Contractors Insurance – You need to protect yourself and your business from unexpected expenses and liabilities. Contractor insurance protects you from the unexpected and gives you peace of mind. It also protects you from risk and liability, which can impact your ability to do business. In this post, you will learn how to find the best contractor insurance policy. Keep reading to learn more!
There are a lot of benefits to hiring a contractor to work on your house. They can save you a ton of time, make your life easier, and improve your home’s value. But there are also risks. You need to know what type of contractor insurance you need to protect your assets and business.
There are as many types of contractor insurance as there are contractors. You need to understand what type of coverage you need and how to find it. Whether your contractor’s business is small or large, there are some basic steps you can take to protect yourself.
In this article, we’ll discuss:
Why You Need to Get Contractor’s Insurance
There are many benefits of hiring a contractor instead of hiring a company directly. You’ll save money on upfront expenses, there’s no risk of getting sued, and you’ll have more control over the work than if you hired an employee. However, there are some downsides as well. You might not have the legal liability or assets to protect if something goes wrong with the contractor. You might even end up paying more in fees. To avoid those problems, you need contractor insurance. This is especially true if you have a small business and need to find contractors that can be trusted and can handle the responsibility. In this article, we’ll discuss some of the benefits of contractor insurance, the different types of contractor insurance, and how to choose the right contractor insurance for you.
What Is Contractor Insurance?
Contractor insurance is a type of insurance you can buy for your business that protects you and your assets against potential liabilities that you might incur through doing contracting work. A common example is a contractor who contracts to build a house for someone. If there’s an accident while they’re on the job, they might end up carrying the legal liability for any damages incurred during their time on the job. This can be very costly. By purchasing contractor insurance, you can protect yourself and your business from these costs, which is why it’s so important to have contractor insurance.
What’s Covered By Contractor Insurance?
When you buy contractor insurance, you’re insuring against risks that are specific to contractors and construction businesses. These may include injury and/or property damage to employees, contractors, and other people who might be directly involved in your project. These risks are what promoters of contractor insurance bills themselves as “The 10 Things That Are Covered By Contractor Insurance”.
However, this list of what’s covered by contractor insurance is not set in stone. Every insurance company will ask you a few questions about your business and what you hope to cover in order to come up with a list of what’s covered by contractor insurance. Here are some of the questions you might be asked when buying contractor insurance:
- What Does Your Business Do?
- What Types of Work Will You Be Doing?
- Where Are You Doing Your Work?
- What Equipment Are You Planning to Use?
- Where Will Your Employees Be Working?
What Will You Be Doing During the Day?
What Does Your Business Do?
- This one may seem obvious, but some companies don’t even bother to ask this question before purchasing contractor insurance, which is why you see so many companies covered under one policy. The answers to this question can help you determine what your liability limits should be. For example, if you answer “Construction” to this question, you might consider having $500,000 worth of coverage.
What Types of Work Will You Be Doing?
The types of work you do will help determine what your liability limits should be. For example, if you operate a general contracting company, you will want to purchase general contractor insurance. However, if you operate a cabinet company, you might want to purchase cabinet insurance, as those are usually not considered to be construction work.
Where Are You Doing Your Work?
This question is important because it will help you determine what type of business you will have to file a claim under. For example, if you own a company that only operates in the state of Texas, you will have to file a claim under that state’s Worker’s Compensation system, which is a completely separate system from general liability.
What Equipment Are You Planning to Use?
This is important because you will want to make sure your contractor insurance covers the equipment you are going to be using. The main things that should be covered by your equipment insurance are your construction vehicles, the tools you will be using on the job, and the materials you are going to be using.
Where Will Your Employees Be Working?
This question is important because it will help determine where you will file a claim. If you own a contractor company that only works in the state of Texas, you will have to file a claim under that state’s Worker’s Compensation system, which is a completely separate system from general liability.
What Will You Be Doing During the Day?
This question is important because it will help determine the types of employees you need to file a claim for. For example, if your primary employees are subcontractors, you will have to file a claim for payment under the sub-contractor’s insurance.
What’s Covered By Contractor Insurance?
When you’re buying contractor insurance, you have a few different options. You can purchase a standard general contractor policy, a specialty policy for certain types of contractors, or you can purchase a policy in an addition to your general contractor insurance to cover additional risks. Let’s take a look at the different types of coverage you can choose from.
Liability
Liability insurance covers you and your employees if someone files a lawsuit against you and you’re found liable. It can cover you if you’re found liable for injuries or property damage caused by your employees, subcontractors, or other people who might be working on your contract. This is the most common type of coverage, but it’s important to note that you will have to show proof of your insurance to a judge in order to get this coverage.
General Contractor
If you own a general contractor business, you will want to purchase general contractor coverage. This type of coverage protects you from lawsuits based on claims such as negligence, strict liability, and breach of contract.
Collision
If your business uses trucks on the job site, you may want to purchase collision coverage. This type of coverage protects you against incidents such as having your truck hit another vehicle or object on the job site.
Theft
If someone steals your equipment or materials while you’re on the job, you will want to purchase equipment and/or materials theft coverage. This type of coverage protects you against incidents such as having computers, phones, or other items stolen while you are on the job.
Who Needs Contractors Insurance?
A contractor is hired by a client to complete a project. For example, a homeowner hires you to build an addition to their home. A contractor can be broken down into two types:
- Contractor. Sometimes referred to as a general contractor, they are responsible for overseeing the completion of the project and fulfilling the contract. For example, completion of an addition to a home.
- Subcontractor. A worker or company hired by the contractor to perform specific tasks or services for a project. For example, a contractor hires an electrician to install wiring in the new addition. Generally, a subcontractor reports to the contractor, not the client.
No matter if your business does general contractor or subcontractor work, you need contractor insurance to protect your business from work-related accidents. Here are examples of contractors that would need contractor insurance:
- Electricians
- HVAC contractors
- Appliance technician
- Handyperson
- Carpenters
- Construction workers
- Landscapers
- Painters
- Plumbers
- Concrete contractors
- Drywall contractors
- Excavators
- Masons
- Roofers
- Snow plowing
- Tile, stone and flooring installers
- Tree service
- Welders
Different Types Of Contractor Insurance
Contractor insurance policies come in a variety of types, based on the type of business you’re in. There are three basic types of contractor insurance: general contractor, specialty contractor, and non-contractor.
General Contractor: General contractor policies cover you for any type of claim that can be filed against you including claims for negligence, breach of contract, and workers’ compensation.
Specialty Contractor: Specialty contractor policies are only available for specialized trades. There are currently no specialty contractors in Texas, so specialty contractors are not available in Texas.
Non-Contractor: Non-contractor policies are only available for business owners who do not own or operate a business doing construction or other similar work.
How Do You Pay For Contractor Insurance?
Contractor insurance is a pretty expensive investment, so you may want to consider purchasing it as part of your business insurance package instead of paying for it separately. Depending on your budget and which policy you choose, you may have a few different options for paying for contractor insurance.
One option is to pay for contractor insurance as part of your business insurance package. However, be careful, as some companies charge an additional fee for coverage above your standard business insurance limits.
Another option is to pay for contractor insurance as a rider on your standard homeowner’s policy. However, this is usually only available in certain regions and usually only for certain types of contractors.
Finally, you can also choose to purchase contractor insurance as a stand-alone policy. However, this option is only available in certain regions and usually only for certain types of contractors.
Bottom line
Contractor insurance is a type of insurance that protects you against potential liabilities that you might incur through doing contracting work. As the owner of a business doing construction or other similar work, you should strongly consider getting this insurance. Choose your contractor insurance based on the types of work you do and the risks involved in those types of work.