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What Insurance should a hired contractor have?
To be adequately Protect, insurance
company have to consider below policies .this acoording to the Dax Kastrin
(2024)
l
General
Liability Insurance- This type of insurance covers property damage and
bodily injury that may occur due to the contractor's work
l
Workers'
Compensation Insurance- If a contractor is injured while working on your
property, workers' compensation insurance would cover their medical bills and
lost wages. This type of insurance is required in most states, so confirm that
your contractor has it before hiring them.
l
Professional
Liability Insurance- Also known as errors and omissions insurance,
this type of coverage protects contractors from being held liable for mistakes
made during their work.
l
Business
Owner's Policy- A business owner's policy (BOP) is a type of
insurance that bundles together various types of coverage, including general
liability, property damage, and business interruption. This can be a good
option for contractors who want comprehensive protection.
l
Business
Auto Insurance- If a contractor uses a vehicle for business
purposes, they must have business auto insurance. This type of insurance covers
damages caused by the vehicle and any injuries that occur as a result of a car
accident.
l
Bonding- This is
not insurance but another type of protection that contractors can have. A bond
is a financial guarantee that a contractor will complete their work as agreed.
If the contractor does not complete the job or causes damage, the customer can
make a claim against the bond to recoup their losses.
( Kastrin ,2024 )
According to Austin Lands (2020) have 4 insurance
coverage to consider.
l
Workers
Compensation- Hiring a contractor without workers comp insurance could leave you
paying an injured employee or subcontractor’s medical bills indefinitely, just
for hiring someone to fix your property.
l
General
Liability ( With Product And Completed Operation) - Without this coverage, you would most likely not be able to collect any
money for your medical bills and you could be personally liable for your guests’
injuries. Additionally, if you are a homeowner, unless you purchased an
umbrella policy, your homeowner liability limits are probably not high enough
to cover the incident.
l
Auto Liability- Auto liability is overlooked coverage by many
homeowners and business owners hiring contractors. Some contractors aren’t
large enough to justify a fleet of work trucks, and some projects do not
require this coverage. Look over your particular project to decide if auto
liability is something you should add to your contractor requirements.
( Landes 2020 )
The two types of insurance for contractors and
sub-contractors according to the Norton S.,(2020)
that is public liability insurance and professional
indemnity insurance.
Public liability insurance for contractors
Public liability insurance is
the first one out of the two types of crucial insurance for contractors. It
covers damage to property and personal injury to other people. Here are some
examples:
·
Damage or loss of goods
·
The employees of a contractor
·
Third-party injuries
·
Legal costs of a claim
Professional indemnity insurance for contractors
Professional indemnity insurance covers the
business owner for legal liability relating to advice or services offered to
clients. All contractors offering advice against a fee need professional
indemnity insurance. Examples of contractors who can benefit from professional
indemnity insurance include:
·
Graphic designers
·
IT consultants
·
Project managers
·
Business coaches and advisors
·
And more.
(Norton ,2020)
With variety of reasons.
Depending on the type of work you do, you may need liability insurance and
omissions insurance, or both. Learning more about different types of insurance,
what it does, and the risks of going without can help you to protect your
business and ensure that clients can hire you with confidence. In addition to
liability insurance, an independent contractor may need other forms of
insurance and omissions insurance.
Liability Insurance
·
Bodily injury
caused to someone else (who is not your employee)
·
Slip and fall
accidents
·
Copyright
infringement
·
Product
liability
·
Slander and
libel
·
Property damage
Omissions
Insurance
While
general liability insurance offers comprehensive coverage for many situations,
it does not offer coverage for alleged professional negligence. You will need
errors and omissions insurance for that.
Just
like the contractors who work with physical equipment and interact with clients
in homes, work settings, and other locations, an independent contractor who
provides advice could be held liable if something goes wrong. Errors and
omissions insurance (E&O) is ideal for accountants, interior designers,
financial planners, and other independent contractors who serve in an advisory
or consultant capacity. If the client experiences damage or losses due to your
advice and they sue you, this type of coverage will pay the damages and your
legal expenses.
Independent Contractors Need
Insurance?
Most independent contractors need some form of insurance. Some
require additional specialty insurance in addition to liability and errors and
omissions coverage. In general, the following types of contractors need some
type of insurance to protect themselves, to work legally in some locations, and
to give clients peace of mind:
·
Construction contractors of all types
·
Plumbers, electricians, carpenters, and painters
·
Handymen and repair contractors
·
Home, business, and carpet cleaners
·
Artists including graphic designers, product designers,
writers, and more
·
Dog walkers, groomers, trainers, and sitters
·
Other animal
trainers
(Nature .,2024)
The Six Types of Insurance following mention as per
the Brown
J.,(2023)
General Liability Insurance - If your company is deemed legally responsible for bodily injuries or damages to client property, you should expect to bear the financial costs associated with those incidents. General liability coverage protects you in such cases, as it transfers the costs associated with these claims away from your business and to the insurer.
Worker’s compensation Insurance - Worker’s compensation insurance offers benefits and protections for workers injured on the job. Their medical expenses and their wages are covered by this kind of insurance.
In the construction industry, an accident can place your
employees at a very high risk of hospitalization. During this time, they are
incapable of working hence no income. With a worker’s compensation policy their
medical bills and a portion of their will be paid.
Commercial
Auto Insurance - The insurance coverage we have
spoken of thus far protects third-party property for the most part. Commercial
auto, however, focuses on the automotive
property of the insured itself.
While this is not specific to contractors, it is a very important
policy for contractors who need to use vehicles to transport tools and
employees as part of their project. If in the course of construction you use
vehicles, these vehicles have to be commercially insured.
Inland Marine
Insurance -
lnland Marine insurance is designed to protect contractors’
property. Damages to your property, plus loss of tools and other working
materials, will be compensated by Inland Marine Insurance.
Professional
Liability -
This type of insurance is mostly used by
consultants, architects, and design and build contractors to protect themselves
against claims made by clients.
Contractors
who do this work alongside their work in the trade, need to take on this policy
to obtain full coverage in regards to customer dissatisfaction, design flaws,
and failure to properly execute plans. A professional liability policy also covers you against negligence on your part
while undertaking your duties. Let’s say that a contractor paints on a wet
wall. Within minutes, the paint starts to peel off.
Umbrella
Insurance -
Umbrella
insurance is simply additional liability insurance that works
by providing Insurance beyond the limits of your other liability policy limits.
It is sold in increments of $1 million.
Conclusions
There is great financial risk in hiring an uninsured contractor,
including litigation. Besides, there are legal risks at play. We’ve all seen
news stories on businesses getting sued for millions of dollars! Not to talk
about the risk to your reputation if an accident or injury were to occur
without insurance cover.
There may also be other types of insurance that are relevant to
a contractor, such as insurance against loss of income. However, public liability
and professional indemnity are the most crucial.
References
Available at : https://contractorsliability.com/blog/the-six-types-of-insurance-general-contractors-must-have/ [Accessed on 7th April 2024]
Available at : https://www.equipter.com/equipter-articles/contactor-insurance [Accessed on 9th April 2024]
Available at : https://www.erm-ins.com/hiring-a-contractor-without-insurance-what-are-the-risks [Accessed on 26th march 2024]
Landes A., (2020) ,Hiring a Contractor Without Insurance – What are the Risks ? (Online)
Available at : https://www.landesblosch.com/blog/hiring-a-contractor-without-insurance-what-are-the-risks [Accessed on 26th march 2024]
Available at : https://www.legalnature.com/guides/do-independent-contractors-need-insurance [Accessed on 7th April 2024]
Norton S.,(2020), What Insurance Do Contractors and Subcontractors Need? (Online)
Available at : https://nortonandco.com.au/how-much-does-what-insurance-do-contractors-and-subcontractors-need/ [Accessed on 7th April 2024]
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