Did you know that 90% of businesses face lawsuits at least once? These litigations may result from anything from service mistakes, negligence, or non-delivery of products. Hence, insurance protection is crucial for every business, including contracting businesses. Multiple contractor insurance policies can help protect your business against these litigations. The best of all is professional liability insurance. Let’s understand why.
What Is Professional Liability Insurance and What Does It Cover?
Contractors often handle complicated projects that involve several different parameters and variables. Since contractors don’t work in permanent teams, they often hire professionals temporarily to handle different aspects of the project.
Professional liability insurance protects contractors from litigation on service mistakes and other losses that are related to damage or repairs. It covers construction errors made by the contractors or any third-party vendors associated with them.
Moreover, it provides optimal coverage for both small and large firms. It broadly covers these firms on the grounds of negligence, omissions, violation of agreed parameters, inaccuracy, etc.
Why Should Contractors Consider Costing While Choosing a Professional Liability Insurance Policy?
As a contractor, a single lawsuit can hit you a hard when considering numerous settlement expenses, plaintiff compensation, court costs, administrative costs, attorney fees, and other legal expenses. It can even result in a complete business shutdown.
Therefore, while choosing professional liability insurance, you must consider the following things:
- The scale of the business
- Geographical location
- Limits of insurance covers
- Claims history
The cost of professional liability insurance increases with the increased risk involved in the project. However, there are certain precautions that you can take to keep both cost and risk factors under control. They are:
- Plan realistic schedules
- Maintain transparency between the two parties with well-defined expectations in the contract.
- Hire reliable vendors and subcontractors
- Properly train onboarded employees
- Arrange regular site inspections
- Maintain thorough documentation
- Focus on the quality of your services
What Are the Different Types of Professional Liability Insurance Best Suited for Contractors?
Contractors can leverage two main types of professional liability insurance policies. These are:
1. Claims-Made Policy
The claims-made policy is the most commonly picked professional liability insurance because it covers all incidents that happen during the coverage period, thus, ensuring comprehensive coverage. However, you cannot claim anything beyond the implementation duration of the policy. Hence, buying this policy before starting the project is advised if you wish to cover the entire project duration.
2. Occurrence Liability Policy
Occurrence-based liability policy, like a claims-made policy, covers all events during the coverage period. The good thing is that you can extend its coverage to additional events that may occur after the defined coverage ends. Occurrence-based liability policy works on a per-event basis which means it involves individual coverage and claim option.
Before you pick any of the professional liability insurance policies mentioned above, you must do a comparative analysis or consult with your insurance provider to understand what is best suited to your needs.
How Is Professional Liability Insurance Different from Builder’s Risk Coverage?
Both professional liability insurance and builder’s risk insurance policies are popular in the construction business. However, subtle differences can help you pick the right policy for your needs. For example, a professional liability insurance policy requires a project structure to define the coverage parameters. However, builder’s risk insurance can be used for new projects with no set structure.
Although these policies have similar cover conditions like the type of loss, professional liability insurance is usually maintained by the contractor; whereas the builder’s risk cover is taken out by the project owner.
Key Takeaways
Professional liability insurance is a must for contractors to protect their business from unforeseen losses and potential lawsuits. There are multiple options like claims-based and occurrence-based insurance policies they can choose from based on their needs.
Having said that, a crucial aspect of professional liability insurance is the insurance provider. Yes, costing is essential, but you should always go for the finest professional insurance solutions in the market.
We at Gonzalez Insurance believe in providing our customers with the best of services at a reasonable cost. We also furnish tailored insurance solutions that you can customize according to your business needs. If this interests you, contact our expert team today to know more.