Contractors are an integral part of a country’s economy. They build and repair infrastructure, provide services to businesses and local governments, and do more than their share to keep the country moving forward.
But as these hardworking individuals are often exposed to high-risk situations, they need to have the right contractor insurance before embarking on their next job or project. Here’s what you need to know about government contractor insurance.
Government contractor insurance is essential for any business that works with the government, whether as a prime contractor or a subcontractor. This post will explore the ins and outs of government contractor insurance and discuss what every contractor needs to know to protect themselves and their business.
What Is Government Contractor Insurance?
First, let’s define what government contractor insurance is. This type of insurance protects companies that work with the government by covering risks such as property damage, employee injury, and third-party liability. It also protects the contractors.
Suppose the contractor damages something or makes a mistake during the contract. The insurance covers the damages. Insurance for government contractors is vital because they are under many limitations, unlike contractors from private firms. For instance, they are under restrictions on what information they can share about the project. Hence, insurance to cover all such errors can come in handy.
In many cases, government contracts require contractors to carry specific insurance coverage. The government requires the contractor to have various insurance policies. For instance, the contractor must have insurance against government property loss or damage. Similarly, the contractors must also have overseas workers’ compensation or war hazard insurance.
Types of Contractor Insurance for Government Contractors
There are several types of insurance that government contractors need. Here are some common government contractor insurances to get.
Errors and Omissions Insurance for Government Contractors
Errors and omissions (E&O) insurance protect you against lawsuits if you are held responsible for errors or omissions in your service. For example, if you misprice a bid or recommendation, it could lead to a lawsuit from your client. The E&O policy helps pay attorney fees and court costs in these situations.
The chances of errors and omissions are less with government contractors due to their vast experience. According to Zippia, there are around 5,294 government contractors in the USA. The average age of these contractors is over 47 years, showing that it requires a lot of expertise to be a government contractor.
However, if any error occurs, it can be devastating. For instance, an error in building a busy government office can damage the property and the people within. Hence, the E&O of government contractors needs to be insured.
The policy covers specific claims arising from services provided by your company during the period covered by the policy. Suppose someone sues you because of something that happened within this period.
In that case, the insurance company will cover up to a certain amount per claim depending on which type of E&O policy you have purchased and how much coverage limit has been selected by your business owner/employer. Coverage may include:
- Negligence: Failure to exercise proper care when performing professional duties, resulting in injury or damage caused by negligence.
- Breach Of Contract: Failure to perform contractually obligated duties properly due to negligence.
Worker’s Compensation Insurance for Government Contractors
Worker’s compensation insurance is one of the most important coverages you can have as a government contractor. This insurance protects your business against specific injuries and illnesses during employment or while performing work-related duties.
In addition to covering medical expenses, worker’s compensation can provide financial assistance if a team member becomes disabled due to an on-the-job injury or illness.
When employees are injured while working for the government, they must understand how to file a claim with their workers’ compensation insurer to receive benefits. This may include compensation for lost wages, medical bills, and other damages associated with their injuries.
While all 50 states must offer some form of worker’s compensation insurance coverage for employers who choose this option, there are many nuances related to both how claims are processed and what types of benefits are available under each state’s system.
However, the number of covered jobs is declining post the pandemic. Data from the National Academy of Social Insurance shows a 2.1% decrease in the number of covered jobs. A total of 136 million jobs were covered in the USA in 2020.
Bid Protests
A bid protest is a formal complaint filed by a contractor or subcontractor that challenges the award or proposed award of a government contract. These protests can be filed with various government agencies, such as the Government Accountability Office (GAO) or the Federal Acquisition Regulation (FAR) Council.
Bid protests can arise for various reasons, such as allegations of discrimination, impropriety, or procurement laws and regulations violations. Government contractor insurance can help protect businesses from the financial risks associated with bid protests.
For example, some insurance policies may cover the legal fees and other expenses associated with defending against a bid protest and any damages or penalties that may be imposed.
Additionally, some policies may provide coverage for the costs associated with re-bidding for a contract or losses sustained due to a delay in the contract award.
It’s also important to note that in some cases, the government may require contractors to have specific insurance coverage or to meet certain insurance requirements to be eligible for certain contracts. This is why government contractor insurance may be a requirement for some companies that want to bid on government projects.
Overseas Government Contracts
If you are working on a government contract overseas, there are some additional steps that you will need to take. The first thing is to be aware of the local laws and customs. It is essential to understand these to avoid any legal issues. You should also ensure that your company has a local agent, attorney, and accountant familiar with the country’s business practices.
If you must travel abroad for an extended period, it might be worthwhile for your company or employees to set up a bank account there.
Conclusion
We hope this article helped you understand the ins and outs of government contractor insurance. You don’t need to be an expert, though. Insurance agents are available to help you determine what coverage you may need.
They can also help you understand how much coverage you should be buying. If a contractor insurance company is offering the policy, they will likely have experts on staff who can answer your questions too.
