3 of the Most Important Insurance Coverages for Contractors (That You May Not Be Thinking About)
The insurance landscape is changing just about as often and drastically as technology. I grew up towards the latter part of the cassette-tape era and now you can play any song you want in an instant. I haven’t been in the insurance industry that long. But, I did start my career in insurance towards the latter end of a “soft” market in a far less litigious society. In the last ten years, there have been enough changes that have the insurance industry I started in much less familiar.
If you’re a contractor, you know that almost every aspect of your business has changed over the last decade. As such, the external risks that you face and the insurance you need to protect yourself from them have changed as well. In helping contractors with their business insurance for the last 10 years (& growing up in a contracting business), I’ve realized there are three aspects of your insurance that you should be paying much closer attention to now than you would have 10 years ago.
1. Cyber Insurance for Contractors
Cyber insurance is one of those things that most businesses know very little about. As a result, businesses tend to ignore the risks associated with cyber-attacks simply because they don’t understand them. The common misconception is “why would anyone target my small business – we don’t have as much information/money as larger companies”. While that thinking isn’t entirely wrong, it leaves out one very important factor that would clearly make small businesses likely targets for cyber-attacks. The factor: it’s MUCH easier to complete a successful cyber attack on a small business because they typically have less protocols and weaker security than big businesses.
If hackers can gain access to companies like Yahoo, Marriott, Equifax, and Target – don’t you think they’re capable of hacking your small business? Think about all the information your business stores on a daily basis – personal information, bank information, customer information. Now, think about what it would do to your business or how you would respond if an outside threat gained access to that information? It is paramount for contractors to consider proper cyber security protocols alongside a comprehensive cyber insurance program to protect their business from this risk.
2. Third-Party Harassment Coverage for Contractors
Let’s face it, there’s a lot of things we used to say ten years ago that just cannot be said anymore. People have become more sensitive to certain topics and as a result, they have taken more litigious actions towards these situations. As a contractor, you may have multiple crews out on multiple jobs on any given day. Some of those jobs may be residences, some of them may be large corporate offices. In either situation, your run the risk of your employee doing or saying something that a customer (or third party individual) finds offensive.
While you and I both know that something might just be harmless banter between two employees, the fact of the matter is that not everyone has the same sense of humor. Also, not everyone can be trusted. Here’s a story to prove my point.
Six years ago, I had an HVAC contractor who did primarily residential work in high-end neighborhoods. He sent a gentleman out for a service call and shortly after he arrived, the business owner received a call from the customer. Hysterical, the customer called the business exclaiming that their employee made a sexual advance at her and exposed himself to her. The business owner quickly called the police to ask them to meet him at the residence to get it sorted out. When he called the police and told them the situation, they responded: “Was this at Mrs. Doe’s residence?”. My client couldn’t believe they already knew about it. When he asked how, they said this was the third time this month she tried to report the same exact instance with a contractor.
Of course, his employee did nothing wrong and this person was simply looking for a pay-day. However, in situations like this, it can become a he-said, she-said situation that you don’t want to find yourself in. The best way to protect yourself from these situations is properly training your employees on proper jobsite etiquette and backing it up with third party harassment coverage.
3. Commercial Umbrella Coverage for Contractors
When I first started in the industry, the stigma around commercial umbrellas was “take as much as you can get”. At the time, umbrella coverage was cheap and it would cost a business a nominal amount to get 2,3,4,5X the amount on their umbrella limit. Unfortunately, that part of insurance has seen a drastic change over the last 5-10 years. Why? Because claims are actually being paid out at amounts high enough to need your umbrella.
Multi-million dollar lawsuits are being handed out like candy anymore. As a contractor, one of the biggest risks you run is your employees driving vehicles with your company’s name on the side. Any car accident involving your company vehicle is going to be looked at with far more scrutiny than anything else. If that accident happens to be your fault and worse, it leads to some sort of disability or fatality – you’re going to need every ounce of an umbrella that you can get.
Now I’m not saying to go insurance broke and buy a $50 million umbrella. But you need to remember that you buy your insurance to protect you from things that you can’t afford to pay out of pocket. Multi-million dollar claims fall at the top of that list. There’s no magic formula to figure out how much umbrella coverage you should have but there are two things I typically ask a business to consider. Number one – what would allow you to sleep better at night? And two – what’s your business worth? Those two things will at least help you start to hone in on what you believe is an appropriate amount of coverage to have on your absolute worst day in business.
I encourage all contractors to keep a close eye on these three coverages next time you review your insurance. These will be three areas that you will see an increase in claims-filed and you’ll also start to see an increase in cost for. An increase in cost in the insurance industry is typically a good indicator of areas that you should be concerned about because when insurance companies start seeing/paying more claims for certain coverages, they start charging more.