Prevent Costs With Contractor Insurance Verification

Business insurance is an important part of a property and casualty insurance agent's portfolio. In the construction industry, contractors are faced with significant liability on each job. For this reason, contractors carry different types of insurance to protect themselves against liability risks associated with building materials or craftsmanship on the jobs they complete.

Business owners often require professional contractors to provide proof of insurance before starting a job. If a contractor doesn't already have the required insurance policy, they’ll need to purchase coverage quickly to be eligible to bid on a job.

An insurance agent who uses agency best practices can promptly provide quotes, coverage, and proof of insurance. They are more likely to enroll a new business customer as well. When agents use software to provide accurate quotes and contractor insurance verification, they can speed up the process and improve customer experience.

What Is Contractor Insurance?

Contractor insurance is usually a package of policies that protect contractors against lawsuits, on-the-job injuries, and damage to equipment. License requirements vary by state, county, and sometimes municipality. Typically, contractors need liability, workman's compensation, and inland marine insurance.

Why Is Contractor Insurance Verification Important?

All property owners are responsible for accidents that occur on their property unless they have protections (like signs and liability waivers) in place to release them from responsibility. Building projects can create unexpected risks that make accidents more likely.

For this reason, contractors must have adequate insurance to cover these risks. Without contractor insurance verification, a property owner could be left paying out of pocket if an accident occurs.

The Importance of Insurance

Typical homeowners' or business owners' insurance policies generally exclude accidents related to construction. Since construction is a voluntary service the property owner sources, insurance policies consider related damages as intentional services.

Without the proper insurance in place, a property owner could be held liable for costs related to injured contractors or subcontractors, damaged equipment, and even damages to their own property. This is why property owners need to hire contractors who are adequately insured. Do you have the right insurance coverage to protect youself from being liable if the unexpected were to happen?

Prevent Unexpected Costs

Any type of construction has the potential to result in unintentional damage. If a contractor has adequate insurance, such damages are an inconvenience. Without insurance, those damages can result in expensive repair bills and ongoing litigation.

Why Verification of Insurance Is Important

Insurance verification provides a business property owner with proof that a contractor has the insurance coverage they claim to have. To secure a job, a contractor should agree that they have adequate coverage or the clause may be simply overlooked in a contract. By verifying that a contractor's insurance coverage is sufficient to meet state and local regulations and specific requirements for a job, the property owner is better protected against potential risks.

Breakdown of Contract Licensing Terminology

General contractors oversee building projects from start to finish, but not every handyperson working with their own tools is a licensed contractor. The terms licensed, bonded, and insured are commonly used to describe professional construction companies. However, these terms aren't always accurately used and could be deceptive when misused.

Clearly defining standard contract terms can help business property owners request proper credentials from contractors. It can also help insurance agents provide adequate coverage for business clients.

Registered

There are two types of contract licenses: Certified and registered. A certified contractor can work anywhere within the state they're licensed.

A registered contractor has not completed a state exam and is required to register in each city or county where they want to work. They must meet state requirements for insurance and fingerprinting.

Bonded

A contractor who is bonded has purchased a surety bond to guarantee legal and financial obligations. A surety bond describes the conditions of legal and ethical conduct for a contractor.

If the contractor's client believes the contractor has violated the bond's terms, they can file a claim against the bond. That’s if they can't obtain compensation for damages or injuries from the contractor.

Some insurance agents sell surety bonds along with other insurance products for businesses.

Insured

An insured contractor has purchased insurance products to protect against the risks of performing construction and maintenance work. However, the term insured doesn't describe a contractor's specific insurance coverage. This is why a property owner needs to seek insurance verification.

Licensed

The term licensed contractor generally refers to a certified contractor who has passed a state exam and is licensed to work anywhere within the state. Certified contractors adhere to fingerprinting requirements and maintain certain levels of insurance to maintain their certification.

It's important to note that a registered contractor may also use the term licensed although they haven't taken a state exam.