exclusion endorsement. A solution to this problem will be providing the plumbing contractor with a proper insurance carrier that does not include a water damage exclusion. The water damage exclusion exclusion prevents the insured contractor from being indemnified by that insurance company for any damage that is caused by water, due to the contractors faulty workmanship. Thus, exposing the contractor to a potential out of pocket payout for that claim. You would think that something like this would never be considered for a plumber, but it happens more than you know. Knowing the exclusions on a policy are really important in making the proper insurance decision. This is why it is so important to work with a broker that you can trust.

Be sure to check your current policy, and make sure that you don’t fall victim to one of these problems. One way of avoiding this is to work with a trusted insurance broker, such as one from Mainline Insurance. An insurance broker works for YOU, not for the insurance company. An insurance broker that specializes in getting insurance for high risk carriers, such as plumbers and roofers, is also a must.