Liability Insurance: How Much Is Enough?

Liability insurance is a necessity for your construction business. Ensure you purchase the right levels of cover, from the right agency.

If you manage a construction business, you will require liability insurance in the form of public and employers (if you employ someone) to protect you, your company and your employees. Liability insurance protects your company from financial loss resulting from a claim being made against your business and it also ensures, in the case of employers' liability, that you meet your companies legal obligations.

Though you know that you need liability insurance as a contractor, it is not always easy to pick the right insurance package or know the exact cover options you need for your business. Read on to help you determine how much liability insurance is enough for your business.

What does liability insurance cover?

Liability insurance protects your business’s property and resources. Without liability insurance, one lawsuit or claim against your business could bankrupt your entire company, burying it under mountains of inescapable debt.

Liability insurance protects you and your business from many of the incidents that might occur on a busy construction site and many of the circumstances that smaller businesses and independent contractors may find themselves in. Claims that are typically covered under liability insurance include injury, disease, damage and even death to a third party. Claims are made often to pay for medical expenses, loss of earnings or damages done to a third party or client’s property; there can also be claims for non-negligent damage, defective workmanship and faulty products all these have to be considered too.

What risks does your business face?

To determine how much liability insurance your company needs, we need to determine the perceived risk of the work you are carrying out. Construction is a very competitive industry with demanding tasks that frequently involves using dangerous machinery and materials. Because of these factors, construction companies typically require higher levels of insurance than other industry averages as they are considered to be more high-risk.

However, the type of construction business you own plays a very important role in determining your required level of cover. For example, a demolition business will require higher levels of liability coverage than a company or contractor that specialises in tiling or carpet laying.

Rate of accidents and injuries occuring in different occupations

How much liability cover do you need?

Once we have determined how much risk your business is exposed to, we can then calculate what level of liability coverage your business needs. We will always recommend erring on the side of caution when choosing cover levels and not leaving your company exposed in any way; if your business falls under the less risky category (tiling, etc.), then your level of liability may not need to be in the higher range, of course, it can also depend on who your client is, some clients like local authorities will require a certain amount. If you have a business that is classed as higher risk, like roofing or demolition, then you will need to look at higher levels of course and in some cases, you may even require an excess layer to cover for higher than what standard levels of indemnity provide.

Another decision which is very important is to select a qualified and experienced agency. When selecting a broker or insurance provider, make sure to inquire how long they have been dealing with businesses in your industry and what kind of cases it typically handles. Most importantly, ask the broker (Good brokers will always place your insurance with a top-rated insurer) or the insurer about their rating to ensure it is a B or higher. You can verify ratings with the Association of British Insurers ABI.

While liability coverage might seem like a hassle or an unnecessary business expense, it is important not to skimp on coverage and leave yourself underinsured. Many local authorities and some clients will require that you have a certain level of liability before undertaking a project. However, if you have inadequate coverage, you could be jeopardising your very livelihood in the event of someone making a claim against you. Choosing the best insurance for your company will protect your business and your hard-earnt assets against unexpected threats.

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