General liability insurance is one of the first types of policies you will need if you are starting a new business. At Clinard insurance we are seeing many new small enterprise startups. Starting your own enterprise is beloved these days with the layoffs we are seeing in our economy. The best choice is often to pursue something that you love doing and so we are seeing lots of people starting new businesses nearby their construction skills. But just because you love to build things doesn't mean you know the best way to safe yourself and your enterprise from lawsuits.
Here are some tips for pitfalls that you should avoid when buying general liability insurance.
Choosing the right agent. The first place people generally go for their enterprise insurance is the insurance division that handles their home and auto insurance. In some cases this will work out well. But the risk is that your current agent may be licensed to sell you general liability insurance on your new enterprise while categorically possessing very miniature caress in evaluating the hazards and risks of your specific type of company. I would suggest that you go out there and look for an agent that specializes in insuring other small businesses like yours. Ask your competitors who they used. At Clinard insurance we have a niche specialty in small contractors and we speak their language and understand their needs. If your agent doesn't specialize in your business, I suggest you find one who does.
Claims Made or Occurrence procedure Type: Construction claims made policies became beloved in the mid 1980's and have been nearby ever since. The promise of these policies were lower rates, but at what long-term damage? In some instances there is no cost savings. Claims made polices for a contractor are the worst potential procedure you can buy. Let me explain: Claims made policies allow you to make claim on your procedure only during the year they are in force. Contractors have claims down the road, not always just in the same year as the project is built! Also, if you want to leave that enterprise and go to another company, you will have to purchase supplementary insurance to cover you for the next 10 years... That's right, 10 years! Why? Because the law allows customers to file a lawsuit for construction problems for up to 10 years after the project was completed.
An Example:
You build a new room addition, all things goes well and you and your customer are very happy with the final outcome... 4 years later your customer calls you and says that the roof is leaking and water came in the house and ruined his new ,000 grand piano. He expects you to heal the roof, the drywall, wallpaper, carpets and, of course, replace the grand piano....
A claims made procedure will not allow you file a claim 4 years later unless you stayed with that same enterprise the whole time. If you intend to convert companies after you have had a claims made policy, you must make a decision. If you want to have security for any claims that have not occurred yet, but will in the future, you will have to purchase "tail" coverage. This coverage will increase the time in which you can file a claim. And tail coverage is not cheap.
If you rule not to buy the "tail" you will not be able to narrative a claim against the claims made policy. And to make matters worse, some companies do not offer the 10 year extension.
So.... When your claims made procedure comes up for renewal, you must decide:
Do I leave the enterprise and pay the supplementary insurance for coverage for the next 10 years, or go without protection.
Do I stay with the same company? Their prices on the new year may stay the same or go up sharply.
Do I switch to another enterprise who has great rates and coverages?
DRYWALL SETTLEMENT
This limits the marketplace ready to you, and makes it harder to accept a great bid from another insurance company. Claims made policies may work in other industries, but for Contractors they are a disaster. Take time after reading this narrative to see if your current procedure is whether an occurrence form or a claims made form.....
Insurance enterprise Rating It is up to you to do the due diligence and ask your agent about the financial health of the enterprise from whom you are buying your general liability insurance. As the previous tip implied, sometimes the claims may be very much delayed and you need to know that your enterprise can pay a claim for you 10 years from now. Use only A rated or higher insurance companies to safe your business.
Exclusions, Understand Them Clearly Be sure to take the time to ask your agent about the procedure exclusions and what they may mean for you. Here are some exclusions that contractors should reconsider when purchasing a general liability insurance policy:
Pesticide, Herbicide and Fungicide Exclusion, Employment Practices Liability Exclusion, X.C.U exclusion, Contractors Warranty Exclusion, professional Liability Exclusion, Asbestos, Independent Contractors. If you don't know exactly what these mean for you on your policy, caress your agent and get the help you need to understand it clearly. This may convert the way you run your business.
Subcontractors Be sure that you understand just how your procedure treats subcontractors. Are you covered if they have no insurance or not enough for the loss? How much coverage should you require of your subcontractors? How often should you collect certificates of insurance? How can you be sure that the certificate of insurance is legitimate. (I have seen fraudulent certs for sale on ebay before). If you are not clear about the answers to these questions vis-à-vis your enterprise and your general liability policy, you should call your agent right away and get the answers you need to sleep well at night.
As you can see buying general liability insurance is not a easy as calling your agent and asking for a quote. You need an experienced professional that understands the procedure forms and your business. At Clinard insurance we specialize in helping small contractors navigate the dangerous waters of the insurance world. If we can help you further, or if you would like more data about Clinard insurance Group, please visit our web site.
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