Ask an Insurance Expert: Why am I being asked if I have insurance?
March 3, 2022
Hi, my name is Bob with Evident, and today we’re going to unpack the question why you’re being asked if you have insurance. So let’s start by taking a look at the difference between your insurance and someone else’s. Your insurance pays for losses you sustain, like damage from a fire in a building or damage that you might cause other people like in a car accident. So in the first example, let’s just say that lightning strikes my business and causes a fire. No one’s at fault for lightning. It’s an accident. So if I have the right coverage my own insurer will pay for that loss, but what if the fire started because of a contractor’s bad electrical work? Should my insurance pay for that loss? Probably not because the contractor is responsible for their work. So when businesses work with another and one causes a loss it impacts another it’s important that the right party pays for the loss. So imagine the following scenarios. The one we just looked at.
A general contractor hires an electrician for a project and before they can start, they need to show that they have liability insurance to cover that faulty workmanship scenario. The general contractor isn’t one cost a loss nor to the property owner so it should fall to the electrician. A delivery company is asked to show that they have auto liability coverage before they can start driving in case they cause an accident on the road. It’s not the fault of the company using the delivery service. It’s the drivers fault who belongs to delivery company.
A franchise that grants a license to a franchisee and to protect that franchises balance sheet and brand they require that each store carries a minimum amount of insurance to cover losses that occur at each store. The franchisor shouldn’t be responsible for slips and falls at a given location. Or a bank that issues a business loan to a company for equipment requires that the company maintains insurance on that equipment for the life of the loan. If something happens to the equipment, the bank wants to make sure they get their money back not eat the cost of that loss. So that’s why people requests proofs of insurance and we’re gonna do a deeper dive on that topic in the next video.