With so many different types of business insurance on the market, deciding which coverage best applies to your business can be challenging. However, comprehending the nuances in the various types of liability insurance can make all the difference in protecting your bottom line.
Although many businesses know the importance of obtaining basic general liability and errors and omissions coverage, contractors often face exclusive risks better addressed by specialized coverage.
Here’s a look at the essential distinctions between these two important types of insurance.
General Liability Coverage Provides a Solid Foundation
General liability insurance is a starting point for your coverage, protecting against common risks such as damage to customer property, injuries sustained by customers on your business premises, and claims related to advertising.
This means that if a customer slips and falls while visiting your office or an employee of yours causes damage accidentally to a client’s property while working there, the associated claims will generally be covered.
Contractors Liability Offers Specialized Protection
Contractors can benefit from the specialized protection offered by contractors’ liability insurance. Its coverage is customized to the exclusive risks that your business faces in the construction and contracting industry.
It considers construction sites dynamic, with constantly changing work environments and multiple parties interacting in sometimes dangerous conditions. In addition to these risks, contractors’ liability addresses the specialized materials and equipment needed for construction projects, along with risks related to completed operations.
The Main Differences in Coverage
One of the most important differences is how these policies approach claims related to completed work. General liability provides basic coverage for certain problems that arise from completed work.
In contrast, contractor’s liability coverage typically has much greater protection for various issues that could arise after the project is completed. Considering that some construction defects may not become apparent until several months or even years after the work is finished, it is easy to see why this coverage is essential.
Coverage for Subcontractors
For those in the construction industry who work with subcontractors, it is important to remember that contractors’ liability policies will offer greater protection for work carried out by subcontractors. The complex relationships involved in carrying out construction work can be significant when several contractors are working on a single project at once, with each posing its own set of risks.
Compensation for Bodily and Property Damage
Although general liability insurance will cover many basic property damage scenarios, contractor liability is designed to address some of the more specialized situations that can arise in this type of work, such as problems related to structural modifications, heavy machinery, and damage to underground utilities. It is significant for more complicated construction projects requiring extensive changes to an existing structure.
The Coverage Limits of the Different Insurance Types
Another difference to keep in mind is the coverage limits and exclusions that apply to the different types of insurance. Contractors’ liability insurance often comes with higher coverage limits that take into account the possibility of a catastrophic construction-related accident or claim. In addition, these policies might include specific provisions for specialized tools and equipment that may not be covered by general liability insurance.
The Importance of Risk Management
The risk management requirements linked to these policies should also be considered. General liability insurance will typically require contractors to follow basic safety protocols.
However, contractors’ liability may require you to follow more rigorous safety programs, including regular safety training and highly detailed documentation of your procedures. You might also be required to maintain certain certifications and quality control measures as a condition of your coverage.
Choosing the Right Insurance for Your Business
It is essential to consider these distinctions when choosing the right coverage for your business. When deciding which type of policy you need, consider the type of work you perform, the location of the work, the subcontractors and other parties involved, and the potential dangers.
Working with experienced insurance professionals who understand the industry well and can help you ensure adequate protection at a reasonable cost can be helpful. At Business Benefits Group, our experienced consultants are prepared to help contractors make these important decisions.
We can help you assess the exclusive risks and challenges your business faces and develop a cost-effective, customized insurance solution while providing you with the coverage you need. Reach out today to schedule a consultation and find out how we can help your business maintain effective protection for all the risks you might encounter.
