An Important Distinction
The Contractor's Insurance Policy
A contractor's insurance policy is designed and priced on the basis the applicant is performing the work as the tradesman (another term often used is Artisan). A business who's main function is contracting others to complete a specific project is not a contractor. The term often used is "General Contractor" and their business insurance needs are much different and more complex than a contractor's.
Subcontracting Limitations Under A Contractor's Policy
Some subcontracting is allowed under most contractor's insurance policies. As a general rule if a subcontracting accounts for more than 30% of the contractor's receipts he would need to seek special insurance coverage. The percentage will vary among insurance companies.
If your subcontracting reciepts exceed 30% of your gross receipts you will want to secure a General Insurance Policy where your needs can be addressed appropriately. Even in cases where the receipts are less than 30% you may still want to seek coverage under a General Insurance Policy.
Are You Covered When You Hire Subcontractors ?
Even when the insurance company allows you to subcontract work they may require you to secure proof of insurance from the sub contractors you hire. This means if you hire uninsured contractors your policy may not respond to losses associated to your subcontractor's work. So this may explain why you are sometimes asked for proof of insurance from some of the people who you sub contract with.
Good Advise - Understand what your policy demands of you. If you can't fulfill those requirements seek out a policy that will fit your needs.
General Contractors
If you are a General Contractor your insurance needs are far more complex. Designing the proper policy for you requires more work and a clear understanding of your operations.
A Comprehensive General Insurance Policy requires an underwriter and a submission. How the application is compiled an presented to the underwriter can make a huge difference on both premium and coverage.
If you are a General Contractor your insurance needs are far more complex. Designing the proper policy for you requires more work and a clear understanding of your operations.
A Comprehensive General Insurance Policy requires an underwriter and a submission. How the application is compiled an presented to the underwriter can make a huge difference on both premium and coverage.
What are the advantages of a Contractor's Insurance Policy?
Contractor's insurance policies are designed to protect contractors operation better than the average commercial property insurance policy. Coverage is usually bundled under the package and addresses most needs of the average small contractor. One size never fits all and the insurance package is usually requires some alterations to address different contractors.
The policy premium is usually substantially lower than under a regular commercial policy where minimum premiums for liability alone are often higher than the average contractors entire policy premium. Insurance premiums start at $400 under a contractor's policy. We can often quote a policy quickly and bind coverage within a short period of time.
Industry Specific Codes
Each insurance company has a list of contractors they will insure under the low rate, better coverage package. These policies are designed for the smaller operators who do a large percentage of the work themselves, or are generally involved in the day to day operations.
The insurance company lists the acceptable trades by Industry Codes. Some insurance advisers are not very well versed in the industry codes and may assume that you qualify for the insurance package when you really don't. This can lead to some contractor's being insured under a contractors policy when they clearly do not qualify. The reason why I mention this is some contractor's insurance policies are rated and bound by the agent much like home insurance is. If an error is made as to whether the contractor qualifies it may never be discovered until after a claim occurs, and often ends in denial of a claim. If your adviser has limited exposure to the construction and service industry he may be prone to making assumptions that a more experienced adviser would not.
Contractor's insurance policies are designed to protect contractors operation better than the average commercial property insurance policy. Coverage is usually bundled under the package and addresses most needs of the average small contractor. One size never fits all and the insurance package is usually requires some alterations to address different contractors.
The policy premium is usually substantially lower than under a regular commercial policy where minimum premiums for liability alone are often higher than the average contractors entire policy premium. Insurance premiums start at $400 under a contractor's policy. We can often quote a policy quickly and bind coverage within a short period of time.
Industry Specific Codes
Each insurance company has a list of contractors they will insure under the low rate, better coverage package. These policies are designed for the smaller operators who do a large percentage of the work themselves, or are generally involved in the day to day operations.
The insurance company lists the acceptable trades by Industry Codes. Some insurance advisers are not very well versed in the industry codes and may assume that you qualify for the insurance package when you really don't. This can lead to some contractor's being insured under a contractors policy when they clearly do not qualify. The reason why I mention this is some contractor's insurance policies are rated and bound by the agent much like home insurance is. If an error is made as to whether the contractor qualifies it may never be discovered until after a claim occurs, and often ends in denial of a claim. If your adviser has limited exposure to the construction and service industry he may be prone to making assumptions that a more experienced adviser would not.
The usual Trades Insured under a contractors policy (with industry codes in brackets).
Acoustic Ceiling Installation (1756)
Air conditioning including Heat Pumps (1717)
- Excl. L.P.G. Systems
- Subject to $1000 PD deductible
Alarm System Installation (7396)
- residential only
- Subject to failure to perform exclusion
Aluminum or Vinyl Siding, Doors, Windows, Awnings, Eavestroughing and Eavestrough Cleaning (1766)
Appliance Repair (7692)
Bricklaying, Masonry, Stonework and Stuccoing (1743)
Building Construction including alteration, renovation or repair
- Residential (1811)
- Commercial (1812)
Excluding buildings over 3 stories or new building Construction over 10,000 sq. ft. in ground floor area and excluding hot tar and torch on roofing applications
Cable TV wiring (1731)
Carpentry (1752)
Chimney Sweeping (7321)
Driveway and Sidewalk Construction (1521)
Drywall (1744)
- Including plastering and lathing Page C-4 Alta. (06/11)
Electrical Wiring within buildings (1731)
- Excluding machinery and alarm systems
Excavation including back filling and site leveling (1774)
- Excl. sewers, tunnels and subways
- Subject to $2,500 Underground PD deductible
Fence Construction (1522)
Floor Covering Installation (1756)
Furnace and Heating Duct Cleaning (7321)
Glazier (1535)
- Excl. Auto Glass
- Excl. exterior operations over 3 stories
Grading of land (1526)
- Excl. excavation and road construction
Heating (1715)
- Excl. L.P.G.* Systems
- Excl. boiler installation/repair
- Subject to $1000PD deductible
House Furnishings Installation (1756)
- no moving
Insulation Installation (1753)
- Excluding Asbestos and Urea formaldehyde foam remediation or removal
Interior Design (1757)
Janitorial Services (7394)
Landscape Gardening (0735)
- no tree removal or spraying operations
Locksmith (7693)
Painting, Decorating and Wallpapering (1754)
- Excluding exterior spray painting
Plumbing including hot tub installation (1711)
- Excl. L.P.G.* Systems
- Excl. boiler installation/repair
- Subject to $1000 PD deductible
Refrigeration (1718)
- Excl. L.P.G.* Systems
- Subject to $1000 PD deductible
Roofing (asphalt shingles only) (1775)
- Excl. hot tar operations or torch on applications
- Subject to $1000 PD deductible
Rug & Upholstery Cleaning (7395)
- Excluding handmade oriental or Persian type carpets Page C-5 Alta. (06/11)
Septic Tank Installation (1778)
Sheet Metal Installation (1762)
- no plumbing or heating
Sign Installation (1532)
- Including erection and repair
- no operations over 3 stories
Siding and Building Wrap Installation (1811)
Television Antennae and Satellite Dish Installation (including wiring) (1534)
- excl. operations over 3 stories
Television, Radio & Home Entertainment Equipment Repair (7691)
Terrazzo & Ceramic Tile Work (1745)
- no masonry, sewers, drains, ceiling work
Underground Sprinkler Installation (1524)
Water Softening or Treatment Equipment Installation (1720)
Water Well Drilling (1770)
- Excl. oil & gas
- Subject to $2,500 Underground PD deductible
Window Cleaning (7392)
- Excl. exterior operations over 3 stories
* L.P.G. = Liquid Petroleum Gas (propane, butane, or mixtures of the two, does not include natural gas)
Contractors that perform more than one trade may find that one of those trades would disqualify them from coverage under a contractor's insurance policy, even if it is a minor part of their business. Yet, an advisor may have a tendency to describe the operation as the predominant trade performed leaving out the industry code for the unacceptable operation. All of the proper industry codes have to be reported on the application.
For example - I have seen cabinet makers insured as carpenters. The trouble is a cabinet maker is not an acceptable risk for this type of policy and should not be considered a carpenter(carpenter is a general trade description). The cabinet maker in this example had a policy he did not qualify for. Cabinet makers are often classified as woodworking shops since their tasks often include high dust concentrations and spraying of flammable material. Only after careful consideration would an insurance company agree to insure a woodworking operation under any circumstances, let alone under a low priced packaged product like a contractors insurance policy.
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