Contractors Insurance 101: What’s Covered And What’s Not
Contractors insurance protects the contractor against being held liable for various things. Let’s take a look at specifically what this insurance covers and what it does not.
Things that are covered
1. Structural damage
Any structural damage that happens as a direct result of the contractor’s negligence or the negligence of one of his employees will be covered by this insurance. All of the property that was damaged will be replaced or repaired at the expense of the insurance company.
2. Bodily injury
If a contractor causes any bodily injuries during a project on a work site, the cost of surgery, rehab, doctor visits or hospitalization will be covered by the insurance. If the injured person decides to sue the contractor for negligence, the insurance will also help to pay for all of the legal fees and any compensatory damages that the contractor is forced to pay.
3. Unexpected damages
Many things can fall into the category of unexpected damages. For example, a fire may start as the result of someone using a blowtorch, or a water pipe could be accidentally broken and result in a flood that severely damages the house. These items would also be covered by contractors liability insurance.
Many tools, especially power tools, are very expensive. Therefore, they are always a target for thieves. If any tools are stolen from a vehicle that is used for business purposes or from a work site, their replacement will be covered by this insurance.
It is important that contractors liability insurance is never confused with traditional worker’s compensation insurance. The majority of states require that all employers also carry worker’s compensation insurance. This type of insurance covers the expenses needed to treat any illnesses or injuries that workers may get while they are under the employ of the contractor. Any sub-contractors will not be initially covered by this insurance. Therefore, a contractor must have his or her policy changed to cover any sub-contractors that are hired.
Many contractors mistakenly believe that their regular auto insurance policy will cover damage done to their business vehicle. This is not the case. If you try to submit a claim of this sort, it will probably be rejected. A contractor needs to buy business rated auto insurance to help prevent any possible denied claims and gaps in coverage.
Things that are not covered
One of the most common things that is excluded from a contractors insurance policy involves water. If a project is exposed to moisture, it can be seriously compromised. Most policies do not cover damage that is caused by the discovery of dry-rot, the malfunction of an appliance, a leaky pipe or a broken toilet.
2. Unsatisfied customers
Contractors insurance does not cover situations where the customer is not satisfied with the work that has been done and refuses to pay. Broken tools are also not covered.
3. Work that is not good quality
Situations where the contractor makes a mistake and ruins the job are not covered. An example could be the contractor uses a material that was not specified by the homeowner. A homeowner cannot claim that their house has gone down in value because of the poor work done by the contractor and expect to be compensated by the insurance company.
Keep in mind that all insurance policies are different. Every insurance company has their own individual guidelines. Policies can be crafted to the needs of each contractor.