It's crucial to understand the various types of insurance available to protect your assets and mitigate risks. Two common terms you'll likely encounter are business insurance and general liability insurance. While they may sound similar, they serve distinct purposes. 

As a restoration contractor, you know firsthand the unpredictable nature of the industry. From sudden natural disasters to unexpected property damage, risks are always lurking. To protect your business and its financial health, it's essential to have the right insurance coverage. Your subcontractors that work on your projects need to carry the maximum amount of their own insurance policy. 

General liability is a must, but they also need workers’ compensation insurance if they have any employees working for them. The best time to find out if your subcontractor has the right type of insurance policy is before they start working on your project. Ask your subcontractors to provide you with certificate of insurance from their insurance company or broker stating that your company is the holder of the certificate of insurance. You would have to retain this document for the foreseeable future. Furthermore, don’t forget to update the certificate of insurance upon the expiration of the current insurance policy.

Imagine you're a restoration contractor working on a water damage restoration project. You bring a plumber as a subcontractor. The pipe bursts, causing significant water damage to the property. If your subcontractor doesn’t have a general liability insurance; the claim has to go on your insurance policy. You can be assured your insurance provider will not be happy. You will end up paying for it dearly. 

Without proper insurance coverage, this incident could have severe financial consequences for your business. Requiring subcontractors to carry insurance provides essential protection. If a subcontractor causes damage to a property or injures someone, their insurance will cover the costs of repairs, medical bills, and legal fees, shielding the primary contractor from significant financial liability.

Furthermore, it is necessary to ensure compliance with industry standards and legal requirements. Many contracts and licensing boards mandate that subcontractors carry specific types of insurance, such as contractors bond, general liability and workers' compensation. By enforcing this requirement, restoration contractors can avoid potential legal issues and penalties.

Your own insurance company and policy also requires your subcontractors to maintain a high level of professionalism and accountability within the industry. It encourages subcontractors to prioritize safety, quality workmanship, and risk management. This ultimately benefits the restoration contractor by ensuring that projects are completed on time and within budget, while minimizing potential liabilities.

Business Insurance: Broad Umbrella

Business insurance, often referred to as commercial insurance, is a comprehensive term encompassing multiple types of coverage designed to protect your business from various risks. It typically includes policies such as:

• Property insurance: Covers physical damage to your business property, including buildings, equipment, and inventory.
• Liability insurance: Protects your business from lawsuits arising from property damage or bodily injury caused by your business operations.
• Workers' compensation insurance: Provides benefits to employees injured on the job, including medical expenses and lost wages.
• Commercial auto insurance: Covers accidents involving your business vehicles.
• Professional liability insurance (Errors and Omissions): Protects professionals from claims of negligence or mistakes in their work.

General Liability Insurance: A Core Component

General liability insurance is a specific type of coverage that falls under the umbrella of business insurance. It primarily protects your business from third-party claims of bodily injury or property damage caused by your business operations. This includes incidents like:

• Slip and fall accidents: If someone slips and falls on your business premises.
• Product liability: If a customer is injured by a defective product you sell.
• Advertising injury: If your advertising campaigns infringe on someone's rights.

Key Differences

Scope: Business insurance offers broader protection, covering a variety of risks. General liability insurance focuses specifically on third-party liability claims.

Components: Business insurance includes multiple types of coverage, while general liability insurance is one component of that broader package.

Customization: Business insurance can be tailored to meet your specific needs, while general liability insurance is often a standard policy.

While general liability insurance is an essential component of business insurance, it's important to understand the broader spectrum of coverage options available. By carefully considering your business's unique risks and needs, you can choose the right insurance policies to protect your assets and minimize potential losses. You can also assess what kind of insurance policy that your subcontractors need to work on your projects. 

Daniel Gebreselassie, MBA, EA
 Alpha Management Insurance Agency Inc
 Daniel@ampcinsurance.com
 https://www.ampcinsurance.com