Commercial liability insurance is very important for small business as well as contractors — both building contractors and independent contractors in other industries. Accidents happen in any business, and if you’re ever sued for injury or property damage a commercial insurance policy can be a real stress reliever.
When a claim is made against your policy, your commercial liability or general liability insurance pays part or all of the damages including the cost of your legal defense.
Without adequate commercial liability coverage, you would likely have to pay damages and defense costs out of pocket, resulting in financial strain or quite possibly, even bankruptcy.
The types of policies and amount of coverage you need, also called policy limits, depends on the amount of risk associated with your particular business and where your business is geographically. Building contractors and sub-contractors in general, are prone to accidents at the work site, even if they take all the safety precautions required. Many contractors carry $1 Million, $5 Million and even higher limit policies depending on their location, risks and the type of projects they work on.
Commercial insurance is either sold directly or indirectly through an agent or broker. Since many independent agents and brokers represent multiple insurance companies they are able to offer better rates. Brokers typically charge more than agents, but you usually get better representation, as brokers are responsible to you first, instead of the insurance agency.
When buying commercial liability insurance you should take time to contact more than one agent, broker or direct insurer. Shopping around is the best way to get the best price. You can also get quotes online if you already know what policy or policies you need.
A good, reputable agent or broker can also offer very specific advice on the amount and types of commercial liability insurance you might need. They can also help help you shop around for your insurance. But remember, some agents may work with only one or a few insurance companies. If this is the case, they may be unable to get you the best price possible for your policy.
That’s why you should work with more than one agent. Not only is this the best way to get the best price, it’s also the best way to make sure you are getting the coverage you need for your business.
When speaking with an agent, ask them to explain anything about the policy that you do not understand. Don’t be shy. Insurance lingo can be difficult to understand, so don’t hesitate to ask any questions you might have.
It is your responsibility to know what the policy does and does not cover (also called exclusions). This includes how to make a claim when necessary, and exactly how claims are processed.
Also note that a policy written on an “occurrence basis” covers losses from incidents occurring during the policy term. A policy written on a “claims-made basis” covers losses which arise from incidents occurring during the policy term but only if the claim is made during the policy term. Therefore you should report any incidences immediately and without delay.
While going without commercial liability insurance may save you some premium dollars, it exposes your business assets and perhaps even your personal assets to potential catastrophe. You could even end up paying legal defense costs even if you are not found liable.
Also, commercial liability insurance is required under federal and state law for many businesses including building contractors and many other independent contractors in nearly all areas of the United States. If your state is included, you could be in for other penalties if you’re found to be operating without a license or without insurance.