Monday, July 16, 2012

Make Sure Your Insurance Coverage Meets the Contract Requirements

Before Bidding

To bid on a project, you need to have accurate information on what insurance you have, what your premiums cover and the overall cost. To get an accurate picture, contact your insurance agent. That person can give you an exact statement of your insurance costs. He or she can also estimate the cost of additional insurance, required by the project, and whether or not you are eligible for it.

Before you make a bid, you should factor in these insurance costs. In a soft construction market, many builders low ball a bid. This strategy can force owners of the company to use inferior materials to make up the difference or to drastically reduce their profit margins.

What do Your Insurances Cover

General Liability

  • Bodily Injury on the Job
  • Property Damage
  • Advertising-Making False Claims About Your Services
  • Personal Injury-damage caused to another person or business

Workers Compensation Insurance

  • Medical Care including Dental, Prescription and Rehabilitation
  • Temporary Disability-Pays 2/3 of worker’s salary while recovering
  • Permanent Disability-Life Long Injury That Impairs Ability to Get Employment
  • Vocational Rehabilitation-When Company Cannot Rehire the Individual
  • Repeated Injury-Carpal Tunnel caused by Repeated Hand Motions
  • Transportation-Travel to Doctors or Medical Facilities
  • Death Benefit-Paid to Heirs of an Employee, Who Dies on the Job
  • Mental Illness-Even Without Injuries, Most States Pay for Mental Illness Due to on the Job Unusually High Stress Levels or Abuse.

Contract Requirements

Besides the usual insurance most builders possess, buyers may require other types of coverage. It’s important to understand what liabilities these added policies would cover. Your insurance broker will be able to determine, whether or not the new insurance would overlap on your current coverage.
Furthermore, how much these new insurances would cost, given any innate risks: proximity to a floodplain, in a coastal area or vulnerable to severe weather would increase the expense of this premium. All these expenditures must be included in any bids that you make.

Additional Insured Endorsement for Completed Work

Many insurance companies will not insure the builder or subcontractors for work after the build is completed. If this type of insurance is required in a contract, the construction company owner needs to negotiate with the homeowner to be freed from that requirement of the project. If builders agree to pay for completed work damages out of their own pockets, their company could be damaged by financing completed work claims.


Insurance is priced based on the level of risk involved-the greater the risk-the higher the premiums. However, risk management is an integral part of good business practices. To make certain that your company isn’t overexposed on a project, it is important to have a construction lawyer evaluate the contract’s content.


Subcontractors need to carry their own liability insurance. This makes good sense for the builder, subcontractor and homeowner. A claim of defective work, which was done by a subcontractor, will be paid for by the subcontractor’s insurance-not through the builder’s coverage.
Making the subcontractor’s insurer responsible for defective work enables the buyer and a subcontractor to discuss how the work could be righted without making a claim. The claim to a subcontractor’s insurance signals the builder to troubleshoot other work that the client might view as below standards.

Homeowners Help

If you are doing residential construction, some homeowners want to participate in the building of their structure. It is not a good idea for the builder to allow homeowners to take on tasks at a work site for a number of valid reasons.
First, the homeowner might produce work that is substandard and doesn’t meet the code and contract requirements. That would force the builder to redo the work. This defective work can endanger the work quality of professionals in the builder’s employ. The homeowner’s sweat equity may lengthen the project’s timeline at the builder’s expense.
Second, if the homeowner is injured on the job, the insurance may not cover the costs incurred. If the injury entails extensive medical expenses, again the builder may be liable for the costs not covered by medical insurance.

Client Risk

To reduce liability from the client’s presence at the site, limit or eliminate the client’s access to the work site during the erection of a commercial or residential building. The customers, even if not actually involved in the construction, can be injured by falling materials, walking on uncompleted flooring or being near other unfinished projects.

Builder’s Risk Insurance

Builder’s risk insurance covers all costs that were not caused by the builder’s negligence during the erection of a dwelling. That means that the homeowner is liable for damages outside of the contractor’s defective work. The client’s liability would include fires, hurricanes, tornadoes or any type of activity that resulted from something other than substandard work produced by the builder.
If builder’s risk insurance is required for a contract, the construction owner can suggest that the homeowners add endorsements to their current insurances or obtain insurance with builder’s risk as part of its coverage.

Insurance Agents Provide Invaluable Information

A knowledgeable agent can reduce your risk and save you money. Diminished risks and costs are crucial to a successful business. If you want to lower the cost of doing business, then you need to speak to one of the experts at Custom Contracting Insurance. Let it be your resolution to find out more about your insurance and how to effectively purchase coverage that will make your projects less risky and more profitable.

For all your Contractors Insurance needs

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