What You Need To Know Before You Purchase Error And Omissions Insurance

Its more than just a game of luck

Home and building inspectors are in high demand in the Ontario area. However, walking through a home or building, while taking notes on the condition of the foundation, roofing, duct work, and electrical systems can be quite an in depth task. It is not hard to imagine that you could easily overlook or miss something that could later lead to thousands of dollars in repairs for the potential buyer. Click here to read more about home inspectors association claims. Of course, when a situation like this happens the involved parties are going to come looking for reimbursement. This is the perfect type of situation in which error and omissions insurance can come in handy for the inspector.

E&O insurance protection

While there are several different types of polices, the main goal of error and omissions insurance is to cover the inspector in the event that he/she makes an error, which leads to a financial loss for the customer. This type of insurance is also a great selling point, when it comes to offering your services to potential customers. If a customer knows that they will be covered, in the event that you make a mistake, they are going to feel more comfortable when purchasing your services. However, before you just go out and purchase E&O insurance, with the first licensed agent you come across, there are several things that you need to be aware of.

Buying Early

As an inspector your job is to detect potential problems and advise the homebuyer that the repairs need to be made by the seller. This needs to be done, before the buyer makes an offer for the home. Well, the same concept applies to error and omissions insurance. The longer that you go without this coverage, the more risk you are taking. You also need to be aware of the fact that most insurance agents use what is known as a retroactive date. This date determines how far back in time the coverage will go. Any claim that is made before this date will not be covered, which is why it is imperative that you get the coverage as soon as possible. It is advisable to purchase this coverage before you even open your business.

Knowing Exactly What E&O Insurance Covers And Doesn’t Cover

E&O insurance policies are designed to specifically cover you in the event that you or an employee accidently causes your customer to incur financial losses. For anything else outside of this scope, you will need additional coverage. For instance, E&O insurance does cover bodily injury due to an accident that occurs on a jobsite. It also does not cover any damages that are done to the customers’ property, while you performing a job duty.

Assess Your Risks

Before purchasing an errors and omissions insurance policy in Ontario, you will need to assess your risks. As an Ontario home inspector, you are left with a long list of responsibilities and job duties. When you enter a home, you are expected to cover every aspect of a thorough inspection, including the flooring, roofing, plumbing, sewage and electrical systems. If you fail to inspect one of these systems, you will be putting the homebuyer at risk of financial loss. If the system fails or malfunctions shortly after the homebuyer moves into the home, you may very well be faced with a lawsuit. Someone is going to need to pay for the repair or replacement costs of the system and the homebuyer is not going to be willing to accept the responsibilities.

risk assessment

The insurer will determine the level of risk that they will accept, when underwriting an errors and omissions policy. It is totally up to the insurer to decide, whether or not they are willing to provide you with the requested coverage. If the insurer reviews and accepts your application, you will need to pay a premium. The amount of the premium is based on the level of risks and the deductible, which is basically the amount of money that you are willing to pay, in the event of a claim. As you probably already know, the higher the deductible the lower your premium. Before determining the deductible amount, you will need to consider your finances, because you will need to pay for this expense out of pocket.

Understanding Why Canadian Contractors Need Surety Bonds

How important they really are

Those that intend to serve Canadians will need to familiarize themselves with the laws of the country. While there are numerous regulations that must be followed, one of the most perplexing is the surety bond. The mass majority of Canadian contractors and businesses will be completely unaware of the surety bond and its purpose. Many will brush off the idea and complain that it is simply another way for the Canadian government to control businesses. While this may be true, there is an underlying importance for the surety bond. The bond is truly a necessity and will help businesses of all shapes and sizes. Below, you will learn why Canadian businesses need a surety bond.

History Of The Surety Bond

A surety bond represents the early form of suretyship, dating back to 2750 BC. Historical evidence also shows that surety bonds existed in Persia, Babylon, Rome, Assyria, Carthage and the Code of Hammurabi. Early Englanders and Hebrews also utilized the bonds to protect their investments. However, it was discovered that suretyship was not always established through bonds. The Code of Hammurabi contains a written code, the earliest mention of surety bond historysuretyship, which was written sometime around 1790 BC.

The system utilized by Medieval England for establishing suretyship, Frankpledge, did not rely on the execution of bonds. The Guarantee Society of London was the first corporate surety, dating back to 1840. The United States Congress passed a law, 1894 Heard Act, requiring all companies involved in federally funded projects to obtain a surety bond.

It didn’t take long for the Canadian government to follow in suit. Today, surety bonds on utilized for private and public construction projects. Most territories and provinces require general contractors to obtain them, before initiating a development project.

Creates A Level Playing Field

Believe it or not, the surety bond is designed to help create a level playing field across the country of Canada. The bond primarily achieves this goal by eliminating fraudulent and nefarious competition. Since the bond is a requirement, it is safe to say that illegitimate companies and those in poor financial standing will be unable to obtain the necessary surety bonds. Therefore, they’ll be unable to bid on projects and this will prevent them from stealing jobs from legitimate, trustworthy and reputable companies, such as yours.

Therefore, the bond is capable of reducing competition and ensuring the project owner or consumer finds the best candidate possible. If the surety bond requirement was not enforced, any Joe off of the street would be able to bid on a project, whether or not they could obtain the subsequent bonds or complete the project.

Leveraging

Another thing to remember is that businesses and contractors can benefit substantially by leveraging with the bond, instead of utilizing their own cash. When putting up your own cash, you’re putting yourself in a very risky situation. If something goes awry and the project falls through, your hard-earned money will be gone and you will have no backup plan whatsoever. At the same time, it is no secret that the majority of contractors will be unable to put this such a substantial amount. By working with a surety company, it will be possible to use the borrowed capital to obtain the bond, while only being forced to pay a small percentage of the total.

This will keep more money in your company’s bank account and that money can be used to better serve your clients. As long as everything goes smoothly, the risks will be minute.

 

Compared To The Letter Of Credit

In some cases, the contractor may opt to utilize a Letter of Credit instead of a surety bond. This is one way to solve the problem, but it is generally not the best solution. The letter of credit will not be a suitable option for many, since collateral is always required. Many business owners do not have collateral to put up, while other will simply refuse to do so. Putting up collateral is generally very risky and could result in your savings or property being confiscated. Many experts agree that obtaining a surety bond is the better option, since it generally delivers more protection and fewer fees.

Bonds are best for small businesses, but are truly suitable for companies of all shapes and sizes. Also, the surety bond will typically cover the entire 100% of the contract, while the letter of credit will generally only cover a small portion, such as 5 to 10%.