The 2 Main Benefits Of Contractors Insurance

Do you enjoy paying auto insurance every month? I don’t, but I do because it’s required by law. Sure, I can drive without insurance and risk losing everything because of it, or I can pay my monthly policy and rest assured that in the event of an accident, I am covered. That’s the point of having insurance, it’s to pass risk from you personally, to the insurance provider.

Contractors insurance isn’t any different, here are the 2 main benefits of having a general liability policy:

  1. Being insured is a great way to get more business

  2. Contractors get more business because they will actually qualify to bid on most jobs. Most homeowners and other contractors that sub work also like to have the peace of mind to know that the contractor performing the work is covered in the event of property damage or bodily injury.

    An example would be the following:
    John is a B rated general contractor, and he was awarded a job that requires replacing everything on the second floor of a mall. John will first consult with a general liability attorney to find out what kind of insurance he will demand when subbing work to artisan contractors.
    John will more than likely sub most of the work out to artisan contractors. He will need a plumbing contractor, an electrical contractor, flooring, etc.
    Before John even gets bids from these artisan contractors he will first require that they provide proof of general liability. Once John obtains the policies, they are passed on to his attorney for viewing. If the contractors insurance satisfy the requirements needed, this will then qualify the artisan contractor to submit a bid for work.

  3. Protect yourself in the event you cause property damage or bodily injury while working

  4. Scenario 1: A roofing contractor goes to a residential home to work on a leaky roof. The contractor sets up his ladder, climbs on top of roof, ladder falls and hits the owner in the head. The ladder impacted hard and has knocked the homeowner out. The homeowner is rushed to the ER and his hospital bills come out to $20,000. If the roofing contractor doesn’t have a general liability policy, the roofing contractor will be liable to pay for the homeowner’s hospital bills.

    Scenario 2: Same situation, but the ladder hits the homeowners Mercedes. Damage caused to car is covered by insurance policy. No general liability, no coverage.

    Scenario 3: Plumber is fixing a toilet, but forgets to turn the water off. Ends up causing 20k in water damage. Would be covered, as long as he doesn’t have a water damage exclusion on his current policy.

There are countless scenarios, but the message is clear.

General liability is in place to transfer risk from the general contractor to the insurance company.

Insurance is not required for all contractors in California, but it is a good idea to keep a policy to protect you in the event that something does happen.

If you do not have a general liability policy, allow Mainline Insurance to provide you with a free quote. You can get a fast and free quote by filling out the form here.

Have a Merry Christmas,

Michael Jones

The Shocking Truths About Contractors Insurance Quotes

shocked_faceHow many of your current suppliers do you trust? Were any of them recommended from contractor friends? When we do business with a company, there is a level of trust, we have to develop trust with our customers too. Without trust (experience, previous work, etc), most would buy solely based off of the best price. You might pay some of your suppliers more based on a great level of trust and dependability. You know if you’re in a crunch you can depend that supplier to help you out.

Why would that trust and dependability differ from an insurance broker or insurance company? It doesn’t, yet price is a huge driving factor in determining where a contractor is going to go for a liability policy.

Here are a few truths to think about when you’re looking to get a contractors insurance quote (and yes, they might shock you):

-Most basic quotes do not show policy exclusions.

Why would they? If an insurance company is trying to sell you solely on price then it serves them best not to show you the exclusions until you are ready to sign up with them. More often than not, the pricing is so much better than anything else that a lot of contractors skip over and trust the insurance agent, or broker that is selling the policy. Even if there were exclusions, they would be for obvious, completely non-industry related, right? Wrong.

Here are 2 policy exclusions that are found on plumbers liability insurance policies:

  1. Water damage exclusion – If a plumber is doing work and a leak is caused and goes undetected, water damage may occur. With a water damage exclusion, the insurance company would not cover any of it.
  2. Heating device exclusion – Most plumbers use blow torches to reset pipe and pipe fittings. With a heating device exclusion, the insurance company will not cover any liability that was caused, or somewhat related to a blow torch.

You would think that insurance companies that write plumbers liability policies would not allow, or be allowed to include exclusions like these, but they are.

What Can I Do?

When shopping around for policies, ask what kind of policy exclusions are on the quote provided. If you have an insurance agent, ask the agent to go over your ISO form and over your policy exclusions. If you don’t have an agent, take a look at your policy and look under the exclusions clause in your current policy.

Non-standard carriers use finance companies for payment plans and charge interest

There are multiple parties involved on your current liability policy. They are;

  • Insurance broker: Your point of contact for your policy
  • Insurance agent: Your brokers point of contact for the insurance company
  • Insurance company: The company that is insuring you
  • Finance company: When you pay your deposit, and monthly premiums, you are paying a finance company. You are not paying the insurance company direct (most of the time). Insurance companies get paid in full for your premium by the finance company, then the finance company charges you interest. The finance company can cancel your policy based solely on non-payment.
  • There you have it. Don’t let price be the single driving force when it comes to getting general liability. Work with an insurance broker that you trust. The insurance broker does not work for the insurance company, they work for you.

    Ready to work someone you can trust? Fill out our quote request form or give us a call today at (888) 467-6612.

7 Contractors Insurance Facts You Need To Know

snake-oil-contractor-salesmanChances are you have been swindled in the past by a smooth talking salesman, heck I know I have. When we are talking to someone about there products or services they usually always have nothing but great things to say. They’re sales reps, right? Sometimes reps tell us things that are not necessarily true, contractors insurance is not any different. Just last week I was talking to a new customer who had been duped by his previous insurance provider. He had a some exclusions on his policy that made the policy arbitrarily pointless. His wife, also the company bookkeeper, was going through documents and found the issues. In this situation it kind of worked out, since he didn’t have a claim to file. Situations like this happen all the time, most of the time these issues come up when a contractor tries to file a claim.

Here are 7 facts that you need to know about contractors insurance:

  1. Deposits are non-refundable

    When purchasing contractors insurance, a deposit of 30-40% of the total annual policy premium is due on signing. Sometimes contractors think that the deposit is refundable, as long as they cancel the policy prematurely. If you were to cancel your policy the following month after signing up, you would not be entitled to a deposit refund, even partial.

  2. General liability does not cover poor workmanship

    Liability insurance is third party coverage. We had one client who installed a bamboo floor in a home, and the contractor didn’t leave any space in-between the walls and the flooring. When the room heated up, naturally due to weather, the flooring buckled in the middle due to this no breathing room for the flooring. The customer called the contractor to get the flooring redone at no charge, and the contractor called us to file a claim with the insurance provider. The claim was not cheap, $80,000 to be exact, and the contractor was not covered because he should have known the flooring would need breathing room. The lesson in this is to know your trade, and don’t assume that an insurance company will cover poor workmanship. You’re general liability should cover you on what is not listed on your exclusions list. Anything that is not excluded and within the scope of operations should be covered.

  3. Be honest with numbers because audits and inspections DO happen

    Audits usually happen at the end of the year. If you were not truthful in your gross receipts, and payroll when you obtained your contractors insurance, you will end up paying the difference when the audit happens. Typically, 2 weeks after the policy is written an inspector calls to verify the information you provided for your policy, then 2 weeks after the policy expires an inspection will be due.

  4. Protect yourself by requiring all subcontractors to be insured because their work is NOT covered

    On the majority of general liability policies subcontractors are not covered on the primarily insurance holder (you). If you are working with a sub, make sure that they have their own policy, and make sure the policy they carry doesn’t contain any exclusions that are out of the norm.

  5. Policies are on an annual basis

    Typical workers compensation, and general liability policies are on an annual basis. There are exceptions with your builders risk/course of construction (COC), and excess/umbrella policies that may be written. A policy that has an exception would be a wrap/owner controlled insurance policy (OCIP)

  6. Short term coverage or project specific policies are NOT available

    Standard policies are not available on short term basis because insurance companies don’t want to expose themselves to that much risk. This is also why insurance companies ask for 30-40% of the total annual policy premium up front.

  7. Any and all contractors license bonds, bid bonds, performance and payment bonds, and completion bonds are based on credit

    It’s better to understand what these types of bonds are:
    Contractors License Bonds: In place in case a contractor doesn’t fulfill contract. The better the credit score of the contractor, the less he will have to pay for a contractors license bond.
    Bid bonds – Help you bid on jobs. Based on not only credit, but current assets and prior work history.
    Performance and payment bonds – Once the job is awarded, the performance and payment bond will already be approved. This is caused because all of fact checking is done prior during the bid bond application process.
    Completion bonds – Process is the same as performance and payment bonds. Once the job has been awarded, the completion bond is provided, requiring usually a simple review.

Hopefully this information helps you when you are renewing a policy or are currently in the market for a new one. As always, we offer free quotes.

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.

4 Huge Mistakes Contractors Make When Getting Contractors Insurance

Contractors Insurance MistakesWe get calls from contractors every month that are extremely frustrated with their current contractors insurance provider because of a mistake the contractor made when getting insurance. They have to cancel the current policy they have, and obtain new coverage that meets the needs of the job they are bidding on. Now, not all of the 4 mistakes below are because of smoke and mirror tactics from insurance providers, though some of them are. A lot of the time contractors themselves don’t provide all of the information needed.

  1. Purchasing coverage just because it’s the cheapest

  2. What happens, more often than not, it doesn’t meet job requirements. Often times the requirements for specific jobs contracted call for a certain endorsement or an A rating. You will more than likely have to cancel your current policy and obtain new coverage to meet the requirements for the job. You will also lose out on all of the money spent on the policy that you couldn’t even use. In the long run, buying the cheapest insurance will cost you more. Cheaper policies also tend to not cover certain needs.

  3. Shopping with more than one broker

  4. Many contractors do not understand that the first agent to submit an app to an insurance company is the agent that receives the quote. Submitting more than one app to an insurance company can have negative effects on the quote. It’s best to find a trustworthy, hardworking agent that allow them to shop with all of the Insurance carriers for you, they are professionals.

  5. Not being honest when providing company payroll/receipts/operations

  6. Insurance companies do audits. If you do not provide all real figures from the get go, it will blow up in a contractors face in the future. In the event that an insurance company does an audit and finds false numbers, the insurance company will do any of the following; will bill you for the additional audit premium from the year in relation to the audit, cancel your renewal policy, or send you to collections if you are unwilling to pay the difference in back premiums.
    If you are honest with your broker at the beginning, the broker can get you discounts, or find a better program for you, even if your payroll/receipts are higher than the minimum premium.

  7. Not understanding the policy they will purchase(exclusions, limitations)

  8. A lot of the time contractors will rely on brand names or price to make there purchasing decision. Understanding the form is… an ISO Form is a preferable form of insurance policy compared to a manuscript form. An ISO Form generally adheres to the insurance industry standard, whereas a manuscript form is “manually scripted” by that particular insurance carrier. What that leads for room for is potential insurance qualifications and standards that cannot be met if and when a contractor is attempting to satisfy insurance requirements to insure a job. Simply put, make sure your broker fully understands what your intentions are for your insurance form to properly fit your insurance needs.

How do you avoid these 4 mistakes? Work with an insurance broker! The more info you can give an insurance broker, the better results they can give you. The broker works for you, so let them work for you. WE don’t work for the insurance company, we work for our contractors.

What is a surety bond?

A surety bond is a promise by a bonding company to pay all or a portion of an arbitration award in the event a contractor fails to pay the order. The purpose of the bond is consumer protection. A property owner can file a complaint against a contractor’s bond for breach of contract or improper work. If the state licensing board orders a contractor to pay money to the complainant, the contractor must pay as ordered. If the contractor does not do so, the bonding company will pay the money owed up to the amount of the bond. The California State Licensing Board requires contractors to carry surety bonds. The amount of the bond is determined by the contractor’s license endorsement.

What does general liability insurance cover?

General liability insurance covers claims of bodily injury or other physical injury or property damage. In the event of a covered lawsuit, such policies will typically pay for a legal defense as well as compensatory, general and punitive damages. A typical general liability insurance policy covers:

  • Bodily injury and property damage liability: If a visitor is injured on your premises, or you or your employee injures some or damages property on your client’s premises.
  • Personal and advertising injury: Certain offenses you or your employees commit in the course of your business, such as libel, slander, disparagement or advertising copyright infringement.
  • Medical expenses: Applicable medical costs if someone is injured and needs medical treatment due to an accident on your premises.
  • Premises and operations liability: Bodily injury and property damage sustained by others at your premises or as a result of your business operations.
  • Tenant’s liability: Claims of damage due to fire or other covered losses caused by you to premises that you rent.

Please note that this list includes typical coverages afforded under some policies. Be sure to examine your own policy carefully for any exclusions, limitations, or any other terms or conditions that may affect your coverage. The terms and conditions of your policy will prevail.

What is the definition of a Sunset clause in Commercial General Liability policy?

This type of clause is a provision in a general liability policy which states that the insurer will respond only to losses reported before some predetermined future date (sunset), usually a set period after the expiration of the policy.
So let’s say your GL policy was effective 4/1/13 and expires 4/1/14, and has a 2-year “sunset clause”.
Any claim made against the policy has to have “occurred” during the policy period and must be “made” no later than 4/1/2016 So if a “latent” defect on work performed sometime within the year: 4/1/13 to 4/1/14 is not discovered until April 2, 2016 (2 years and 1 day after expiration) or later, there will be NO coverage under the policy.

What is the significance of and insurance company’s A.M. Best rating?

For insurance companies, their financial strength rating is a strategic tool that can enhance consumers’ confidence in the organization’s financial stability, as well as its attractiveness to investors. A rating also enhances an insurer’s credibility with reinsurers – a valuable resource, particularly for insurers entering new markets.
Insurance professionals depend on a Best’s financial strength rating to assess the creditworthiness of an insurer’s operations, to evaluate prospective reinsurance accounts, to compare company performance and financial condition, and more. A rating can influence an agent’s selection of plans to market.
The rating scale and descriptors are:

Secure

  • A++, A+ (superior)
  • A, A- (excellent)
  • B++, B+ (good)

Vulnerable

  • B, B- (fair)
  • C++, C+ (marginal)
  • C, C- (weak)
  • D (poor)
  • E (under regulatory supervision)
  • F (in liquidation)
  • S (suspended)

What is the difference between a California admitted carrier and a non-admitted carrier?

From an insured’s point of view, an “admitted” carrier means that if you think the company has treated you unfairly, or cancelled your policy unjustly, you can submit a complaint to your state insurance department and have them review it, and possibly remedy the problem. It also means the insurance company’s rates are determined by the state and cannot be negotiated. Non-admitted carriers have more flexibility with both policy terms and pricing, so there are coverages that you can get through a non-admitted company that you can’t find through an admitted company. Lloyd’s of London, the first organized insurance company is a non-admitted carrier.

When you are speaking to your contractors insurance agent, be sure to ask if they are an admitted carrier or a non admitted carrier. The answer they give you could end up saving you a bundle!