The Risk of Working with Underinsured or Uninsured Contractors

For contractors looking to stand out among their competition, there are certain variables that can play a role in getting new jobs. It may be positive online reviews, word of mouth, or pricing. But one factor that will most assuredly make a difference is working with Contractor Insurance. For uninsured contractors who lack contractor insurance or operate without the level of contractor insurance that is desired by clients, the amount of risk for liabilities rises significantly, while the potential to obtain new clients drops.

When a contractor takes on a job, they’ll often delegate work to one or more subcontractors. But, even with this being the case, the general contractor carries the overall responsibility when it comes to legal compliance and the quality of workmanship. With this in mind, it’s important for contractor insurance carriers to convey how crucial it is for their contractor clients to carry the right amount of contractor insurance, and to understand the risks they might face when working with uninsured contractors.

The Need for Contractor Insurance

There are many different forms of contractor insurance, and all are vital when it comes to covering for liabilities, such as injuries, delays, negotiation issues, pricing, and more. All forms of contractor insurance protect the customer if things don’t go according to the original plan, which should be expected to a certain degree. What’s more, some states usually won’t issue a contractor’s license if the minimum level of contractor insurance isn’t already obtained.

All subcontractors on site will have their own contractor insurance or operate under the contractor insurance and license held by the general contractor. In any case, the client will be looking for the maximum level of protection that can be provided and counted on. 

The Risk of Working Without Contractor Insurance

There are many risks that come with operating without contractor insurance or the right level of contractor insurance. From injuries on the job to low quality workmanship to the destruction of power or sewage lines, contractors are only opening themselves up to potential major legal issues if something doesn’t go as planned.

If unlicensed or underinsured contractors cause an issue, such as breaking a power line, the client they’re working for becomes the responsible party. This, in turn, could open the door to lawsuits brought on by said client(s) who feel they were led to believe the contractor was adequately covered by contractor insurance.

Failing to obtain a contractor insurance program can limit a contractor’s ability to work without high risk or even find work at all. Contractor insurance carriers need to be sure to work closely with their clients to find the right contractor insurance programs to keep liabilities low and avoid costly legal battles that could arise. Knowing the risks can help to increase awareness and prevent risks from happening, especially when it comes to working with uninsured contractors.

About American Team Managers Insurance Services

Founded in 1998 by Chris C. Michaels, American Team Managers Insurance Services (ATM) has provided wholesale and MGA services to more than 5,000 independent insurance agents throughout the United States. Our goal is to establish close, long-term relationships with our agency partners and insurance carriers and provide competitive products for the Exclusive and Non-Exclusive markets that we serve. For more information on our products and services, give us a call at (877) 671-7503 to speak to a representative.