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As the economic climate becomes more As the economic climate becomes more hostile towards remodeling contractors and new home builders the need to save money on contractor’s insurance coverage increases. However, contractors need to be well aware of what it is they might be giving up to get that low price. Insurance brokers have several ways of lowering the cost of your contractor’s insurance costs. However, they are also lowering coverages and thereby the level of protection that your business has against claims for property damage, bodily injury, construction defect, or any other claim that might arise. Three things every contractor needs to know In this article I will introduce the concept of the sunset clause, the manifestation clause and the money saving risk retention group policy. These are three options that may save you a bundle of money now but can cost you your business later. Unfortunately, when competing for the sale some insurance brokers are willing to sell you anything just to get the business. Always ask your insurance broker if the policy you are purchasing contains one or both of these clauses or if it is being offered by a risk retention group. Sunset clause The sunset clause limits the time that a claim can be filed after the policy expiration date. For example, a general contractor has liability over his operations for ten years after the projects completion. A sunset clause would limit the ability to file a claim to however many years the clause stipulates. So a policy with a three year sunset clause would limit the insurance company’s liability to the said amount of time. That does not mean that the general contractor is absolved of the liability for the remainder of the ten year term. The contractor is still responsible no matter what deal he cut with his insurance company. Manifistation provision The manifestation clause limits claims to be filed within the policy year or a short time thereafter. The manifestation clause says that the damage being claimed had to have manifested itself or shown itself to the average person during the time of the policy or the stipulated time period. If the damage was not seen or noticed during the designated time period the claim will not be covered. Again, this leaves the contractor holding the bag for any damages that he may be liable for. The sunset clause and manifestation clause can be written into the policy separately or together. Used alone or together the insurance company limits their liability so severely that the policy becomes virtually worthless. All this for a savings of usually just a few % of the annual premium. Risk Retention Group The third way that insurance brokers sneak one over on the client in an attempt to get the lowest quote possible is with a policy offered by a risk retention group without fully explaining the risks involved. I don’t care how safe your insurance broker tells you risk retention groups are, they are not safe at all. Purchasing your insurance coverage from a risk retention group is not a financially sound decision. There are several issues with Risk Retention Groups. The two that I find most dangerous are a) the fact that they are not under the authority of any State Department of Insurance and b) there is no guarantee of funds being available in case of a claim. There is no remedy for the insured if the company is dissolved. These are not minor problems if you ask me. The fact that RRG’s are not under State DOI authority lends them to playing by their own rules often times. I have seen this in the underwriting stage, in the policy servicing stage and in the claim process. Even when an insured files a complaint with the DOI, the RRG cannot be compelled to act. Once a business buys this type of coverage they are opening up a can of worms that may very well come back to haunt them. While there are several safe ways to save money on your business insurance these are not some of the ways that I would recommend. Although I am addressing contractors in this article this information is important to anyone who is purchasing business insurance no matter what their industry. Ask your broker to put all the terms, conditions and exclusions of the policy that you are about to purchase in writing on a formal proposal. Make sure to read the entire proposal and make it a point to understand the insurance proposal thoroughly. If there is any part of it that you do not understand take the time to ask your broker. That is what he or she is there for. Also, make sure that the name and rating of the insurance company is noted on the proposal. This will enable you to make sure that you are purchasing coverage from a reputable carrier that has a good reputation and is going to stand behind you and your business at the moment of truth. If you still don’t feel like you are getting the coverages you need for a reasonable price shop around. Call a broker that specializes in the type of coverage that you are looking for. It is your right as a consumer to get the best coverage that your money can buy.
Article Source: http://www.onlinearticlessite.com
contractors insurance business insurance
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