Most commercial jobs will require you to be properly insured and even some residential customers are asking for proof of insurance. We asked the experienced team at Brunswick Companies to share their insight on the importance of insurance.
Senior Vice President Michelle Hirsch has over 14 years of insurance experience, working with entrepreneurs and small business owners to help them manage their risks while they grow. Brunswick Companies has offered insurance brokerage and risk management consulting services since 1972.
Business owners and individuals recognize the benefit of transferring potential liability to others and negotiating contracts to their advantage. When hiring contractors like you, these buyers are aware of possible risks in having workers on their premises or in their homes and will take steps to mitigate those risks.
When contracting a job, buyers will request your certificates of insurance and may ask to be an additional insured on some of your insurance policies.
Certificates of Insurance
A certificate of insurance is a form issued by your insurer or agent that includes your policy number, policy limits, insurer, agent, coverage period, and official name of the insured.
Buyers request a certificate of insurance to confirm proper liability coverage. Requesting a certificate of insurance does not, in itself, transfer any risk but does provide evidence to the buyer of your types, limits, and dates of coverage.
Your certificates of insurance will let buyers know whether you have adequate insurance coverage or limits. For example, if you don’t have workers’ compensation or property liability, buyers would have to file bodily injury claims or property damage losses against their own insurance. Most buyers would refuse to do business with contractors who have no insurance or not enough insurance.
Additional Insured Status
The main advantage of being an additional insured on an insurance policy as opposed to being a certificate holder for that same policy is that the additional insured has certain rights under the policy for what you are legally liable for. A certificate holder has only a document that provides information as to the insurance coverage in effect.
Additional insured endorsements can cover the buyer for accidents that arise from your negligent acts during the project. This status may provide coverage even if a court invalidates your hold-harmless agreement with the buyer. Under your insurance, the buyer will have certain rights and additional protections, particularly with regards to defense coverage. Being an additional insured also discourages your insurance company from subrogating against the buyer when a loss is caused by their acts or omissions.
When done effectively, risk transfer distributes risk to the parties best able to control and insure against that risk, so buyers will require contractors to have appropriate and adequate insurance. Four common types include workers’ compensation, commercial auto liability, property, and general liability.