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Contractor Insurance Explained

An increasing number of people in the workforce are contractors. If as a business owner you use contractors, you have to ensure that they have contractors insurance in the event of damage or injury caused by them on your property. As a contractor you may need coverage to protect yourself from claims made against you directly and any legal costs incurred even if you are wrongfully sued.

Who is a potential candidate for contractor insurance?

This type of policy is an option to anyone who contracts their services to other companies. Some companies are more likely to use you if you have a contractor insurance policy in place to protect them from any issues. Cover is mandatory if you want to contract to a governmental organization on a federal, state or even city level. Without contractor insurance you have no chance of being asked to supply services to government.

You have a responsibility over the work you provide to your client and contractors insurance protects you and them from the resulting issues.

What typically does a policy cover?

A policy in this area typically has three parts to it, a schedule to cover you, a schedule to cover the company or person you are contracted to and a schedule to cover any member of the public affected directly by your work as a contractor. In each of the categories, there should be a full protection option available from your provider against accidental damage caused to equipment and property and full liability protection covering medical, legal and compensation costs.

What typically does a policy not cover?

A policy typically will not cover negligent acts or errors that are deliberate. Nor will they provide extended cover if you demonstrate a pattern of consistent, negligent behavior. Other than those two major exclusions, contractor insurance is typically very comprehensive as it gives you and the company that has offered you the contract, a safety net that otherwise would not be available.

Additional products that policy holders might take out in this area

Contractor policies are largely made up of public liability and professional indemnity elements. It also covers equipment and property to a large degree. If you want extra coverage in these areas as you know the amount of business you will turnover in a year is high then you can apply for separate cover to protect you to a greater degree.

Additional coverage for a contractor insurance policy

As contractors work may be used many years after they have completed the work, a policy may only come into play many years after a contract is completed. Have appropriate coverage will ensure you are still covered for liability even after you retire as you want to be covered in the event of any subsequent legal action. This may take the form of a 'run-off' insurance policy or an extension of the liability clause to your contractors insurance.

What will it typically cost?

Contractor coverage is essentially a hybrid of professional indemnity and public liability policies. The amount you have to pay for a policy is usually determined by a percentage of your company's turnover and the amount of cover required. The size of the percentage is then dependant on your industry and the likelihood your company will be taken to court and the insurer you choose to go with. Rates range from 0.5% to 1% of your total cover.

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