ShockleyMost subcontractors approach their insurance purchasing the same way. The lowest bid gets the deal. However, if their specifications and expectations are not clear, they may wind up paying thousands in uncovered losses.

Insurance in its simplest form is buying peace of mind. You pay a premium for a piece of paper that promises to pay if specific events occur, or to pay on your behalf if you are negligent in the conduct of your business. The piece of paper you buy is not easy to read or understand, and some would argue that it's written by lawyers to either impress or confuse other lawyers. Here are some examples of what can happen:

· A renewal bid was $20,000 below the incumbent. The bid disclosed that collapse; explosion and underground coverage was excluded. This would not be a good buy for a Landscape Subcontractor.

· A bid is received for automobile insurance $2,500 below their existing coverage or about 10%. But the sub was not told that every change in drivers might result in an additional premium-since the insurer assigns each driver to a vehicle and charges citations. This resulted in a $3,000 additional premium over the year.

· A quote for liability coverage was 15% less than the previous year. But the insurer made a minimum charge of $25 every time an "additional insured" was added to the policy.

· A subcontractor was told the company would pay "replacement cost" on equipment and tools covered under the Inland Marine policy. The policy limited "replacement cost" to equipment and tools purchased within the last 3 years and only if scheduled on the policy at full replacement value. This is a 2 way "got ya" -equipment over 3 years old is adjusted at "actual cash value" (replacement cost less depreciation) even though the premium is charged on 100% of the new value-so you pay more for less value.

· A contractor asked his agent if "Contractual Liability" was included in the policy. It was but he was not told that "fines, liens, attachments, judgments, etc." were not covered. OSHA fines the subcontractor and General Contractor. The subcontractor pay his fine. The General gives the subcontractor his fine and refers him to the contract paragraph that says "subcontractor will hold harmless and defend General from any and all fines, liens, judgments" associated with safety of the construction project. The subcontractor who signed the contract pays $35,000-the insurer doesn't since FINES ARE EXCLUDED. If the sub had known about the exclusion he might have tried to negotiate some of the words.

Not all agents are created equal-not all agents have the same level of knowledge about the contracting industry or specific needs of subcontractors. It becomes apparent then, that you (the sub) must know what is needed in your insurance program. Remember, there is no such thing as BEING COMPLETELY COVERED. Every insurance policy has LIMITATIONS and EXCLUSIONS-which takes coverage away.

How do you as a subcontractor deal with this costly problem?

1. Know what coverage you want and need.

2. Ask questions-find out what is limited or excluded from coverage.

3. Ask questions-find out what the agent knows about the construction industry and subcontracting specifically.

4. Get it in writing-"he said it's covered" isn't a good way to deal with adjusters.

5. Read the contracts you sign-ask specific questions of your agent and negotiate words that expose you to loss without recovery from insurance. LCM

REMEMBER IT'S YOUR BUSINESS, PROTECT IT!