Whether you are a small or large contractor, selecting the proper insurance program to protect your business is important. Did you know that a properly tailored insurance program can help you secure bigger and better contracts?
Sometimes insurance is simple. You have a car, you buy your license plates and if you want more coverage you buy an extension auto policy. Contractors perform many different kinds of work, for many different kinds of clients and this can make contractor’s insurance complicated. Contractors are some of the busiest people out there, and you have a complicated situation that needs to be handled quickly.
Here’s a quick rundown on some of the main types of insurance a contractor needs to consider.
Are your tools covered? What about your larger equipment, like bob cats, skid steers, and loaders? What if you are half way through a job and your trailer is completely cleaned out? What if you your trailer carrying your skid steer is side swiped by another driver sending you machine crashing to the ground?
Carrying property insurance for your tools and equipment ensures that you will have the ability to replace your tools and equipment quickly if needed, or to pay for the repairs if repair is an option.
No one likes to think about mistakes or accidents happening, but the reality is that in the construction world accidents happen, and sometimes property is damaged or people get hurt. Carrying proper liability insurance can protect your business, and even you personally if an accident happens and causes damage to a third party. Liability insurance even goes so far as to pay legal costs associated with your defense in the event a third party decides to sue you for damages.
Often times in order to get a job, you may be asked to provide a proof or certificate of insurance. This means the person or company you are working for wants to make sure you have liability insurance in place to meet obligations you might become responsible for if an accident does happen.
Having an insurance provider who can issue certificates of insurance quickly is essential to keeping your business moving.
Did you know most liability policies exclude coverage for your part of the work that you have completed – that can cause serious problems if your work is damaged in an accident that occurs at your job site. What if all the expensive wiring you just installed causes a fire because of one small mistake? Make sure your liability has broad form completed operations coverage, to provide you with the best liability protection available.
Bonds / Surety
So what is a bond and why would a contractor need one? There are two classes of bond that are commonly used by contractors, one being licence bonds, the other being contract bonds.
Licence Bonds – these bonds are used in obtaining a licence to act as a contractor in a specific line of work, such as electrical work, or gas work. The licence bond is a guarantee by the bond company that if the contractor is in violation of the terms of their licence the bond will pay out the penalty. The alternative to using a licence bond is posting thousands of dollars of your own money with the licensing office. Licence bonds are relatively inexpensive, and easy to qualify for, selecting a multi-year licence bond can save you money in the long run as well.
Contract Bonds – contract bonds, commonly referred to as bid bonds, labour & material bonds, and performance bonds are a complicated subject that often catch new contractors off guard. If you are looking to bid on larger jobs, or start doing some work for school boards, municipalities, the provincial or federal government, or even to sub-contract under some larger general contractors you may be required to submit a bid bond with your tender.
The bid bond is the bonding company’s guarantee that your bid is responsible, and that if awarded the job you will accept the job at the price you bid. Failing to do so, the bonding company will pay the difference between yours and the next lowest bid, up to the maximum bond penalty.
That puts a lot on the line for the bonding company, and as you can imagine for a company to support your bids that way they are going to want to know a lot about you. If you’re applying for bonding be prepared to provide detailed financial information from your company. Also be prepared to provide a detailed resume outlining your qualifications, skills and work history.
Obtaining a successful relationship with a bonding company takes time, usually two or three weeks at the shortest. It’s always a good idea to have the bonding relationship in place before you ever need to provide bid bonds, in support of your bids. This is called a bonding facility.
Having a broker who has power of attorney appointment for the bonding companies they represent can mean a shorter turnaround time on bond processing, and can help get you a competitive advantage when bidding. A skilled broker should also be able to help you make the case for your business and your bids to a bonding company, helping you get the support you need for your bids.
How do you get a policy? What information is needed?
For most small contracting operations 1 – 5 employees, insurance can be provided quickly and easily. Even for larger contracting operations the quoting and issuing of a policy is pretty easy. When contacting an insurance provider, you should have the following information ready:
– Description of operations – essentially what you do on a daily basis the type of work you undertake
– Gross receipts – annual revenue generated by your business, this is used to gauge how much work you’re doing and charge the appropriate liability premium
– Number of employees
– Area of operations – Saskatchewan only? Western Canada? U.S.A?
– Description of property to be insured – general speaking anything with a value under $2,500 can be considered a tool, and lumped into a blanket limit (ie $20,000 coverage limit for all “tools”), anything with a value higher than $2,500 is equipment, and should be listed on your policy, to list equipment, the year, make, model, serial number and item value are required
* Note; if you’re going to be applying for bonding support, additional financial information is required and it’s best to speak with a broker specializing in the type of bonding you are interested in.
Often times, the cost of contractors insurance is a lot less than people expect, and convenient monthly payment plans are almost always available. Having the right insurance in place before you need it is always a good idea.