Are Your Subcontractor's General Liability Policy Limits Enough?

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Risk management is highly important for the overall profits of a business. It is not uncommon to become liable for some losses so it is crucial to properly determine any possible risks.

You have to know that there are two types of retention. It is mandatory to be aware of the problems that could occur before getting in trouble and risking the future of your business.

The first type of retention is commonly called "unidentified" as it concerns losses that haven't been evaluated yet. The second one is "known" as it involves default risk retention that has to with losses that exceed the policy limits. You can't transfer this one and you will have to pay a per-established deductible before your policy pays other exposures.

Unidentified retention's are the most problematic for a general contractor, particularly due to subcontractors. Their carelessness can trigger unwanted expenses.

As you can't control all of their actions and machines can go wrong as well, it is better to be safe than sorry. So you can either get extra coverage or ask your subcontractors to purchase their own liability insurance with an extended coverage.

The second option is more advantageous for you as a general contractor as it significantly diminishes the chances for your business to be affected by your subcontractor's mistakes. Many business owners still fail to get enough coverage and to make sure that the liability policy limits of their subcontractors are enough for them to manage their business without encountering major issues.

Take into account the following useful advice to manage subcontractor negligence better: Don't forget about the insurance of subcontractors.

It is compulsory for them to be insured. This should go without saying if you want your own business to evolve. A subcontractor's contract should include terms of policy limits. Analyze the situation thoroughly and ensure that the acceptable ones are sufficient for the possible losses that might intervene in the business collaboration.

Keep checking.
Each and every contract should be checked for you to be sure that your policy still complies with the insurance requirements.

Don't disregard the importance of periodic certificates of insurance.
The contract should specify that subcontractor's coverage is the main one. This will prevent you from going overboard with your own policy limits.

Indemnity agreements help. The subcontractor should be obliged to pay for his negligence. Check if the law permits that in your area.

Need Insurance? Give us a call we can help: Call (619) 773-1100

Photo by David B. Gleason


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