When Your Contractor Says He’s Fully Insured
Have you ever seen a plumbing company van pass by and it says Fully Insured?
You probably have, but as someone in the insurance industry, I often wonder what’s meant by that. From where I’m sitting, it seems like a broad claim, and it’s not as cut and dry as you expect.
Fully Insured: What They Probably Mean
At a minimum, I assume this means General Liability and Workers’ Compensation/Employers’ Liability coverage. At its fullest extent, it’s going to include Commercial Auto insurance and perhaps an Umbrella policy.
These are the four most common lines of business in commercial lines. If your contractor has these, they probably think they’re fully insured.
Here’s a tip for you: nobody is ever really fully insured, unless you count self-insurance. (In layman’s terms, that’s paying out of pocket for your own liability and property losses.) Do you know how many lines of business there are? I doubt I’ve heard of all of them and I’m in the business, but be assured it is more than four. If anyone was, they’d be spending a lot of cash on insurance covering every imaginable exposure.
Getting on the Road to Fully Insured
As previously mentioned, there is way more to insuring your business than General Liability, Auto Liability, Workers’ Comp, and an Umbrella. A few other things for a business owner to consider include the following:
Professional Liability (Errors and Omissions). If part of your business operations include design, for example, you have a Professional Liability exposure. Let’s say you’re a HVAC subcontractor and before a job, you design the ductwork system at a retail store. Your design turns out flawed, and the store suffers a financial loss as a result. Your General Liability coverage does not cover this, but an E&O policy does.
Commercial Crime policy or Fidelity Bond. You might hear about Employee Dishonesty coverage, which applies when an employee steals from you. There’s also third-party crime coverage, which is of interest to your clients: it’s not for the employee ripping you off, it’s for ripping the client off. Some buildings with large management firms in charge won’t let small contractors onto the premises without it.
Cyber Liability. If the contractor with whom you do business stores non-public information, like credit card numbers, there’s a big risk here. What happens if that information is compromised? Aside from the obvious impact to you, they’re on the hook in a big way. A good cyber liability policy covers things like privacy notification expenses, consumer redress, and reputational injury to clients.
These are just a few additional coverages for business owners to consider, and unless you have a savvy agent, they can be easy to miss. The policies you think make you fully insured ignore other exposures about which most small businesspeople miss.