Although it’s not a legal requirement in many areas of the US, most contractors and small business owners need to get general liability insurance. This type of policy protects them against lawsuits related to property damage, personal injury, and advertising injury. Today, we’ll have a closer look at what general liability insurance for contractors is and how you can find an appropriate policy.
What Is General Liability Insurance for Contractors and Small Businesses?
Businesses in a wide variety of industries are vulnerable to lawsuits filed by customers and visitors. In fact, around 80% of surgeons have been sued at least once by the time they retire. Coffee shop owners, construction companies, retailers, lawyers, accountants, and real estate agents are also at risk. If you run a small business or you operate as an independent contractor, it’s best to protect yourself against the possibility of a lawsuit.
General liability insurance covers several issues, including property damage and personal injuries that occur at your company’s premises. If a customer slips and falls while waiting in line at your shop or if someone’s expensive possessions get damaged due to a problem at your office, they can sue you. The insurance company will pay for the damage and the legal fees associated with the case.
What Is Advertising Injury Coverage?
Contractors who don’t have their own shop or office might believe that they don’t need general liability insurance. But this isn’t always true. Even if you don’t have a physical location where clients or customers visit you, you could still be the target of a lawsuit related to advertisement injury.
Businesses that advertise their services or post on social media need general liability insurance because they could be sued for making a false claim, damaging someone’s reputation, or stealing someone’s ideas. These lawsuits are usually filed by one company against another, and they can cost business owners millions of dollars.
Do I Need to Purchase a Policy?
Virtually every business needs to purchase a policy. If you run your business from a physical location, where the public visits you, it’s extremely important that you take out insurance. You’ll also need general liability insurance if you run your company from a third-party location, use social media privately or professionally, advertise your services, or hire temporary employees.
Aside from protecting your finances and preventing bankruptcy, taking out insurance shows potential business partners that you are responsible and careful. You might have trouble picking up work contracts if you’re not properly insured.
How Much Insurance Do I Need?
The best way to find out how much coverage you need is to speak to a professional insurance agent. They will analyze every aspect of your business to determine your biggest risks and the likelihood of a lawsuit. Then, they will let you know the ideal coverage amount. Many contractors and small businesses choose a $1 million/ $2 million policy.
This covers them for $1 million per occurrence and $2 million for the total duration of the policy period, which is usually one year. For most companies, such a policy is enough. However, you need more insurance if you’re working in a high-risk profession or your company has many employees.
How Much Does a Policy Cost?
The average price of a standard policy is $42 per month, so it is affordable for most contractors and small businesses. The amount you pay depends on several factors, including the size of your company, the type of work you do, your business location, and the size of your building.
Personal details will also be considered. Most insurance companies consider whether you have ever made an insurance claim in the past and how much experience you have in your field. New contractors and business owners are considered riskier because they don’t have a track record of success, so they might need to pay more.
How Can I Find the Best Policy?
Every contractor has different needs, so a policy that works well for someone else might not suit you. Discuss your individual situation with your insurance agent, and ask them to provide you with several quotes from local insurers. Then, evaluate each policy to determine which one offers you the most value for the money spent.
Sometimes, combining several policies is the easiest way of saving money. Insurers want to capture as much of the market as possible, so they might give you a special deal if you take out general liability, workers’ comp, and property insurance simultaneously.
What Else Can I Do to Keep My Insurance Costs Low?
Aside from choosing a policy that suits your needs and working with an insurance agent, you can get the best quotes by running your business in an ethical way and doing your best to avoid lawsuits. Although there are no guarantees, it’s much less likely that you will get sued if you take the necessary precautions to secure your business premises.
Always clearly label dangerous areas like steps in your building, clean up spills as soon as they occur to avoid slip and fall accidents, and keep your building in good repair. If something happens, speak to the injured party. Sometimes, lawsuits can be avoided when you sincerely apologize for any issues and provide a high level of customer service.
What Other Types of Insurance Do I Need?
If you take out general liability insurance for contractors and small businesses, you’ve covered your biggest and most expensive risk. However, you might also need to purchase several other policies to fully protect your company. Some of the most common ones are auto or property insurance, workers’ compensation insurance, business interruption insurance, and key-man insurance.
Auto and Property Insurance
Many contractors have at least one car or van used almost exclusively for business purposes. It’s important to get this vehicle insured. You can get liability coverage only, which covers the damage done to other people and their property during an accident. If you believe it would be difficult for you to replace your company vehicle, comprehensive insurance might be the better option.
This is more expensive, but the insurers will pay for any damage to your car. Aside from your vehicle, you might need to get other items insured, including the industry-specific equipment you use to serve your clients or customers, electronic gadgets, and furniture. If you own the building you run your business from, it also needs to be insured. If you’re renting, your landlord might have already taken out a policy. Speak to them to find out more.
Workers’ Compensation Insurance
General liability insurance protects you from lawsuits filed by third parties like customers and visitors, but it doesn’t pay if one of your team members sues you. For this reason, any business owner who employs other people must take out workers’ compensation insurance. In fact, this is a legal requirement in many areas of the country.
A workers’ comp policy pays out when one of your employees gets injured on your premises and files a lawsuit. This usually happens when working conditions are unsafe. You might have failed to properly train your staff, carry out necessary renovations to your building, or supervise people. But even if you didn’t make a mistake, you’ll have to pay the legal bills associated with the case. Getting workers’ comp protects you from this issue.
Business Interruption Insurance
Businesses get interrupted for a number of reasons. There might be a natural disaster or storm, a power outage, political unrest, or a fire in your area. When you and your team can’t work due to a factor outside your control, you might lose a lot of money.
You’ll still have to pay rent, your bills, your employees’ wages, your advertising campaigns, and insurance. You might also have to give dissatisfied customers a refund or a free product. Take out insurance if you’d like to minimize the financial impact of business interruption.
Some tasks can be performed by many people, which means that employees are easily replaceable. For example, a cleaning company can find a new cleaner without much trouble if an employee quits or gets ill. However, other tasks can only be carried out by one employee. If you employ people like artists or scientists who can’t easily be replaced, consider taking out key-man insurance.
This compensates you when you or one of your most important employees is no longer able to perform their duties due to illness, a sudden death, or a similar issue. Key-man insurance needs to be tailored to the individual company. Speak to an insurance agent before taking out a policy. They will help you calculate exactly how much you need to take out based on the key person’s value to your business and how long you think it will take you to replace them.
If you’re a contractor or you run a small business, ask an insurance agent what kind of insurance policies you need. General liability insurance for contractors is crucial because it protects you from lawsuits, but you might also need auto insurance, workers’ compensation, business interruption insurance, and key-man insurance. Contact us at ISU Armac to get the best quotes in your area now.