Avoiding Insurance Pitfalls
The possibility of an accident is always there. That’s why you cover that possibility with insurance.

In the commercial world, however, policies may be sold through “Independent agents,” each representing several different carriers. In most cases, this is the preferable arrangement for a construction business owner for the following reasons:

•• You will have the opportunity to select an agent who specializes in commercial insurance for contractors.

•• Independent agents work for you, as they are not employees of the insurance company. Their judgment won’t be clouded by who signs their paycheck. An established, career agent is interested in developing good client relationships, and that can only be done through consistent, reliable service along with recommendations that serve your company’s interests. They are interested in the long term relationship.

•• They can match you with the carrier who best fits your business since they represent several different carriers. They will often get competitive quotes from 3 or 4 carriers to determine the best price. But price isn’t the only consideration. They also bring into the equation their experience with that carrier. How easy are they to work with? How well do they handle claims? Then you will be able to choose your carrier, using your agent’s advice.

A final important consideration in the selection of an agent is to make sure the agent has a professional support staff that can adequately service your policy.

Once you have settled in on the right agent, you will select an established, reputable carrier (using your agent’s guidance).

•• Place your coverage only with a carrier rated A-or better by AM Best Company. If the ratings are lower then that, the company has been having issues which could compromise their ability to service

you. Beyond that, avoid coverage from unrated carriers or self-insurance funds. Such companies may have lower rates, but the risks of their not being able to service your claim adequately are just too great.

•• Ask about value added features offered by each carrier such as loss control services, interest free pay plans, safety programs, etc.

•• Ask about the carriers claims-paying reputation. Are they fair and responsive, or tough and slow?

•• If possible, select a carrier that has offices in your state.

•• The bid mentality doesn’t work well with insurance. Good insurance companies aren’t excited to write insurance with “shoppers.” They are looking for the long-term relationship. So select a company and stay with it several years before shopping for a better deal.

POINTS TO NOTE

Contractors need three kinds of insurance: Commercial Insurance, Workers’ Compensation Insurance, and General Liability Insurance. For each of these types of insurance, we’ll list areas to which contractors in particular need to pay attention.

PROPERTY INSURANCE

Property Insurance covers losses of property or time that the business may incur. There are many different kinds of coverage. Of particular value to a contractor is “Builders Risk” insurance that covers buildings while they are being constructed. “Business Interruption” is another. The loss of income and the additional expenses a business has when there is property damage or loss are covered by this type of insurance. Coverage for tools and mobile equipment (called Inland Marine Insurance) is another type of property insurance.

WORKERS’ COMPENSATION INSURANCE

If a company has three or more employees Georgia law requires employers to purchase Workers’ Compensation Insurance. However, companies with fewer than three employees still need to consider this kind of insurance very

seriously. Whether or not they purchase coverage, they are still responsible for an injured employee’s medical bills and lost wages—without limits. So if you have any employees, workers comp insurance is a necessary precaution that protects your business and provides reasonable assurance to your employees that their needs will be taken care of.

Although Workers Compensation insurance is strictly regulated and the policy language is standardized, it is still a competitive product in Georgia. You will need to evaluate who to get it from based on factors such as value-added services, better payment terms, claims experience, and price.

In regard to Workers Comp don’t overlook the following important points:

Make sure the legal issues are covered: If your employees are sent to work or travel in states other than Georgia, be sure to check and make sure those additional states are listed in the policy “Declarations.” Otherwise, they are not covered and you could be liable for an accident there.

Estimate your payroll accurately: overestimating or underestimating your payroll can create unfavorable situations for the employer.

Managing your Subcontractors: If you sub out your work to an uninsured subcontractor, you will be responsible for the benefits of the sub’s injured workers. To avoid this liability, make sure you have current certificates of insurance for each of the subcontractors that you used during the policy period. Also make sure the certificates show Workers’ Compensation coverage is being provided. (Many small subcontractors have General Liability coverage but no Workers’ Compensation coverage.) Certificates of insurance must cover the period when the subcontractor worked for you. Be aware, this may require certificates covering different policy terms for the subcontractor. During an audit, you will be required to show those certificates.