Today we will discuss 4 things that you need to avoid when buying New York contractors insurance.
Insurance, and especially contractors insurance can get complicated with insurance companies competing for policyholders by offering less than ideal terms.
Don’t make the mistake of choosing the cheapest policy without making sure you have successfully avoided the pitfalls outlined below.
For additional information download our helpful guide to purchasing contractors insurance in the sidebar.
Avoid a Claims Made policy:
Although often this is a cheaper policy, we always recommend purchasing an occurrence based policy.
Let us explain. Claims Made policy is triggered when the claim is brought in. So if the policy is not in force while the claim is brought to the insurance company, there is no coverage.
The most common example is a retirement. Let’s say, Dave, had retired from his 40 year old construction business. 2 years later a claim is brought in for the project he worked while in business.
Even though he had insurance, since he terminated the policy, once he retires there is no coverage!
The only way you can get coverage for past projects with claims made policy is to purchase a “tail coverage.”
An Occurrence based policy is often more expensive, but there is no catch.
As long as you had the policy in force while on the job, the claim is likely to be covered (or at least investigated).
Avoid a poorly rated insurance carrier:
Companies such as A.M. Best and Standard and Poor’s rate all insurance companies based on their financial health.
The companies abilities to pay out claims is rated on a letter scale with A++ being the best rating a company could receive. Any quote you receive should detail the current rating for that company.
We recommend not accepting any company with a rating less then A-.
Not only your policy is at risk but also your bigger clients will often require you to be insured with an A rated carrier to award you the job.
Avoid a broker that represents only one company:
An experienced broker that represents multiple insurance carriers has the ability to be a true advocate for you.
It’s important to compare at least a few quotes, and a broker is your one stop shop – all the work is done behind the scenes saving you time and money.
The broker will explain the differences between each company’s quote and advice on which coverage suits your situation best.
With an agent representing only one company, you are stuck with that company, or you need to repeat the quoting process with another agent, wasting valuable time.
Look for an independent or trusted choice agent.
Avoid “your work” exclusion:
“your work” exclusion excludes coverage for any work completed by you, the insured.
Simply put, it will decline coverage for any construction defect claims.
Since construction defects lawsuits are the most common in a construction business, including this exclusion in your policy can be disastrous.
Bonus – Avoid Action-Over Exclusions or Contractual Liability Limitations:
New York is home to a unique law that imposes strict liability on contractors for gravity related injuries.
Holding the contractors liable most of the time regardless of fault! These claims can result in large settlements and claims.
If you have employees or use sub-contractors you need to be aware of this law and insurance coverage.
Bottom Line:
It is very tempting to go for the cheapest deal on the table, but it can backfire.
For example, if you purchase a policy with “your work” exclusion then you effectively render your policy useless no matter how much you paid for it.
An experienced and trustworthy broker is key to avoid big and costly mistakes when it comes to your coverage.
