Spring is here and that means building and landscaping operations are popping up! We always see an influx of calls from contractors starting their own businesses in the spring. Beehive Insurance LOVES to work with new venture contractors! Our small business unit helps hundreds of contractors find the appropriate coverage for their new business. Here are just a few basic general liability guidelines that we tell our new clients to keep in mind when starting a small construction or landscape company:
1) The Department of Professional Licensing (DOPL) only requires a minimum limit of $100,000 per occurrence / $300,000 aggregate on your general liability coverage. We find this limit to be dangerously low based on claims statistics where the payout on a simple general liability claim will quickly reach $1,000,000 or more. We recommend having general liability limits of no less than $1,000,000 per occurrence / $2,000,000 aggregate. Higher limits are also available within an umbrella policy.
2) All payroll for owners, partners, employees and money paid to insured subcontractors must be accounted for on your policies. Your premium will be calculated based on your estimated annual payroll and subcontractor costs. Most policies will be audited at the end of the term, so if you had more payroll or subcontracted costs than you had listed on your policy, you would owe additional premium for that growth. Conversely, if you had less payroll or subcontracted costs than you paid for, you may be eligible for a return premium.
3) It is important to communicate with us what your anticipated operations will be. Each policy will be written with a specific class code(s) which indicates what type of jobs you will be performing i.e. electrical, plumbing, flooring, roofing, landscaping, etc. It is common for your operations to expand as your business grows so make sure to call us when you have changes in your organization so we can adjust your policy to cover all your work.
4) We work with hundreds of general contractors who hire most of the work to be done by subcontractors instead of doing the work themselves or by their employees. The insurance industry deems these operations as “paper contractors” where the general contractor just manages the paperwork and schedules of the subs. Most primary insurance companies will not write this type of work, but don’t worry, we have many options for paper contractors! An application will be required before a quote can be generated, but we typically can receive quotes back for a paper contractor in 3-5 days.
5) When hiring subcontractors to do work for you, make sure to only use insured subcontractors who carry their own insurance with limits no less than yours. Using a strong subcontractor agreement contract and collecting certificates of insurance with every subcontractor you hire is critical to protect your business and your assets. At audit time, your insurance carrier will ask for copies of these certificates to prove that you are indeed using insured subcontractors. If you have not collected those items or if you are using un-insured subcontractors, the insurance company will rate that work as employee payroll which comes at a much higher rate.
Whether you are just starting your contracting business or would like to shop options for your current coverages, please give Beehive Insurance a call! We love contractors and would enjoy working with you!
