Contractors: Do You Know Your Minimum Insurance Requirements?

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Contractors: Do You Know Your Minimum Insurance Requirements?
The construction industry is a thriving field that is in the middle of a huge boom in opportunity. Growth is expected to steadily rise over the next few years and cities like Portland and Phoenix are opening up to population growth due in part to the construction industry. But while this is great news for industry leaders and those who work in the space daily, it also shows that managing risk is an even more critical component.

Owners, inspectors, project managers, location, and subcontractors are all a factor in terms of levels of risk. And because each project carries its own unique set of possible liabilities, knowing how to manage them is vital.

Construction companies need to have coverage in place to protect against costly risks that can occur during any project, no matter the size or scope. But what should be included in a coverage plan? Specifically, what are the bare minimum requirements for contractors looking to operate within the necessary outline of liability?

Insurance Risk Transfer

Risks can be avoided, controlled, mitigated or transferred to other parties. The latter usually happens through a bonded contract, and when this transaction does take place a contractor typically purchases insurance to provide protection against possible risks. This is known as an insurance risk transfer and includes a backup plan of sorts so contractors are safe against liabilities.

The surety underwriter will focus on both the insurance carried by the applicant and the parties that they contract. This is because any uninsured loss could cost major financial issues in relation to a bonded principal.

Financial Security

Surety underwriters take the principal’s financial security seriously when it comes to contractors liability insurance. The surety underwriters approve a bond mostly based on certain conditions including the financial stability of a principal contractor. If a contractor has faulty credit or funds, the bond that’s issues to them can’t be taken back. Uninsured losses have a domino effect, adversely impacting the principal’s financial condition as well as any guarantors.

Commercial General Liability

Within a contractors liability policy there must be some barebones components that help an owner out in times of possible legal distress. Liability coverage must include personal injury liability, contractual liability, independent contractors liability insurance, and property damage liability within certain limits should be included in a general liability plan for a full-circle approach to being protected.

Workers’ Compensation

Workers’ compensation insurance must be provided for all vendors performing duties under a purchase agreement or contract. This covers the contractor, their employees and subcontractors for any injuries that arise from a project. Bumps and bruises, scrapes and splinters, all need to be covered in order for a project to continue above board.

Automobile Liability

Like most construction sites, there are heavy-duty trucks and vehicles that are hired out to do the brunt work like hauling away rubble. Since they’re being used for the purpose of the project, they too need to be covered with Business Auto just as an everyday car needs personal coverage.

Carrying Insurance

It’s important for all parties involved in a construction project—from contractors to subcontractors to owners—to have an insurance plan covering all risks to help management. Actual coverages and limits have to be evaluated to make sure there is enough protection across the board for all involved. The general contractor on a project has the primary exposure if there is injury to anyone or damage occurs on any property.

About Shields Insurance Agency

Shields Insurance Agency is an independent insurance agency located in Birmingham, Alabama that provides insurance coverage to local businesses and families throughout the southeastern United States. As an independent agency, we will shop your coverage with numerous top-rated insurers, virtually guaranteeing you get the most competitive rates available with broad coverage terms. For more information on our products and services, contact us today at (205) – 783-5893 to speak with one of our professionals.

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