The economy of today is not like that of yesterday. It’s fast moving, dynamic and rewards businesses who can quickly adapt to the changing marketplace. One strategy that many businesses employ today is to source out or ‘contract out’ some of their work or projects. There are many companies who specialize in niche services and can deliver their services or goods far more effectively and economically than others. This helps to reduce costs and allows your company to focus on its core business. Win-Win. What’s the problem then?
Do you know if the company or person you contracted has the proper insurance in place for their business? Did you check?
Some industries are now making a habit of requiring confirmation of insurance from contractors or those conducting business within their buildings. For example, hotels increasingly require wedding decorators, dj’s, and other entertainment companies to provide proof of insurance. Why? Hotels do not want to assume liability for injuries that may occur as a result of the actions or equipment of third party vendors.
Some municipalities now require certain classes of businesses have insurance before licences can be purchased. As an example tattoo parlours must show proof of insurance before they can get their business licence in the city of Toronto. Why? Because through regulation this is one way municipalities are moving to protect consumers.
Contract your IT work to an outside company? What if they aren’t keeping up to date with their security? Depending on the services of your IT contractor make sure they have the appropriate insurance for their business so as to minimize your risk and exposure. Should you suffer a data breach of your client information, how might their policy respond? Read Erb and Erb’s IT Insurance Whitepaper to know more.
Related Read: Can Cyber Risk Affect Your Business
Contracted companies who have insurance are more likely to abide by the codes of their industry because insurance companies and municipalities require it. Companies who have insurance do so to protect both themselves and their customers. If you are working with a third party vendor and they don’t have insurance your company could be assuming the liability for any damage, or worse injury, caused by the negligence of that third party company. In turn, this assumption of liability could affect your company’s own insurance, by either raising rates or forcing the insurance company to re-evaluate your whole insurance package.
Related Read: What Kind of Liability Coverage Does Your Business Need?
How does one get confirmation of insurance? In commercial insurance, businesses routinely ask for Certificates of Insurance. This is a piece of paper, which your broker will provide on behalf of the insurance company where the policy is placed. It will confirm the type and amount of coverage and has a reference to the company who is requesting the confirmation. At Erb and Erb we quickly provide this for our commercial clients because contracts can depend on this confirmation.
When you next contract out work, ask for proof of insurance from the contractor or third party company. It’s your right.
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