Cheap Contractor’s Insurance Is Not Always the Best
Contractors: Cheap insurance is not always the best. It’s like paying for a flimsy and fake wood material rather than the real thing. You may have a cheap rate now but chances are you’ll end up paying for it big time later—and we’ll tell you why. There are certain factors you have to watch out for in your contractor’s insurance policy that could cost you thousands out of your own pocket and ultimately your business.
The presence of a manifestation clause in your policy states that you (the contractor) will only have coverage if a past client makes a claim if it was discovered during the policy period. If the issue was manifested after the policy period, then you are not covered—you could have to pay out of your own pocket.
*For example, let’s say the pipes you did in my house 3 years ago had been leaking. However, I only found out this year because that’s when I saw evidence of the leakage. Your policy expired last year. Are you responsible to pay for the damages? Yes. Does your insurance cover for it? No. Summary: You are responsible for any claims put against you after your policy had expired or changed. On top of that, you are NOT covered.
The sunset clause is a provision in your policy that basically sets an “end date” or “expiration date” for your coverage (this date is after the policy period). The claim must be made before the “sunset clause” end date. If made after, again you could have to pay for it out of your own pocket.
*For example, let’s say the pipes you did in my house 3 years ago had been leaking. I found out about it this year so I make a claim. In your policy you had a 1 year “sunset clause,” which ended last year. Even though you were covered during the time you did the work, the claim being made this year is NOT covered. Summary: you are not covered for any claims made after the sunset clause end date and you must pay for it.
As a daughter of a contractor, the thought of my father being responsible to pay today, for work he did years ago is a scary thought. Any of your past clients would be able to make claims against you, and because of these clauses you would have to pay for all of it. You could be paying for it your whole life. Watch out for those cheap insurance rates—there’s definitely a good reason why they are so cheap. It breaks our hearts knowing that those who get the cheapest rates could be taking a major toll later. Talk to us if you have any questions about your contractor’s insurance and know that Atchley Insurance will give you all the information you need to make the right choices for you and your business.