When you’re a contractor, few types of insurance matter as much as general liability insurance. If you’re uninsured and are named in a lawsuit, you could be responsible for your legal fees and any settlement the plaintiff receives. These expenses can be enough to wipe out a small business.
However, you shouldn’t just rush to purchase the first general liability insurance policy you find. Liability insurance is more complex than many people realize, and the best way to protect your company is to choose a policy that’s custom-tailored to you. These are some of the most important things contractors should know about liability insurance:
There Are Different Types of Liability Insurance
First, learn what is meant by “liability insurance.” As a contractor, you will probably need two main types of liability insurance:
-
General Liability: Protects you against bodily injury/property damage claims
-
Professional Liability: Protects you against claims that your work was substandard
Professional liability insurance is often called “errors and omissions” (or E&O) insurance. It protects you if a client claims you made a major error. For instance, suppose that you build a retaining wall for a client. A month later, they claim the wall has collapsed and demand their money back.
If you have E&O insurance, your provider probably will try to negotiate a settlement with the client. If no settlement is reached, your insurer should represent you in court.
Deductibles and Policy Limits Matter
Some people determine what type of insurance they need and then purchase a policy without reading the fine print. Others try to get their monthly premiums as low as possible, so they choose policies with high deductibles and low limits.
There’s nothing wrong with going for an affordable monthly premium. However, it’s usually best to find a balance. The higher your deductible, the more you’ll have to pay out of pocket before your insurance kicks in.
Your insurer will also only pay up to your policy limit. A too-low limit can be problematic when it comes to large claims. For example, suppose that an employee accidentally hits a pedestrian with a work vehicle. The court awards the injured person $400,000 in damages. You have a general liability insurance policy, but your limit is only $300,000. That leaves you on the hook for the remaining $100,000.
The good news is that not all insurers price their plans the same way. If you want a policy with a low deductible and a relatively affordable premium, your insurance agent can help you compare quotes and make a decision.
You Can Personalize Your Liability Coverage
When you purchase liability insurance for your company, you don’t have to be stuck with a “standard” policy. When you work with an independent agent, you can adjust your coverage to fit your specific risk profile. If necessary, you can include additional types of coverage.
For instance, if your company is taking on larger and larger projects, you might start to worry that your current liability insurance policy isn’t enough. In this case, you and your insurance agent might determine that an umbrella policy is the best way to grant yourself superior protection and better peace of mind.
Ready to Choose Your Policy?
The right general liability insurance policy can protect your business from a number of different harms. However, actually selecting one can be challenging.
For three decades, the Hulett Insurance team of independent agents has guided business owners like you through the process of choosing policies. Contact us to get started on your personalized general liability insurance plan today!
