Have you recently started your own general contracting business? Are you feeling overwhelmed trying to figure out what types of insurance you need? You’re definitely not alone. When first venturing out on your own, the small business world can seem complex. Insurance for business and general contractor insurance requirements for other general contractors themselves is one area that often confuses new business owners.
However, properly insuring yourself and your company is crucial. Insurance cost provides financial protection if something goes wrong, five types of insurance coverage are legally required. Where do you even start? Luckily, there are some basic guidelines you can follow to save money as you explore your options right.
This article will walk you through the different policies that are essential to insurance for contractors and any contracting business or small business owner’s policy. Don’t worry – I’ll break things down in plain language without all the confusing legal jargon. You’ll learn about general liability insurance policies, workers’ Insurance policies, commercial property insurance, auto coverage, and more. Some key factors like coverage amounts for each policy type will also be addressed.
By the end, you’ll have a better understanding of the ins and outs of the construction industry business insurance. You’ll feel confident partnering with an agent to select plans that suit your construction company’s specific needs. Let’s start with an overview of the construction businesses insurance must-have for any business in the contracting world.
What Does General Liability Insurance Mean For A Contractor?
General liability insurance is crucial protection that every contractor needs to have in place. Commonly referred to as general and contractor liabilities insurance, general contractor insurance covers a “GL” policy. It shields you from costly claims in the event someone is injured on one of your job sites or a client’s property is damaged as a result of your faulty workmanship.
These types of incidents are fairly common in the construction business. Say for example a roofing worker slips off a ladder and is hurt. Or a plumbing leak ruins the drywall below. Without general liability insurance for contractors, you the the independent contractor or general contractor could be on the hook to pay medical bills or repair damages out of pocket. Insurance takes on most contractors’ financial responsibility for medical bills.
Most experts recommend a minimum of $1 million per occurrence for general liability limits. That means if one incident occurs, causing injury or serious property damage or loss, the policy will pay up to $1 million total. You’ll also want aggregate limits of at least $2 million. Aggregate general liability coverage adds an additional layer of protection if multiple serious property damage or general liability claims happen throughout the year.
Beyond the basic certificate of insurance coverage and general liability insurance policy, some additional endorsements provide expanded protection too. A common optional insurance is personal injury protection, which beyond general liability insurance, covers lawsuits resulting from bodily injuries or from non-physical harm like libel, slander, or invasion of privacy on a job site.
Contractors handling especially hazardous work may need specialized policies, too. Working with flammable materials requires a dedicated fire coverage endorsement. Renovating older homes could necessitate an additional insured endorsement for mold issues. It’s worth discussing insurance requirements and your unique risks with an agent.
Be weary of minimum legal requirements, too, as they vary by state but tend to be far too low for small businesses. Getting additional insured stuck holding the bag for higher damages defeats the whole purpose of business insurance anyway. Ultimately, proper business insurance coverage translates to peace of mind running your business without legal expenses. A good agent can also help review add-on options to custom-tailor a plan to fit your business insurance needs.
As a general contractor business yourself, it pays to protect not just yourself but clients as well from liability with a general liability insurance coverage. Don’t cut corners on what’s regarded as the number one must-have: a general contractor liability insurance policy for construction industry protection.
Workers’ Compensation Insurance for a General Contractor
No discussion of contractor insurance basics for small businesses would be complete without covering workers’ compensation. This type of certificate of insurance policy for workers’ compensation is required by law in every state to protect small businesses from financial fallout if an employee suffers a work-related injury or illness. Even minor incidents like a twisted ankle or repetitive stress injury need to be covered by workers’ compensation. Anyway, your contractor insurance pays for workers’ compensation, lost wages, and any medical expenses and bills resulting from any such mishappenings. This prevents employees from seeking costly legal action against you and your company.
When selecting a workers’ company policy, pay close attention to your business’s risk classification code assigned by the insurance provider. This code depends on factors like the types of jobs you perform. Higher risk trades like roofing may cost more to insure employees for than an office-based role. You’ll also need sufficient coverage amounts based on your typical staffing levels. Consult with your agent to ensure compliance with state laws. Most require minimum workers’ company limits relative to your average monthly payroll.
It’s worth exploring any available discounts too. Having a formal safety program, lower injury rates on job sites, or attending training seminars could qualify workers compensation for you for cheaper premiums over time. Just be sure any exemptions still leave employees fully protected as workers compensation is required. At the end of the day, setting up workers’ company Insurance fulfills a necessary legal duty. It’s also just good ethics to look out to hire employees and the team’s safety on and off the clock.
Commercial Auto Insurance Coverage
Besides liability concerns for bodily injuries on job sites, transporting tools, stolen equipment, and materials between work locations also pose risks that require other types of insurance for coverage. That’s where commercial auto insurance policies come in. If you use a company vehicle like a truck, van, or trailer, a regular personal auto insurance policy won’t be sufficient to cover costs alone. Commercial auto insurance is designed specifically for business use on public roads. It protects against claims if one of your vehicles is involved in an accident while conducting work duties.
Pay attention to coverage limits that align with your fixed total value. Comprehensive and collision coverage repair or replace vehicles if they’re damaged. You’ll also need ample liability protection of $1 million or more per accident. Opting for higher liability limits is always recommended. As a business owner, your personal and business assets could be in jeopardy if an accident exceeds your commercial auto coverage and leads to a lawsuit.
Another advantage is allowing employees who drive for your work to be listed as approved operators on your commercial auto policy. This removes pressure if you have jobs requiring backup drivers sometimes. Just be sure rates won’t jump with more drivers added. Deductibles balancing affordability with protecting cash flow are worth comparing with agents, too. Collisions do happen, so choose an amount that doesn’t threaten your contracting business operation if a vehicle is totaled. Overall, properly securing commercial autos leaves one less worried if transporting equipment ever results in an insurance claim down the road.
Professional Liability Insurance (also known as Errors and Omissions Insurance)
While not legally required, professional liability insurance offers valuable extra protection for contractors managing larger construction projects. Also known as errors and omissions or E&O coverage, it defends construction companies’ hired employees and project owners against lawsuits, and any design flaws or workmanship defects surface sometime after a job is complete.
Claims can emerge years later as materials age or if a building system wasn’t properly installed from the start. Many other construction companies and pros opt for this voluntary policy, considering basic risks and how litigious the industry has become. It’s an assurance you’ll be around to make repairs even after a project wraps.
Coverage amounts should scale according to your typical project size and budget. Most underwriters offer $1-5 million per claim limits, with similar aggregate caps. However, high-risk trades like structural engineering may require more. Be aware of retroactive dates, too. These attach liability protection only to projects finished after a certain date, not whole careers’ worth of prior work. Requesting retro dates far enough in the past ensures maximum coverage.
Premiums for general contractor insurance tend to be higher than basic policies. But it could save a contracting company from bankruptcy. Should an expensive lawsuit arise down the road over past deficiencies. For large complex builds E&O general contractor insurance and liability insurance also provide valuable legal defense and repairs if problems emerge later on. As with other insurance sectors, professional and other general contractor insurance and liability insurance options continue evolving, too, to keep up with modern risks. Consulting experienced agents regularly is important to stay optimally protected over the long haul.
Property Insurance
As a contractor, your tools, equipment, and business property are crucial assets that require insurance protection. A property damage policy safeguards these valuable resources from perils such as theft, fire, and water damage.
Whether you work from a physical office or store supplies at your home, property insurance covers accidents and losses. It will reimburse you to repair or replace property damaged on job sites or construction businesses as well as at your business location. Opt for replacement value coverage so adequate funds are available if Anything should anything happen. Property insurance policies may also cover additional living expenses if your business faces a total loss or property damage renders your space uninhabitable during repairs.
Business interruption liability commercial property insurance for general contractors, is another worthwhile component, providing income replacement if ongoing operations face disruptions after being covered for property damage or losses. This allows focusing on recovery without financial strain. The types of property coverage insured under your policy can also extend to leased or rented equipment. Property Coverage follows these offsite assets for specific reasons. Property insurance for general contractors or construction business which, however, shields the equipment, supplies, and offices that keep your contracting business running productively.
Umbrella Insurance
Umbrella insurance provides that extra layer of general liability insurance that covers some protection above your standard general liability and policies. It picks up where your other general liability coverage and auto coverage end if claims exceed those limits.
These supplemental plans are highly recommended insurance for contractors and construction businesses at large. Property damage and awards juries sometimes stand out. An umbrella policy ensures you don’t put your personal assets at risk even if the insurance company and cost for a lawsuit judgment surpass the insurance company and primary limits.
While not required, umbrella coverage offers strong security for relatively low extra premiums. They usually kick in once general liability limits and the property damage coverage are exhausted, providing an additional $1-5 million in liability protection.
Contractors whose work entails high risk should especially consider umbrella plans. Just a single catastrophic accident could jeopardize operations and personal finances without this increased ceiling on medical expenses and legal fees for lawsuits and judgments.
Ten Things to Know About Contractor Insurance
Checkin’ Job Specs
Don’t just assume – always ask the client earlier on so you know what they’re requiring. Lots expect at least a million in full liability insurance for general contractors these days, plus add-ons. Miss one of those details, and you could lose the gig! Take ten minutes to read the fine print. That way, nothing comes back to bite you later.
Understand Your Risks
Take a good, hard look at what you do day in, and day out. If it’s deemed more dangerous, basic coverage ain’t gonna cut it. Working with hazardous crap or big machinery fires up the stakes. Touch base with your agent to see what else you may need. They’ll give it to you straight, so you’re set up right.
Keep Policies Shipshape
Review everything each year and Talk to your agent about any changes in statements. Growing means more coverage and new equipment too. Try something different. Alert them so it’s all in your good. That way nothing is left in the dark if heaven forbid something crops up.
Limits Lookover
Every 12 months, reexamine what you’re insured for. More and more jobs mean more liability and property values change with time. It’s better to pump up protection proactively than scramble after something goes sideways.
Notify of shifts
Let the agent know right off if your operation evolves. Especially for riskier moves, new lines require adjustments. Dragging while informing them could mean denied claims later when something pops up related to stuff that wasn’t noted before. Just shoot them a text, which hereby makes it easy.
Keep good records in case of claims
Organize vital project records like signed contracts and detailed scopes of work, specific job site addresses where or transpired, and completion dates for reference should claims situations emerge. Neatly organized paper or digital files prepared in advance expedite proving involvement if defending allegations. Backed by meticulous documentation readily available for review, the insurance company claims processes resolve more efficiently for all sides involved.
Carry insurance cards with you
Certain worksites may demand proof of active general liability insurance coverage by way of the general liability insurance or ID card from your provider. Municipalities of most insurance companies, and private clients in particular typically expect contractors performing jobs on their properties to furnish proof of general liability insurance cover promptly on demand. Always having cards easily accessible from your vehicle prevents unpleasant surprises from on-site compliance checks that could otherwise delay work.
Respond promptly to any claims
If an accident, injury, or situation arises after a car accident that triggers the claims process, be sure to notify your agent or carrier immediately. Some policies have firm timetables of just days to report a claim before coverage can lapse. Getting ahead by making contact allows timely responses while memories remain fresh. Moreover, expeditiously providing documents assists resolution efficiency. Though full cooperation maintains eligible protection status according to policy terms throughout the effort.
Consider additional business insurance
Beyond standard policies, specialty business insurance and protection fill emerging gaps as technology invades more industries. For example, cyber liability coverage offsets growing digital risks from data loss or data breaches to network outages crippling business activities. Similarly, many contractors layer on both professional liability and business liability to defend contract disputes years to post-completion. Foreseeing threats prepares the business proactively through multipurpose supplementary policies scrutinized routinely.
Work with a trusted insurance agent
Cultivating relationships with seasoned experts provides an inside resource well-versed in the construction industry and insurance company options and requirements. Asking other reputable, long-standing firms for referrals identifies knowledgeable agents focused on reliable client care. Chemistry facilitates open analysis of exactly which evolving products or services align with changing construction business needs alongside regulation familiarity. Partnerships between well-informed policyholders and adept top insurance companies and specialists ensure navigation confidence above all else as complexity grows.
Final Thoughts
Insurers constantly tailor new offerings to fit contractors’ shifting needs. But keeping this overview of the main construction insurance basics in mind puts you ahead of the pack from the start. Discuss factors like your trades, average payroll, and project sizes when seeking tailored contractor insurance protection.
Don’t overlook higher liability limits, endorsements, or voluntary E&O coverage either. While costing more up front, they could also save money for your small business if an unlikely accident does happen down the line. Taking the time now to properly ensure your small business is facing pays off with years of security.
Approaching reputable insurance companies and agents regularly also ensures contractor insurance and companies are staying up-to-date on regulatory changes and underwriting innovations. Network actively within the construction sector contractor insurance business community for broker recommendations too. Being insured fully protects client property and your client’s home, business, and livelihood, so take it seriously from day one.
