Knowing Your Risks: Contractors

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As a contractor, your exposures are unique to the type of work that you do. So when it comes to insurance, you might be wondering what coverage is best for you! To do that, it’s important to understand your risks as well as strategies to manage them. 



When you enter a contractual agreement with a client or with other contractors on the job, this involves the legal transfer of risk. Your insurance policies may need to respond to certain aspects of these contracts, but with some of the risks, you might think that they’re not insurable.  This is why it’s important to understand and share all your contracts with your lawyer and your insurance agent! To make sure that you’re getting the correct coverage, even when you think you don’t need it! 

The most important aspect of your contracts that involve insurance are the Indemnification Clauses which involve making changes to your insurance policy. Failure to make the necessary changes to your insurance could result in breach of contract and other liabilities, according to some attorneys.

The most common policy changes involve:

  • Additional Insured – naming the other party on your insurance policy (also, there are many different types of additional insured clauses, so agent needs to understand the requirements)
  • Waiver of Subrogation in favor of other party
  • Primary & Noncontributory clauses – meaning your insurance is primary to any losses incurred and transferred by your contractual agreement


If you need to protect your work while it’s under construction or repair from damages like wind or fire, then you may want to buy an Installation Floater or Builders Risk insurance policy. This is something that your agent can help you decide on!


In most states, businesses are required to abide by state workers compensation laws, which obligates the employer to pay for any medical expenses and lost wages related to work-related injuries or illnesses. Workers Compensation insurance is required to ensure the financial resources are available to meet this obligation. Implementing good safety and training practices into your contractor business will help prevent work comp claims and keep your costs low. 


As a contractor, there is a good chance that you will either own or rent the tools that you’re using for your jobs! To protect this equipment against theft or other types of damage, you can purchase an Equipment Floater insurance policy! If you just own a small value of tools or small equipment but rent equipment, then buying an Equipment Floater may allow you to save money, by waiving your obligation to buy the insurance from the equipment rental service.


To learn about more risks and solutions that you could face as a contractor, visit or contact Shields Insurance Agency today at (205) 783-5893. 

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