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5 Reasons to Only Hire Contractors with General Liability Insurance

When you are thinking of updating or renovating your home, you have many options available for you when it comes to hiring a contractor for the project. But you need to make sure that you are hiring the most reliable and reputable contractor who will work efficiently for completing your project at the right time. There are different factors that you will need to consider when hiring a contractor, but the most crucial factor is the insurance of these professionals. This is especially important because the insurance will protect the contractor as well as the people living/working in the property. Moreover, contractor liability insurance will also offer immense help in the event of damage or accident that might occur when the contractor is working at your property. Since the work of the contractor is filled with different risks, insurance will reduce the extent of property damage or the threat of workers getting injured while working on your project. The insurance policy will also offer financial assistance to the contractors so that you will not have to pay the price for any unforeseen circumstances.

Five reasons to hire contractors with general liability insurance include:

  1. Protection of the workers- since a construction or renovation project is completed with the use of sizable dangerous equipment, you need to ensure that the contractor is insured before starting the project. General liability insurance plays an essential role in offering extra protection to the contractor as well as the property owners.
  2. Protection from claims- when construction workers are completing the project, there might be instances of property damage at your property or your neighbors’ property. Hence, with the right insurance policy in place, you will get the right kind of coverage so that you will not face any claims for the damages caused by the workers. You will not be held liable for the contractor’s fault because the insurance policy offers the highest level of protection.
  3. Long term investment- when the contractors are insured, you will not have to face any risk caused due to injuries or accidents of the construction workers. This is the best way to eliminate the trouble so that no one can sue you for the contractors’ fault.
  4. Complete peace of mind- hiring an insured contractor is a worry-free experience because these professionals will handle the entire problem that might arise during the construction project. The contractor will handle any delays, mishaps, and challenges associated with the construction project. The insurance will also compensate for the legal fees on behalf of the contractor when he issued by a third party.
  5. Required by law– hiring an insured contractor is mandatory in many states because accidents or mishaps can take place any time, and an insurance policy will offer you all kinds of protection. Apart from property damage, the insurance policy will also handle issues relating to accident and safety concerns. Moreover, a construction company cannot perform the work legally without getting an insurance policy.

You may always check here to confirm your contractor is licensed in California.

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How is a Contractor Bond Different from General Liability Insurance?

A good number of contractors mostly confuse contractor bonds and liability insurance. Potential clients need contractors to uphold a certain standard. The two are very popular and might seem alike, but they could never be more different. So, how can you differentiate the two?

A contractor bond is a surety bond that is usually dispensed by the bank or an insurance company to protect the client, contractor, and company. This reassures the contractor completes the project according to terms. Conversely, general contractors insurance protect and secure the insured party from potential bodily injuries or damages.

HOW IS A CONTRACTOR BOND DIFFERENT FROM A LIABILITY INSURANCE?

Upon comprehending what the two terms mean, it is now easier to understand their one-to-one dissimilarities.

First and foremost, the two differ when it comes to coverage policies and limits. Liability Insurance is quite available within diverse coverage bounds. The price usually depends on the policy, i.e., some may start at a limit of two-hundred thousand American dollars and extend to millions. Most contractors regularly go for policies that have a limit of up to a million USD.

Alternatively, the law requires contractors to preserve an active amount of cash or license bond when contract bonds are involved. This is a circumstance for being licensed. The law usually fixes this amount, so there is no way around it. As a result, there is no free coverage choice of contract bonds for contractors.

An additional way the two contrast is the cost. Several factors contribute to how much a contractor’s bonding will total to; the contractor’s license account and credit score are such factors. Each indemnity has its distinct propriety rating method, and this makes the cost to be different greatly depending on the mentioned factors.

Nonetheless, when it comes to Liability Insurance, the insurance company may lay out different whys and wherefores (payroll, selected coverage, etc.) that may affect the cost. Typically, the policies start at a specific price per year and increase exponentially in the subject to the factors.

The third way to differentiate the two is how respective claims are run and taken care of. In the event of a claim, a contractor bond will need surety. Thus the company has to disburse money as a result of the contractor’s unauthorized activities. This payout includes the indemnity and any necessary additional expenses.

Accordingly, the bond company also has to appraise the case by conducting proper research and contacting both parties for essential information helpful to the situation. This helps conclude if indeed a violation has transpired or not.

Claims related to Liability Insurance do not demand any form of security or security at all. Upon the filing of a specific claim, the company analyses the claim and the related policy to determine if it is covered by the policy or not. This means the law does not bind the contractor to pay out under ordinary context.

Finally, the rates of each surety tell apart a contrary bond and the liability insurance. The former does not usually need the contractor’s credit score or license history for the company to decide the rates. In some situations, however, the company might need these if allowable by the law. In liability Insurances, however, the company will utilize its rating system to know what rates apply to the specific contractors.

Companies usually depend on the works of the contractor and how good or even bad they are doing in terms of revenue to foresee potential risk. In such cases, percentages are pulled together from a strong group of policyholders and used to reimburse claims of a trivial few if and when they come about.

Every contractor licenses their bonds no matter the company allotting it whereas Liability Insurance policies will always have security barring with different policies having different exclusions. Bonding companies have to make sure you can well account for the money they pay out.

In a nutshell, the critical difference that will always stand is which party stands to get financially reinstated. None is a substitute of the other but are both handy services. Anyone interested in applying for either should know what they are up for beforehand.

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Contractor’s General Liability Insurance

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It is important for all contractors to carry the proper insurance coverage to ensure their business is covered in time of need. With so many unknown accidents that may happen, it is always important to safeguard your livelihood with a policy that protects you from 3rd party bodily injury and property damage.

General Liability insurance is designed to provide coverage for these 3rd party claims as well as provide coverage for legal defense expenses. Attorneys may cost over $1,000 per hour, wouldn’t it be nice to know these are being paid for by a properly covered insurance policy.

We thank you for visiting our website, be sure to visit often as we will continue to update you on the latest developments within the contractor’s insurance industry.

We are committed to offering our readers up to date information about the ever changing world of insurance in the construction industry.