There’s something incomplete about the statement “save for the rainy days”. There should be a part that accommodates the statement “insurance for the rainy days”. Why is this?
Without a good understanding of how insurance works, as well as the right plan, everything you have saved and toiled for, can go down the drain.
Other than the practical need for this form of financial security, several administrations such as that of California require that some companies have a working financial cover. This is to protect disadvantaged parties, including the company, if/when anything goes wrong.
So, for such organizations, it is safe to say having insurance is both a legal requirement and a necessity. Having established this, let us discuss the basics of contractor insurance.
Kinds of Companies that Need these Plans
Broadly, there are 2 categories of contractors that need and are required to have certain insurance coverage. They include:
- General Contractors
- Specialist, Artisan, or Sub-Contractors
General Contractors
From a financial stance, the best way to identify these kinds of companies is by checking out how much of their revenue is paid to outsourced companies.
These companies deal with jobs that require a wide range of special services. Examples include general building companies. Such services will likely need to outsource jobs to electricians, HVAC specialists, plumbers, and many other artisans.
As a result, a sizable amount of their gross revenue is spent on hiring these sub-contractors. From experience, these sorts of companies will spend well above 20 percent of their revenues paying outsourced companies.
Sub-Contractors
These companies are specialists in particular engineering, building, or installation areas. Examples include interior decoration companies, electricians, plumbers, HVAC specialists, and many others.
Often, these companies get their jobs from general contractors, rather than from the primary clients.
General Contractors or Sub-Contractors – Who Pays More Premium?
General contractors are billed more by the insurance companies for various packages. The reason is simply because of their vulnerability to damages, accidents, and mishaps.
This is because they have limited control over the massive amount of jobs under their care. A general contractor is responsible for every sub-contractor it engages and has to account for damages on their end. This is especially if the sub-contractor does not have a working or well-structured insurance plan.
For this reason, insurance companies are likely to bill general contractors about 25 percent more than their sub-contractor counterparts.
This does not rule out the need for sub-contractors to have a working insurance plan. Many notable general contractors will, in fact, refuse to deal with sub-contractors that do not have the right insurance plans.
So, to increase the chances of getting jobs, especially from the high-flying companies, artisans are required to have this cover.
Some of the Insurance Packages Open to Contractors
The jobs of general and sub-contractors can be complicated. As a result, they need plans that take account of their occupational peculiarities and protects them as much as possible. On this note, below are some of the packages open to these sets of companies.
You should also be aware that some of them are mandated by the oversight bodies, while others guarantee more protection for them.
General Liability
This is mandatory in some places; an example is California. There are 2 categories of situations covered by this kind of plan: Operational hazards and completed operational hazards.
These situations may have different names ranging from one insurance company to the other. However, they are all based on the same ideas.
Operational hazards are accidents, damages, and mishaps that occur when the construction is actively in progress. On the other hand, completed operational hazards suggest that the job has been completed before the accident, damage, or mishap occurs.
Workers Compensation
As the name suggests, this is financial coverage for workers that get injured or affected in the line of duty. This plan takes care of medical expenses and the financial impact of the accident on the worker. As seen in California, this plan is also mandated by many oversight institutions.
Auto Insurance
This plan takes care of accidents and serious issues for commercial vehicles insured. For example, in the case of an accident and possibly items affected by the accident, this plan can provide financial coverage needed to sort out certain things.
Having identified the package that your company needs, it is important that you deal with an insurance company that has your best interest at heart. You can visit: californiacontractorsinsurance.org for more information on this.
Wrap Up
In this article, we have addressed some of the insurance packages open to general and sub-contractors. Other packages include builder’s risk, contractor’s bond which is equally mandatory in California and many states, property insurance, installation floater, and a few others.
As stated earlier, these financial coverages are important for rainy days. This is because, at some point, it may be the saving grace for a company faced with endless litigations. On that note, it is important that companies do not default in getting the right insurance packages and playing by the rules.
