Top 5 Insurance Mistakes Contractors in Alberta Make
The construction industry in Alberta contains a wide array of risks that cause many contractors and subcontractors to have significant financial losses if they have an uninsured gap. Some risks that contractors experience are job site injuries; loss of equipment; contractual disputes; project delays.
The majority of contractors are unaware that they do not have the adequate coverage needed through their current insurance programs and that they may have substantial exposures. Here are five common mistakes that contractors make regarding contractor & trades insurance in Alberta, and what you can do to avoid them.
1. Assuming Your Relying Solely on Commercial General Liability
Many contractors mistakenly believe that CGL insurance will cover all of the risks associated with their job sites. While CGL is a critical component of your insurance program, it does not cover all project-related exposure.
There are some commonplace exclusions found in CGL insurance: faulty workmanship, professional errors, liability arising from pollution; some claim limits, and some claims made under contract. Relying solely on CGL insurance may create significant gaps in insurance coverage for contractors, which could ultimately adversely affect their business.
How to Avoid this Mistake:
Complete a detailed review of your overall scope of operations with your insurance broker to determine the appropriate coverage limits of any supplementary insurance that provides coverage for your project. This may include Builder’s Risk, Professional Liability, Pollution Liability, and/or Wrap-Up Insurance policies.
2. Not Understanding Your Contractual Insurance Requirements
The majority of construction contracts include requirements for contractors to carry certain types and limits of insurance as a condition of the contract’s execution. The vast majority of contractors will sign a contract without having a complete understanding of the insurance terms and conditions. Not understanding the insurance requirements of their contract may ultimately result in a denied claim, or an additional expense associated with a contract dispute.
How Can You Avoid This Mistake:
Work with a certified insurance broker in Alberta to review any contracts that you intend to enter into prior to signing. Ensure that your insurance policy complies with the terms and conditions of the contract and the limits specified in each contract you execute.
3. Equipment and Tools Insufficiently Covered by Insurance
Tools and equipment used by contractors are frequently undervalued or underinsured. Furthermore, replacement costs have increased dramatically, yet many insurance policies are still written using outdated values of replacement cost.
An insurance claim payout for a piece of equipment that is not properly insured may not provide the amount of money needed to replace the damaged item.
To avoid underinsuring tools and equipment, regularly obtain appraisals of equipment to ensure that limits on the insurance policy are based on the actual current value of the equipment.
4. Builders Risk / Course of Construction is often overlooked by Contractors
Some contractors will rely on the project owner’s construction insurance policy to provide builders risk coverage for the build. In some cases, both the contractor and project owner will share the builder’s risk coverage, but not all instances are clearly defined.
If there is no builders risk policy in place during construction (i.e.: there is no builders risk or course of construction coverage), the contractor will not be covered if a loss occurs at the job site during construction. This includes potential loss due to fire, vandalism, or weather damage.
To avoid this exposure, contractors should clarify who carries builders risk coverage on the project and ensure that their exposure is fully covered.
5. Businesses don’t regularly assess their coverage as they grow
As contractors grow their business to work on larger projects, employ more employees or have a larger fleet of vehicles, their risk exposure increases.
Insurance programs that sufficiently covered the contractor’s risk exposure two years ago, may no longer be able to provide sufficient coverage now.
To avoid insufficient insurance coverage, contractors are encouraged to schedule annual insurance reviews with a commercial insurance specialist who has experience in providing contractor insurance throughout Alberta.
Conclusion
Negligence in building can create big impacts even from small forgotten items throughout the building process. An appropriate insurance program for construction companies should actually operate the same way as their business and not just meet required guidelines or principles.
Commercial insurance for Contractors, Builders and Trades in Alberta through A-KAN Insurance. We find risks and coverage gaps early on in projects and align the contractual and operational risk with insurance policies so that Builders can continue their business with confidence.
If it has been a while since your program was reviewed, do it now to make sure your program covers your projects, employees and long term viability.
