Contractors face significant risks daily, from on-site accidents to property damage, making liability insurance a crucial safeguard for their business. However, many contractors unknowingly make mistakes when selecting their liability coverage, leaving themselves vulnerable to financial loss and legal exposure. Understanding these common errors can help you better protect your contracting business.
One of the most frequent mistakes contractors make is opting for the minimum required coverage or a cheaper policy without considering their specific risks. The scope and scale of your projects matter—a small residential job involves different risks than a large commercial or industrial construction site. For instance, contractors working with heavy machinery, hazardous materials, or multiple subcontractors face increased liability exposure that demands higher or tailored coverage limits.
Choosing insufficient coverage may seem like a cost-saving move but can leave you liable for legal fees, damages, or medical expenses beyond your policy limits. To avoid this, evaluate your business risks carefully and work with an insurance professional to select adequate coverage that reflects your unique needs and project scale.
Insurance policies always include exclusions—events or damages not covered by your liability insurance. Contractors sometimes neglect to review these exclusions or assume all risks are covered. Common exclusions could include damage to property in your care, custody, or control; pollution-related incidents; or lawsuits related to third-party employee actions.
Failing to understand these exclusions could result in expensive out-of-pocket liabilities if the excluded scenarios occur. Contractors should scrutinize their policy documents and discuss potential gaps with their insurance agent. Additional policies, such as pollution liability insurance, can often be added to cover specific risks not included in general liability policies.
General liability insurance covers many risks, but it may not protect against all potential issues contractors face. For example, professional liability insurance (also known as errors and omissions insurance) is key if you offer design, consulting, or architectural services. Without it, you could be liable for mistakes in your professional advice or services.
Other essential coverages include workers’ compensation insurance, which is legally required in most states if you have employees, and commercial auto insurance if you use vehicles for work tasks. Skipping these additional coverages or not tailoring your insurance package to your business operations can leave you underinsured in critical areas.
If you hire subcontractors, you may be responsible for their actions or accidents on your job sites. Many contractors overlook ensuring their subcontractors have adequate insurance, assuming their own policy will cover everything. This mistake creates liability risks and potential claim disputes.
A well-crafted contractor liability insurance policy should include coverage requirements for subcontractors or endorsements that protect you from subcontractor-related claims. Always verify subcontractor insurance certificates and clarify responsibilities before work begins.
Choosing the right liability insurance coverage is essential to protect your contracting business against unforeseen risks. Don't leave your financial security to chance by making common insurance mistakes. Contact us today at Scavone Insurance Agency Center LLC today for a thorough policy review tailored to your business needs. Our experts will help identify gaps, guide you through essential coverage options, and ensure you have rock-solid protection so you can focus on what you do best, building success. You can also call us directly at (914) 428-7111.
General liability insurance covers many risks but may not include professional errors or employee injuries. Additional coverages like professional liability and workers’ compensation are often necessary.
Review coverage limits, exclusions, subcontractor insurance requirements, and additional endorsements. A detailed review ensures your policy fits your business risks.
Yes. If subcontractors are uninsured or underinsured, your policy may be liable for their damages or accidents. Always verify subcontractors' insurance before hiring.
An insurance agent with construction expertise can assess your risks, recommend proper coverage types and limits, and help avoid costly coverage gaps.
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