General Liability insurance is necessary for contractors because you need to consider it “sleep insurance.” It will protect you while you’re off the job site, while you’re not working. For example, if someone is putting an air conditioner on a roof, and the boom swings through the window and smashes it out, and you don’t have General Liability insurance, you’re going to be on the hook for all of that. If you have a contractor’s bond they’re going to go after that instead and you’re going to be in trouble. Let’s say you’re a subcontractor, working for a general contractor, and there’s a fire on the job. Who knows whose fault it is – could be the paint guy, nobody knows. But what’s going to happen is, every single subcontractor is going to get sued. And if you don’t have General Liability insurance of your own, even though you’re working for the GC, you have liability there.
On the upside, General Liability insurance can help you, especially if you’re going to bid on a job and it’s you against three other guys. One guy walks in and says: “Hey, I don’t have insurance but I’ll give you the best rate, and pay me in cash.” The second guy comes in and says, “Well, I’ll get insurance if I get the job.” And you walk in the door and say, “I’m bonded, I’m licensed, I’m insured – I have General Liability insurance, I can have my agent send over a certificate, and I want to earn your business.” On the level of professionalism that’s huge! If you walk in the door and you’re prepared, chances are you’re going to get that job.
In my industry, being on the commercial insurance brokerage side, my customer service department spends a lot of time dealing with panicking contractors that are going to get kicked off jobs because they don’t have the right insurance, they said they were going to get it, or they started the job, signed a contract, and now they’re trying to get insurance. Insurance is part of your work as a contractor so make sure you plan for it and budget for it. If you go bid a job, and don’t put in the price of insurance on your job, you just took a cut in pay.
Get It Right From the Beginning
As a broker what I recommend, when I give presentations to contractors all over the country, is to bid your job out correctly in the first place. If you’re going to go out and bid on a job, one of the first things you should do is ask the client for their insurance requirements in writing. It sounds like a small thing but it’s very important. Number one – that’s going to make you look professional, and number two – you’re going to be putting them on the spot. If they’re requiring insurance, you’re letting them know that you want to know what it is. That allows you to go to your broker who can review the insurance requirements in writing. Not all insurance requirements are the same. They may just want an additional insured request; they may just want a certificate request. Or they may just want an additional endorsement or something that’s going to run up the cost of your insurance. How will your broker know unless you give it to him? That’s a real problem in our business. Contractors are blowing up our phone lines because they’re getting kicked off jobs or even worse; they’re not getting paid on a job that they worked on!
This has reached epidemic proportions in our industry.
Contractors are signing contracts and agreeing to insurance requirements that they don’t understand because they never provide them to their broker. And the GC doesn’t ask for them until you’re about half way through the job. And if you don’t provide those, they don’t have to pay you. So if you want to work for free, don’t ask for insurance requirements. I know a contractor whose marriage fell apart because he started a job, he didn’t get the insurance that he needed and he did not get paid $45,000 owed to him, and you can’t take back concrete once it’s poured – and he ended up getting a divorce over it. True story.
So to wrap up, when you’re bidding on jobs, ask for the insurance requirements, up front and in writing and have your broker review them. Then you will be prepared. There may be a price increase – they may be asking for some things that nobody knows about, and you sure won’t know about it until it’s time to collect that pay check.
Mark Chandler is president of My Trade Network, a place where contractors can obtain insurance products and services that will assist them in running their business more efficiently.