You’ve worked hard to bill your contractor’s business, but did you know that you could lose everything if you’re not properly insured?
Being in the construction industry and working as an independent contractor comes with a lot of risks. Find out why you need a contractor’s insurance policy, what it covers, and how much it will cost.
What is contractor’s insurance, and why do you need it:
All types of contractors will need to have business insurance. The nature of the work performed by construction contractors as service providers on construction projects means that you will be taking on risk. As an independent construction contractor, insurance should be in place before you start any job to limit your general liability.
If you are working on a large job or with a government agency, they will require proof that you have the proper insurance in place in the form of certificates of insurance listing your customer on additional insured endorsements. If you’re working on a smaller job, the customer may not ask for proof of insurance upfront, but you’ll want to make sure it’s in place in case anything goes wrong.
Without an insurance policy, you (and your company) will be responsible for any harm or damage caused by your work. With insurance, your liability risks will be limited based on your insurance coverage. General contractor’s insurance is actually composed of several types of insurance coverage from general liability insurance through tools and equipment insurance.
How does contractor’s insurance protect you?
Without any independent contractor insurance, you will be solely responsible for any claim against your company, whether it’s a claim against the quality of your work, harm caused by your business operation, or an injured employee.
By having independent contractor insurance, your contractor business has a partner in the insurance company that will assist you with claims and the amount you will be held liable for.
The insurance company will help fight the claim if only to prove that they are not responsible for the associated costs by assisting you with a legal defense of the case. A liability policy can also help protect you against errors and omissions claims, reputational harm, and business interruption.
What are the different types of contractor’s insurance?
General Liability Insurance:
Commercial general liability insurance covers many claims against your business. The claims include damage done to property, a bodily injury to your customer, or any claims against the work you performed, whether the work is done by your employees or independent contractors that you hired.
How much is covered will be determined by your general liability coverage, which will be stated on your policy information. A general liability insurance policy will also cover the legal costs associated with the claim up to your coverage limits. Depending on your coverage, you may also have coverage for any loss of business income.
As a small business owner, you are usually focused on being a service provider. You might also run into claims against your business practices. General liability insurance policies can also cover you against personal and advertising injury, which includes claims of slander and libel against your company. Omissions insurance coverage may also be included, which would cover any errors or omissions in contracts put together by your company.
Tools and Equipment Insurance:
You know that, outside of your employees, your tools are your most valuable resources. Good tools are also expensive tools. You’ve invested so much of your money into buying the right tools, you’ll want to make sure your equipment coverage is sufficient to get you back up and running.
Manufacturer and store warranties only cover your equipment for defects from the manufacturer. But what happens if your equipment is damaged because it gets run over by a car, dropped from a roof, or left out at a jobsite? Warranties won’t cover that type of equipment damage.
You can purchase tool and equipment insurance to cover damage to equipment that is outside of the normal warranty coverage. This type of coverage is usually only available for equipment over $1,000 and generally has a deductible before the coverage kicks in.
Worker’s Compensation:
Every company with employees is required to have workers’ compensation insurance. The only possible expectation is if you, the owner, are the only employee and most business owners choose to opt-out of the coverage.
Workers compensation covers your employees in case they are injured while performing job duties. It does not include coverage for auto accidents that happen while your employees are on the job.
You should make sure that each of your independent contractors has a certificate of insurance, otherwise you will be required to provide worker’s compensation coverage for them in most states.
Commercial Auto Insurance:
If your employees or independent contractors use your vehicles on the job, you will need to have commercial auto liability insurance to cover your business in the event of an auto accident which are not covered under your general liability insurance. Commercial auto insurance covers injuries and property damage resulting from auto accidents and the related automobile liability.
How much does a contractor’s insurance cost?
Contractor’s insurance varies by the type of coverage you select, the deductible on your policy, and where your business is located. You will also find that coverage costs vary based on the type of contracting work you do. The more coverage you select and the higher the liability limits, the higher the premium will be for your business owner’s policy.
For example, a roofer might have a higher cost than a general contractor. Insurance companies set their rates based on their own formulas, so you should shop around to find the best company for your specific business.
With a high deductible and few employees, business insurance can start around $100/month and will grow along with the size of your business.
How to find the right contractor’s insurance for your needs
As a contractor, you will probably need several independent contractor insurance policies to ensure that your entire operation is covered. You can do your own research on each type of policy, figure out which types of insurance for independent contractors you need and buy your own insurance.
Because of the risks involved and the complexity of the various types of policies, you’ll want to work with an insurance broker that understands the interplay between the policies to ensure that you are covered in the unlikely event that something goes wrong on one of your jobs. Insurance brokers work with several insurance companies and can help you compare the coverage details on a business owner’s policy.
You’ll also want to assess your current business owner’s policies (to make sure you don’t have the same coverage elsewhere), determine how much business property you own, and how your business operations are managed. As general contractors, there are many variables that go into finding quality coverage. Using a business broker can free up your time to do the work your business performs best.
What to do if you are injured on the job site
Get Medical Assistance. The first thing you need to do if you are injured on the job is to seek medical assistance, especially if the injury is threatening your life or limb.
Report the Accident. Once you are out of immediate danger, you will need to contact your workers compensation insurance provider to find out what type of documentation they need.
Keep Records. It’s important that you document all events surrounding the incident, including any violations of company policy that might have led to the accident.
Evaluate Your Company Procedures. It’s important to determine what caused the accident and how to prevent future accidents from occurring. Having standardized safety procedures in place will be required by your insurance provider to reduce the likelihood of future incidents.
Contractor’s Insurance: Final Thoughts
Being an entrepreneur involves a lot of risk. But you don’t need to work without a safety net. By having the right contractor insurance and professional liability insurance in place, you can reduce the likelihood that an accident or injury will grind your company to a halt and complete each construction project with less worry on liability and more time to focus on customer satisfaction.
Ask us which type of insurance is best for your contractor business, consult an experienced insurance agent at ContractorsLiability.com. Moreover, we specialize in insurance for the construction industry. We will also give you a free quote in just 5-minutes. Call us at (866) 225-1950
