Any sole proprietorship or small business must take a lot of risks. Even to come into existence, a variety of financial and personal risks are necessary. Whether it’s quitting your reliable full-time job to pursue an unsure dream or investing your savings into a new and exciting idea, the world of business is fraught with risks – and failures.
Some risks, however, are completely avoidable. Unfortunately, all too many businesses fail within the first two years due to a lack of proper foresight on predictable problems. Oftentimes, doing the proper research beforehand can prevent many of these problems from arising.
One such area in which real risk exists – and where you shouldn’t be rolling the dice – is failing to insure your construction business. Today, let’s examine all of the potential risks and pitfalls that can await you if you choose not to take out contractor insurance.
Damage Caused by Subcontractors
Whether you are constructing a new deck for a client or painting a home, there are always risks associated with any contracting job. Many contractors rely on the labor of subcontractors and/or temporary labor to get the job done. Unfortunately, this presents unique risks; namely, many of these workers will not be as concerned with the health and longevity of your brand in the same way you are.
Shoddy work and/or skimping on safety protocols can lead to property damage caused by your team. In the event this happens, your firm – as the one accepting the contract work – will almost certainly be held liable. While you can attempt to extract restitution from the subcontractors for the damage done, you will still be liable for the initial damages. As such, general liability insurance for contractors makes sense.
On the Job Injuries
When hiring employees and subcontractors, you are often responsible for what they do – and what happens to them. Jobsites can be chaotic and are often inherently dangerous places. Being injured on the job is not a matter of if, but when.
There are countless scenarios in which somebody could be injured. Not only is it possible for your employees to be hurt while working, but the residents of the home or property can be at risk, too. Whether it be due to shoddy craftsmanship, a failure to follow safety protocols, or just a freak occurrence, an accident can come out of nowhere.
As such, having a general liability insurance plan is vital in maintaining your business’ fiscal solvency if a costly accident resulting in injury occurs on the job.
Most quality contractors and construction firms provide certain guarantees for the work they do. After all, peace of mind goes a long way toward making the sale and securing that contract with a homeowner or business owner. Various guarantees may cover the cost of labor, the quality of materials or the time in which the project will be completed.
Even with a variety of guarantees, contractors can only extend so many protections and reassurances to their clients. Over the long term, a particular project may begin to show signs of weakness or poor quality. Whether molding begins to crack, windows begin to expand and contract, or a roof replacement prematurely fails, this can potentially open the doors to a lawsuit from the client.
These latent liabilities – even with contract stipulations that minimize contractor risk – can pose a big financial risk to contractors out of the blue. If somebody who had work done on their home five years ago suddenly has a major problem and the work was guaranteed for 20 years, then you may be held liable in a court of law. By having general liability coverage, you can minimize the chances of being caught off-guard.
Third Party Issues
Last but not least, it’s important to remember that unrelated people and property can suddenly be affected by one or more of your contract jobs. For example, repairs being done on a busy sidewalk might put a worker in direct contact with passers-by; a falling object could cause injury to somebody unrelated to the project.
Likewise, potential negligence might result in damage to neighboring properties, giving those owners a legitimate, third-party claim against your company. General liability insurance protects you in these situations and is immensely valuable in these random chance encounters.
There are many unique situations in which general liability insurance may protect you from both frivolous and legitimate claims. However, the vast majority of these instances can be boiled down to four broader categories, ranging from worker injuries to unintentional property damage. By being insured, you maximize the chances that your contracting company or firm won’t be destroyed due to one little mishap.
The important issues that the author writes about here are really all about one thing: avoiding risk. This is a subject that’s near and dear to our hearts here at zlien, though we’re usually focused on another type of risk that plagues the construction industry: payment risk.
The construction industry is very fortunate, however, in that most instances of payment risk are almost entirely avoidable. For general contractors, that includes requesting, collecting, and tracking lien waivers from every single party on the job. For subcontractors, suppliers — really, for everyone in the industry — that means securing your payments by managing your lien rights on all of your jobs and projects.
Accidents and other unexpected incidents happen all the time. But many risks can be prevented, or at least managed, by taking a few simple steps on the front end. That’s what we do here at zlien. Get in touch with us if you’d like to learn more about how we do it.