Contractors: There's No Place Like Home
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General Contractor Insurance Tips and Precautions
Often times, contractors get opportunities to do work outside of their home state. Before making this decision, it’s important to understand what leaving your home state means in terms of coverage and cost. Due to the fact each state has its own Department of Insurance, contractors need to be well-informed prior to making this move.
If we assume that our home state is Illinois, and specifically Cook and the collar counties (yikes, I know), then we know we’re in one of the toughest general liability and workers’ compensation environments in the country. Acceptable coverage in this geographic area will very likely afford the protection you need in other states.
Though this may be the case, it’s also important to understand what you’ll see from any subcontractors you hire. General and trade contractors will often venture outside of their local area and find out the hard way that not everyone out there has the same insurance requirements and processes. Things like reduced limits and the inability to provide Blanket Additional Insured or a Waiver of Subrogation can cause headaches for the owner and general contractor.
Some states will require that new codes with new rates be added to your policy. States like California are frequently written on completely separate policies, while adding states like Indiana and Wisconsin can simply be endorsed to a Workers’ Compensation policy. As many already know, rates are essentially a reflection of losses versus payroll within individual states by class code. Don’t ever assume that your current rates are the same in other states. In some cases, rates will be higher and in others lower.
General liability is another area that can be a serious headache if contractors don’t do their homework. Take the state of New York for example. The general liability market in Manhattan and the Boroughs is so bad that working there will generate six figure general liability policies despite the amount of exposure you have. Understanding New York general liability is a whole separate article, but simply put the case law in New York drives these premiums.
In summary, the idea of expansion and the opportunities that are in the marketplace are raising the interest of contractors to move outside of their local area. If you’re considering a project in an outside state, talk to your insurance representative to understand how the move will affect coverage and cost.
Contractors who don’t do their homework can find themselves in a situation where they’re losing money on the expansion project. However, if done right, moving into other states can be easier than one might think and very beneficial.
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