FAQ & Definitions

You can find policy descriptions and endorsement definitions below, as well as a walkthrough of your finance and audit processes

Common Policy Endorsements

Additional Insured

An Additional Insured endorsement extends your liability coverage to a third party to address a liability exposure you potentially create while working on a project . A common example is a Home Owner or General Contractor being listed as additional insured during a project you perform to avoid being held liable for a claim resulting from your company’s “ongoing” work on the project.

Waiver of Subrogation

A Waiver Of Subrogation endorsement will  prevent one party’s insurance carrier from pursuing a claim against the other contractual party in an attempt to recover money paid by the insurance company to resolve a covered claim.

In other words, if subrogation is waived, the insurance company cannot sue the other party to regain their losses.  A common use for this endorsement would be when sub-contracting out work, protecting your company against a claim your sub-contractor may have paid while working under contract with your company.

Primary & Non-Contributory

A Primary & Non-Contributory endorsement means that the insurance policy will be the first policy and only policy to pay out in the event of a claim. This is a common endorsement for sub-contracted labor as it makes the sub-contractor liable for a claim even if the General Contractor was involved.

Completed Operations

A Completed Operations endorsement will cover a contractor’s liability to a third party after your work has ended until the end of the policy period. This is another common endorsement General Contractors require for sub-contractors as it protects the General Contractor against a claim after a project has been completed. An additional insured endorsement alone will usually only cover “Ongoing-Operations” with no coverage for completed work.

Per Project Aggregate

A Per Project aggregate means that the maximum policy payout will be applied to each project the insured performs. So if you have a $1 million policy limit, each project you perform will be covered for $1 million. It is a common requirement for the “Per Project” endorsement that  each project be submitted to the carrier.

Stop-Gap Coverage

An endorsement to a General Liability Insurance policy that is primarily used to provide employer’s liability coverage for work-related injuries arising out of exposures in monopolistic fund states. This coverage is applicable to employers in Washington State, North Dakota, Ohio, and Wyoming.

Insurance Definitions: Coverage Types

General Liability Insurance

General Liability insurance provides third-party protection against claims resulting from injury and damage to people or property.  Liability insurance will cover legal costs and payouts for which you would be found liable. It does not cover professional errors, damage to business property (including tools and machinery), or contractual liabilities.

Worker's Compensation Insurance

Workers’ Compensation Insurance covers the expenses that come with an employee’s work-related illness or injury. If an employee is injured or sickened on the job, workers’ compensation covers the employees medical expenses and rehabilitation costs. If you are using 1099 labor these workers will be considered as payroll on a policy and will be afforded the same coverage and costs a W-2 employee would be.

Excess/Umbrella Liability Insurance

Excess/Umbrella Liability Insurance is designed to provide additional policy limits against catastrophic liability claims. Excess/Umbrella coverage can be written over general liability and commercial auto policies. These policies add an additional coverage amount that will apply after the underlying policies have exhausted their coverage limit.

Excess/Umbrella liability coverage is no broader than the underlying policy it is written over. The sole purpose is to provide additional limits of insurance.

Inland Marine Insurance

Inland Marine Insurance offers coverage for property such as mobile tools and heavy equipment or vehicles used for construction, landscaping, etc. Computer and office equipment coverage is also offered through these policies. It can be written as coverage for rented equipment or leased vehicles as well and is often a requirement for heavy machinery rentals.

Builder's Risk Insurance

Builder’s Risk policies cover building materials, equipment and structures during the construction or renovation period. This is a common policy for new construction projects to protect against theft, vandalism or other damages to materials. Most Home Owner’s policies have a “renovation exclusion” written into the policy, in which case they can purchase a Builder’s Risk policy to cover their home during renovation.

Further Insurance Definitions

Contractor Bonds

Contractor Bonds are required in many states as a prerequisite to  licensing. They are in place to cover any claims that would not normally be covered under a general liability policy. These type of claims can include state taxes, employee wages and benefits, negligence, breach of contract, faulty workmanship, rental or supply fees, etc.

Performance Bonds

A performance bond is issued to one party of a contract as a guarantee against the failure of the other party to meet obligations specified in the contract. These can be required by cities and counties for various types of projects.  A common example of a performance bond is a Right Of Way Bond used to block public traffic.

Commercial Auto Insurance

Commercial Auto Insurance provides coverages such as liability, collision, comprehensive, uninsured motorist, and medical payments (or personal injury protection). It is similar to personal auto, but coverage is extended for business liabilities not normally associated with an auto policy.

Combined single limit (CSL)

A combined single limit  policy has the same dollar amount of coverage per occurrence whether bodily injury or property damage, one person or several.

Hired and Non-Owned

Commercial auto coverage offering protection for accidents occurring when an employee drives their own vehicles on behalf of your business.

Any Auto

Any Auto coverage  extends coverage to recently purchased vehicles until the end of the policy term. This will cover a vehicle even if it is not listed on the policy as a “Scheduled Vehicle.” This coverage is only offered if required by contract.

Business Owner Policy (BOP)

Business Owner Policies combine coverage for all major property and liability risks in one package. Coverage includes property, contents and liability. An office space or storefront (including restaurants needing liquor liability) would be a common type of business needing this coverage.

BOPs do not cover professional liability, auto insurance, worker’s compensation or health and disability insurance.

Errors & Omissions Insurance

Errors & Omissions Insurance is a type of professional liability insurance that protects companies, their workers, and other professionals against claims of inadequate work or negligent actions.

Audits & Finance Info

What Is A Policy Audit?

Due to insurance policies being written on a projected estimate, your provider will perform a year end audit to confirm the coverage is accurate for your business. An independent third-party auditor will verify your daily operations, payroll, subcontracted labor and gross receipts and can require tax records or banking statements  for confirmation. These can take the form of a brief phone inspection, online forms or even project site inspections depending on the carrier and type of coverage. If your policy is written with lower projected sales or payroll, an auditor will add additional premium to the term which will be due at the time of audit completion. This can be  very expensive, so it is always a good idea to let your agent know of any mid-term changes in business. If you have any questions or concerns about an audit please contact us and an agent can advise you of your best course of action.

How Do I Comply With My Policy Audit?

You will be contacted by an audit company directly. They will advise you on what documents and forms you will need to provide to complete the process. We are happy to help with your audit in any way we can, and can act as a middleman to avoid any confusion or concerns of fraud as they often request accounting information.

Why Do I Owe Money On An Audit?

If you have a change in operations or your projected Gross Receipts and Payroll were higher than indicated on your policy, additional premium will be added at the end of your term. This payment will be due immediately, with few options. If an audit is not paid in a timely manner the amount will be sent to a collection agency  by the audit company. We can help negotiate these costs as best we can and our agency will do anything possible to help you with your audit.

How Do I Submit My Monthly Finance Payment?

If you choose to finance your policy we use several different finance companies to cater to your insurance needs. After your policy is bound you will be sent monthly payment vouchers directly from the finance company either by mail or email. You will then pay your finance company directly through mailed payments, automatic bank withdrawal , online  payments at the Finance Companies website or you can pay over the phone with a credit card for a fee.

How Can I Sign Up For Automatic Payments?

If you would like to set up an automatic payment account with your finance company please contact our agency and we will send you the appropriate forms and confirm the account has been set up correctly.

Can I make my finance payment Online?

You can make online payments directly to your finance company through their webpage.

The process will vary depending on the company, but for the most part is simple and can save you time in comparison to mailing a check. Most finance companies charge a base fee for credit card payments over the phone so an online account can help you avoid these extra charges.

FAQ About Contractors Insurance