Who Pays More, a Contractor Or the Employer?
However, if they know ahead of time that the bidder will charge them a premium for the services they plan to use, they may not do so. In fact, some companies will charge contractors much more than necessary to cover their overheads, such as insurance, upkeep and utility bills. Some will do this even if they have no legal obligation to do so, and many will do it under the guise of saving money. In short, they will hire anyone and everyone, just so long as they can make more money off the deal than they paid for.
But what about when a company has a contractual obligation to only hire licensed and insured contractors? In these circumstances, it is easy to understand why the question “Who pays more?” arises. Contractors are required by law to carry professional liability insurance. When an insured contractor breaks a rule, such as speeding, then they could be forced to pay the other party’s insurer for the cost of damage.
That brings us to another point. Most large companies hire quite a few subcontractors. Some companies even hire just one person to manage a whole range of tasks that are contracted out. In these instances, a company could find itself paying a lot more for each individual than they would for all the subcontractors working together.
Sometimes, however, a contractor knows exactly how much each subcontractor is charging them and charges them accordingly. In those cases, it makes sense for the company to hire its own liability insurance company. Even then, it pays to check into what happens if one of the sub-contractors gets sued because they injured a customer during work. If the company was not already carrying its own policy, then this could be a costly issue for you. There are state and federal laws in place that protect contractors from their own liability insurance.
Does this mean that it pays to have your own contractor liability insurance? No, it does not mean you have to have your own company insurance policy. What it does mean is that you have to carry enough coverage through your own company that you can handle any unexpected situation that might arise. That’s a long term commitment. You should always have the necessary resources in place should you be sued by a customer.
In the case of private contractors, this may seem like a lot to spend on insurance. It is something that you will have to weigh against the amount of time and effort you can put in to get the job done right. A contractor is just that – someone that works on a project. They come in at the beginning, finish what they have and move on. They are less likely to take out loans or file for personal loans to pay for things they didn’t cause themselves. The typical contractor works a long term contract, which means they are committed to a certain amount and for a certain length of time.
The liability insurance a contractor carries can be very low in comparison to the amount of work they do. The number one reason a contractor might not have liability insurance is because their company does not carry it. The contractor would have to sign a form for the company not to carry insurance, but many companies do not do this. This can mean that when you have an accident on the job, it is up to you to find out who pays more, yourself or your insurance company.
Remember that an insurance company is not going to start paying for any job that they write a claim off. The claim has to be on their books as being paid by the company. There is nothing, your insurance company will do for you if you are not going to make your own business money. Find out what you are entitled to before you start your job and then you should be able to negotiate the best deal for yourself.