Business Articles - Legal and Insurance

Choosing the Right Insurance Policies for You and Your Business

Going into a job with the right insurance is just as important as having the right tools for the project. However, rising insurance costs have made some budgets too tight for comfort. Keeping your costs as low as possible and still have adequate protection for your employees, your clients, and your company can be tricky business. If you're feeling the insurance crunch, here's some info that can help you make the best decision for your situation.

There are several types of insurance policies you can buy as a contractor to protect your workers and your company in the event of an accident, but having them all can be a financial burden. Whether you're an artisan flying solo or a contractor with a whole crew under your command, the insurance you carry can instill a sense of security in whoever hires you. It's a good idea to take inventory of your policies and make sure that you've got adequate coverage for whatever may occur.

Workman's Compensation Insurance
For very small companies (less than two to five employees, depending on your state) and contractors who live in Texas, having a worker's compensation policy may not be a necessity. However, even if your company exists in one of the above situations, having a workman's comp policy in place might be a good idea, anyway.

The cost of workman's comp changes from situation to situation, but the idea behind how the cost is figured is relatively simple. According to "To arrive at a base rate for workers' compensation insurance, each [job] classification is translated into a dollar amount, which is then multiplied by 1 percent per $100 of the total payroll for that employee. For example, the office clerk classification in California is roughly $1.25 per $100. So if that employee is paid $500 per week, the workers' compensation insurance premium for that employee costs roughly $6.25 per week." Unfortunately, most construction jobs are considered far more risky than "office clerk", so that "$1.25 per $100" is likely to be higher for anyone in the industry.

Though the expense of a workman's compensation policy might seem steep, there are ways to reduce this cost. For example, you can actually get a reduced premium if instances of injury on your job sites are less than the national average. How do you keep injuries at a minimum? The old fashioned way: training your workers in safe practices, hiring the best employees possible, and identifying and eliminating safety risks on the job site. Make sure to talk to your insurance provider about rate reduction if you already have a good safety record; if it's your first time buying a workman's comp policy, it is often worth the time it takes to get several different quotes.

Sole Proprietors
If you work alone, you may be able to depend on your own health insurance policy rather than workman's comp in the event of an accident, but this will not do you any good if you have a job requiring you to have another person help. In the same way that a general contractor needs to make sure that the subs he or she uses are properly insured, a sole proprietor needs to make sure that any help brought to the job site is covered. Since this can be a bit of a hassle, some sole proprietors choose to use a labor agency (who will make sure the person they send you is covered before they arrive) when they need an extra hand on the job.

General Liability Insurance
The sad fact is, lawsuits are now a very common occurrence in our country; this is why for most contractors, having a general liability policy in place is a good investment. Instead of protecting your company from claims brought by your employees like workman's comp, general liability insurance will kick in when damage to property or person affects the clients you are working for. Like workman's compensation coverage, how much coverage you should have and how much you pay for it can vary dramatically.

For a sole proprietor doing tile work, a policy with a $500,000 maximum might be adequate and may often be purchased for less than $1,000 a year; on the other hand, a roofer with a crew may end up paying a couple thousand per employee, per year for a $1,000,000 maximum policy.

Because there are so many variables, it is very difficult to say what the "average" cost of general liability insurance is. You can, however, say that even though it can be a pain, shopping around and getting quotes from several different companies might end up saving you thousands.

Is Insurance Worth the Cost?
Unfortunately, the amount you need to pay to the insurance company to stay covered can be quite a burden, at times. This is a growing problem; in fact, insurance payments can get so high that some companies might opt to go without coverage. In many situations, this is illegal, but in nearly all situations, the stakes are high enough to make it a bad idea.

Providing good service is (or should be) the goal of every good contractor, and that means hedging your bets with adequate coverage rather than leaving it up to chance if an accident occurs. Having insurance is not just a matter of being ready for the unforeseen, either. People are looking to the web for advice more and more. Websites such as Wiki-Answers, Yahoo, and Money-zine, all advise homeowners to make sure the contractor they hire is covered. You might even find that being covered actually helps you compete and could lead to more jobs, even if it doesn't seem cost-effective at certain times.

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