Types of Contractor’s Insurance and Why Your Business Needs It
By Space Coast Daily // August 29, 2021
You may be asking yourself: Why do I need insurance? Insurance is an important part of any business. It protects your company from lawsuits, property damage, and theft or personal injury on the job. Contractor insurance will protect you in case one of your employees falls off a ladder and breaks their arm while working for you.
There are many different types of contractor’s insurance available to businesses today, so it can seem overwhelming when trying to decide which type is right for your business. In this article, we will discuss the most common types of contractor insurance and tell you why each would benefit your business!
What is contractor’s insurance and why does your business need it
Contractor’s insurance is insurance that covers your business for claims of injury and property damage caused by the work it does. This insurance is required to operate in most states, including California, New York, Pennsylvania, and other common states where contractors are needed.
A contractor’s insurance policy will cover a number of professions like general construction laborers or electricians who provide their services on-site without any permanent physical establishment.
Some examples include:
- General contractors who take responsibility for building structures (ie houses) from start to finish
- Specialty trade workers such as project carpenters or plastering specialists
- Home improvement professionals such as roofers or window installers
It often includes coverage for personal liability arising out of performing the contract agreed upon with clients.
If the insurance does not cover you, your business may be liable for any injuries or property damage it causes on site. The insurance premium is a small investment in protecting against liability claims and lawsuits that might otherwise devastate your company.
The important insurance requirements in each state are set out in insurance laws, and insurance brokers like to see that your business has the appropriate insurance. That is why insurance brokers will often ask to see insurance certificates before they provide insurance, or may refuse a contract altogether if it is not insured.
Types of contractor’s insurance
The requirements for contractors vary from state to state, but generally, insurance companies provide coverage in the following general categories:
■ Worker’s compensation insurance
■ General liability insurance
■ Commercial automobile insurance (covers business vehicles)
Those types of insurance are usually the minimum required to operate because they cover all of your business’s employees and properties.
Worker’s compensation insurance: Worker’s comp insurance protects you from injury claims arising out of an accident on-site, such as a worker slipping at work or being injured by another employee. It also covers injuries that happen off-site but arose during the course of employment like car accidents while commuting to work or medical bills for which workers were treated following their job duties.
General liability insurance: General Liability Insurance is coverage against lawsuits over property damage, bodily injury, advertising injury, product liability, and other losses caused by negligence in performing contracted services that arise outside your control (i.e. not due to natural disaster).
This type of insurance is usually not required by insurance brokers if you have worker’s compensation insurance, but it may be mandated in addition to workers’ compensation insurance.
Commercial automobile insurance: Commercial Auto Insurance covers your business vehicles and includes coverage for liability arising out of accidents involving those vehicles while they are being used on the job as well as damage or loss caused by them.
It also provides protection against theft or vandalism when a vehicle is away from the workplace with some exclusions (i.e. off-road use). Workers who own their car can often opt for this type of insurance instead of Worker’s Compensation since it can cover injuries that happen during work hours which would normally not qualify under worker’s comp provisions.
Why you should have a general liability policy as well
General liability insurance is insurance against lawsuits over property damage, bodily injury, advertising injury, product liability, and other losses caused by negligence in performing contracted services that arise outside your control (i.e. not due to natural disaster).
This type of insurance can be a necessary addition for contractors with worker’s compensation insurance.
Other types of policies that are important to protect your company assets
You may also want to consider insurance policies for the following:
■ Business Interruption Insurance
■ Liability insurance
Business interruption insurance provides protection from loss of income due to natural disasters or other damages, whereas liability insurance covers injury and property damage caused by your company. This type of insurance is usually not required by insurance brokers if you have worker’s compensation insurance, but it may be mandated in addition to workers’ compensation insurance.
Contractors should always make sure their contract includes a clause that states what kind of contractor coverage they are providing (or what kinds are being provided). If there is no mention of the types offered, assume general liability will cover all aspects of work performance and provide this service yourself.
How much does the contractor’s insurance cost
You can make the best deal for insurance by contacting insurance companies and asking for quotes. If you have a broker, they should be able to help with this process as well.
Some insurance providers may offer discounts if you bundle your policies together (ie Worker’s Compensation Insurance + General Liability Insurance), but it is usually much easier and cheaper to just seek out the best price for each type of insurance individually when possible.
The cost of contractor’s insurance will vary depending on a number of factors including how many employees work at your company, what types of business vehicles are used in conjunction with the services provided, whether or not workers must commute using their own vehicle or public transportation options like taxis or buses, etc.
Your business needs to have the right insurance in place for protecting against any potential damages. This includes general liability coverage and other types of policies that can help protect company assets. When it comes to pricing, if you’re like most contractors we work with today, monthly premiums may be more affordable than one-time payments or yearly contracts.
Plus, unlike some traditional forms of insurance where there is no payout until after the damage has occurred (e.g., fire), many providers will offer an advance on future claims when they see signs of increased risk due to external changes such as extreme weather conditions or natural disasters. Choose wisely and make the perfect option for your business!