What is contractors insurance?
In the simplest of terms, contractors insurance is a specialized insurance policy for any general contractor or subcontractor. This type of policy is suitable for any contractor who works in one of the following fields:
- Construction
- Electrical
- Landscaping
- Plumbing
- Painting
- Carpentry
- Telecommunications
- HVAC
- Air duct cleaning
Someone whose job is in any of the industries mentioned above will face certain risks that workers in other fields will not. These risks can include anything from damages to your tools, injuries on the job, unhappy clients and lawsuits if property damage occurs on a project. This is why it is incredibly important to make sure that you have a strong insurance policy in place to protect you and your business.
What types of coverage do contractors need?
Every individual person and business will have their own specific insurance needs and requirements. These can be based on factors such as your company’s location, and what specific industry you work in. Thankfully, there are many different coverage options available to you. The following seven coverage options are some of the most common and highly recommended for contractors to include in their policies.
1. Commercial General Liability
Almost every single business, regardless of the industry or field, should have this type of coverage on their policy. Commercial general liability is in place to protect you and your business against other’s claims of bodily injury or property damage. This coverage could help to cover the costs of medical bills, legal bills or property repairs. As a contractor, you may end up facing a bodily injury claim if someone gets hurt as a direct result of your work, or a property damage claim if you accidently damage or break something on a client’s property while working. Having this on your policy will protect you and cover you for any expenses that result from these claims.
2. Commercial Property
This type of coverage is another one that is very important for most business operators. If you have a business that rents, leases or owns a physical location, you should consider including this on your policy. Commercial property insurance will protect the physical property of your business. This can include, but is not limited to, your actual building and its structure, furniture, supplies and inventory. Having this coverage can help you with the costs associated with repairs and replacements. Some perils that you can be protected against with this coverage are fires, hail, theft, lightning, smoke and vandalism.
3. Commercial Auto Insurance
As contractors are generally on the road and travel to different worksites often, commercial auto insurance is quite useful to have on you policy in case of an accident. This type of coverage is good for any type of vehicle that is used for business purposes, including cargo vans, sedans, semi-trucks and dump trucks.
When you get a commercial auto insurance policy on your vehicle, the only coverage that is required is called Civil Liability. This will protect you if you get in an accident and cause damage or injury to someone else or their vehicle. If you’re looking for more protection than this, there are extra coverage options that you can add onto you commercial auto policy. The most popular additional coverages are “Collision and Upset”, which will protect you in the case of any kind of accident, and “All Perils”, which covers any damages caused to your vehicle by something other than an accident.
4. Surety Bonds
In some cases, you may be required by law or by your client to have proof of a surety bond before you are hired for a project. A surety bond is essentially a three-way contract between you, your client and your insurance provider. It protects said client from losses, up to the limit of the bond, that result if you fail to perform any obligations. Common examples of surety bonds that contractors may in contact with over the course of their career include the following:
Contract Bonds
These act as a guarantee to your client that you will fulfill your contract within any determined provisions.
Licence Bonds
Depending on the circumstance, these can be required by the government in order to receive a permit that allows you to operate your business.
5. Mobile Property
This type of coverage is in place to protect any property that is not stored at one fixed location, or that is routinely taken off-site or is travelled with. This will cover any of your equipment, tools or other property while it is off-site, and also during the entire process of transit.
As a contractor, you are generally required to travel from jobsite to jobsite. The fact that your property is not often stored in a secure location raises the risk of theft and damages. Mobile property coverage will protect you from these risks.
How much does contractor’s insurance cost?
The total cost of each individual contractor’s policy will differ from customer to customer. Firstly, every policy will include different types of coverages depending on your specific needs. A general rule of thumb is that the more coverages included on a policy, the more expensive it will be.
Secondly, the cost will differ depending on a number of factors relating to your business. These factors can include:
- If you have a physical location. The size of your physical location will impact your rate, as well as the geographical area of said location. Areas with higher crime rates generally have higher premium rates.
- Your company’s size. This includes the number of employees that you have, the amount of equipment that you have and your average monthly income and revenue.
- Your company’s history. This can mean anything from how long your company has been in business to your claims history.
- The industry of your business. If you work in an industry that can be seen as dangerous (you often work with flammable or toxic substances, your work involves heights, you work with dangerous machinery, ect.) you might be labelled “high risk” and have higher premiums.
Due to this, it is incredibly difficult to pinpoint one specific price for a contractor’s insurance policy.
Ready to get a construction insurance quote?
Are you a contractor or subcontractor? Are you thinking of starting your own contracting business? Or do you simply have more questions about contractor’s insurance? Get in touch with one of our licensed insurance professionals.
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