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Contractors: Always Ask for Certificates of Insurance

December 13, 2019

3 min read

A certificate of insurance could save you from lawsuits, medical payments, and liability.

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You double-check the tools. How many workers do you need to complete the job? Did you ask the subcontractors for a certificate of insurance?

Wait, what?! You have 1,000 ideas running through your head, which makes insurance your 1,001st thought.

Hear us out. A certificate of insurance could shield you from lawsuits and help you maintain your reputation.

What Is a Certificate of Insurance?

This document verifies that you have coverage.

Here’s what the certificate lists:

  • The producer (agent or broker)
  • Name of the insured
  • Insurance company
  • Types of insurance
  • Policy effective dates
  • Limits of insurance
  • Certificate holder (persons requesting it)

When You Need to Provide a Certificate of Insurance

Think about the risks of contracting jobs:

  • Physical injury
  • Property damage
  • Legal battles
  • Equipment theft

Those dangers give your customers great reasons to ask for a certificate of insurance. They don’t want to pay for worker injuries or mistakes.

A certificate proves you have liability insurance, too.

Liability insurance covers two BIG risks:

  • Bodily injury, like when a client trips over a wire and sprains an ankle.
  • Property damage, like when a worker mistimes a sledgehammer swing and hits the wrong wall.

Do you know about the ACORD 25? It’s the standard certificate for liability insurance.

Visit ACORD’s FAQ page for more information.

Ask Subcontractors for Proof of Coverage

Require certificates of insurance when you hire subcontractors or other vendors. Don’t compromise on this step.

If you bring on uninsured subcontractors, you run the risk of accepting liability for injuries or damages they cause.

Many states’ laws allow an employee to “climb the ladder” until they find coverage. That’s another way of saying you could end up paying for medical bills if an employee of an uninsured contractor gets hurt.

Spend a little more time at the front end of a project if you need it to collect the certificate. It sounds harsh, but terminate the contract if the other party doesn’t give you the documentation you need.

If work starts before the subcontractor submits a certificate, consider playing hardball by withholding payment.

Putting a process in place will help you avoid these difficult steps. Have a written contract with all subcontractors and vendors. Make sure it has a provision that they submit a certificate of insurance prior to starting work.

What if you receive the certificate but don’t understand the information listed on it? Contact the listed producer or insurance company to verify coverage.

Don’t leave your local, independent agent out of the loop! They’re coverage experts, and they will guide you through your questions and concerns.

What Other Coverages Do Contractors Need?

Check out the other business coverages offered by Pekin Insurance:

  • Commercial auto for the vehicles you use to haul tools and equipment
  • Workers compensation for work-related illnesses and injuries
  • Disability illnesses and injuries not related to work
  • Business property for your buildings, tools, and equipment
  • Errors and omissions for claims of negligence and mistakes in work

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Your Pekin Insurance agent will create a plan that fits your contracting business.