Understanding the Basics of a Hammer Clause for Contractors


Construction Insurance / Monday, July 5th, 2021

Working as a contractor can often be a difficult journey. Not only must you deal with the struggles related to running your own business, you also need to think about taking out insurance that meets your specific needs. When you are met with circumstances that you didn’t expect from your insurance provider, such as being told you are being forced into a blackmail clause, it can do some serious damage. Thankfully, learning more about this option in advance can make a world of difference.

What Is the Hammer Clause?

A hammer clause for contractors works in the same way as it does for any other plan. Essentially, this type of clause works in the favor of the insurance provider. If the provider doesn’t want to deal with a claim put in by the insured, the hammer clause allows the provider to force the insured to settle. Typically, this clause needs to be offered and identified in advance. This means that it is always in your best interests to avoid taking out such a clause when it is offered to you. Other points to consider include:

  • Previous claims made
  • Costs of workers’ comp coverage
  • Risks specific to your industry

Make the Right Choice

By learning what you can about insurance options in advance, you will have a much easier time finding coverage that appropriately reflects the needs of your business. Look into the details of the hammer clause and similar options to gain more perspective.