Business Insurance, and especially contractors insurance can be somewhat confusing and difficult to understand.  Many business owners do not understand their insurance coverages.    In most cases the business is the lifeblood of the business owners income, which makes this knowledge crucial to the survival and success of that business.

Business owners are busy people and quite often don’t think that they have the time to sit down with their insurance agent to properly discuss their business.  It is vitally important for the insurance agent to completely understand the business and the risks that are involved.  A gap in coverage could spell financial disaster.

Workers’ compensation insurance

The most common type of insurance for contractors is workers’ compensation.  Most businesses and contractors in Indiana are required to procure workers’ compensation insurance.  This insurance provides coverage for personal injuries suffered by employees while they are on the job.

Turmoil in the health insurance industry and the rising cost of health insurance has caused workers compensation insurance to increase in cost.  This has caused some contractors to “skimp” on their workers compensation insurance by not fully disclosing their true number of employees or their true payroll.  While this tactic will decrease the upfront premium it opens that business owner up for serious financial problems if they have a someone injured on the job.

Business Owners Policy (BOP)

For most small business owners a Business Owners Policy (BOP) will cover the majority of their risks.  Most BOP’s can cover the business liability, building coverages, personal business property, tools, and many other items.  However, like all individuals, each business is unique and has its own set of risks that need to be evaluated.

Your insurance agent should know the intrical parts of your business and the risks that are taken each day.  For example many landscaping companies engage in snow removal during the winter months.  If the insurance agent is uninformed about the snow removal there may not be any coverage for snow removal, and one accident could mean financial ruin for the business owner.

What’s usually NOT covered

Some contractors and business owners may be under the false impression that their insurance can protect them from faulty workmanship.  In most cases, insurance covers the insured for sudden and unexpected accidents or losses.  Defective workmanship can sometimes be covered in a warranty plan, but your BOP normally does not extend coverage to warrant the quality of your work.

Does your business cover losses caused by subcontractors?  Some policies do and some do not.  In either case, if your company uses subcontractors be sure to obtain proof of insurance in the form of a Certificate of Insurance and have them name you as an Additional Insured.  This one simple step could save your company from financial disaster.  In most cases your insurance agent will be happy to help you with this simple step.

Business Insurance can be both complex and expensive.  It is vitally important for your insurance agent to understand your business.  I recommend that you sit down with your insurance agent at least on an annual basis to review the progress of your business and how your insurance fits your needs.  Your insurance agent should be a trusted advisor that you can depend upon for advice and a true assessment of the risks that you as a business owner take every day.