One questions a lot of contractors ask is why is a Certificate of Insurance so important? The obvious answer is that it helps provide liability protection, but there are more specific reasons why a proof of insurance certification and in some cases, a certificate of insurance tracking service, is a good investment for any contractor. Here are just a few of them.
Protection from Errors
About 4% of all Errors and Omissions claims (general liability) involve a certificate of insurance. Not having one can leave you responsible for negligence or simple mistakes, even if you personally, or your employees, are not directly responsible.
Of that 4%, about a third are the result of contractors and subcontractors who have failed to add additional parties to be insured. This means someone working for your sub can cost you money because they were not properly documented or insured and you would be none the wiser until the damage is done.
On average, about 20% of those cases are caused because the holder of the certificate misrepresented coverage or claimed coverage that did not exist.
You Get Held Liable for Their Errors
A subcontractor without the proper insurance that causes a liability claim can result in your being held liable for that claim. Even if the terms of your subcontract contract are clearly spelled out and even if they require insurance, if you have not verified it, you are responsible for their mistakes and negligence. This is also where the benefits of a certificate of insurance tracking service become very clear; the software does the work, you just input the data.
Avoid Liability from Insurance Status Change
In a competitive environment, where every penny counts, it is easy for some contractors to drop liability coverage. It is really easy for a subcontractor to drop coverage to save money, especially if they are a small outfit. By requiring a certificate of insurance, you are verifying they are current in their coverage, which protects you. Plus, if they provide the certificate and it is false, you have legal options against them to reduce or eliminate your liability.
Alleviation of Risk and Worry
The best way to avoid the flu is to make sure you are not exposed to it. The same goes for liability where your subs and customers are concerned. By using an insurance certificate tracking software to keep your contract documentation organized and current, you give yourself piece of mind as it pertains to your subs and the work they do.
In the competitive world of contracting, anything that increases risk, financial exposure or liability is to be avoided. Making sure your subcontractors have verified their insurance coverage and keeping tabs on it through a certificate of insurance tracking service is almost a requirement for a responsibly run business. The benefits are many while negligence in this area can be financially devastating.