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Business Insurance For Contractors

Business Insurance for Contractors

Getting business insurance is crucial for general contractors. This is because uneven surfaces, sharp edges and human errors can make construction sites quite hazardous. Whether you are a plumber, electrician or an excavation contractor, you are probably aware that it only takes split seconds for accidents to happen.

It is expected that general contractors implement construction plans into force, meet deadlines and ensure that the projects are properly completed. As a general contractor, you may be at risk of property damage claims that can cost you dearly.

Business insurance is vital for the following types of contractors:

  • Construction workers
  • Electricians
  • HVAC contractors
  • Plumbers
  • Carpenters
  • Landscapers
  • Painters

Why Do General Contractors Need Insurance?

As a general contractor, you may be held responsible for damages that occur on your construction site. Here are top 3 reasons why purchasing an insurance policy is important for you:

Protection of the Business

Independent contractors typically have legal obligations and liability exposures similar to larger firms. They can be sued for bodily harm to a worker, damage to the client’s property, or advertising injury. General liability insurance contributes towards the legal fees and helps cover the damages caused by a lawsuit.

Client Requirement

Some clients require you to opt for general liability insurance before they sign a contract with you. Without an insurance policy, they may risk being held responsible for any accidents or suspected wrongdoings on your part.

Legal Requirement

In some states, independent contractors are compelled to carry general liability insurance in specific industries, such as construction. Most of the time, it is ideal for both you and your client to purchase separate insurance policies.

Insurance for General Contractors

General contractors are responsible for taking on a project from its beginning and ensuring its completion. This does not only refer to management, but also involves hiring the efficient team members to do the job. Here are the two most important types of insurance for general contractors:

General Liability Insurance

This guards your business against property damage claims and third-party bodily injury. It essentially protects you in case of an unexpected event.

Acquiring contractor liability insurance assures your peace of mine in case of a covered loss or lawsuit. General liability insurance financially covers the legal fees, judgments, settlements, and even medical payments regarding third-party damage or injury claims. Here are coverage details for your business:

Customer Injuries

If a customer meets with an accident and gets injured on the premises, you could be held responsible for the injury. For instance if a customer falls from a ladder or trips over a toolbox as you are involved in carpentry or electrical work, you may just have to take care of the medical and legal expenses. In this case, general liability insurance would cover:

  • Court-ordered judgments
  • Attorney fees
  • Medical bills
  • Settlements
  • Funeral expenses if the accident proved fatal

This policy, however, does not include employee injuries.

Product Liability Insurance

Contractors must make sure that their general liability policy contains product liability insurance, also called products-completed operations coverage. This safeguards your business when your finished work results in bodily injury or property damage due to flaws in workmanship.

For instance, a plumber installs a new sink in a bathroom at the premises. After a few weeks, the homeowner finds out that there is a leakage and the water damaged the bathroom flooring. In such a scenario, the coverage would cover the plumber’s legal costs if the homeowner happens to file a lawsuit.

Libel and Slander

When marketing your company or your construction services, you may unintentionally end up copying a competitor’s slogan or their ad campaign. Such accidental advertising injuries are often covered by general liability insurance. Examples include:

  • Copyright infringement
  • Defamation, both written (libel) and spoken (slander)

Benefits of General Liability Insurance

Being a general contractor is not only a physically demanding job, but also involves considerable risks, such as working with dangerous equipment.

Nobody can predict accidents, which is why it is important to opt for extra protection via a general liability insurance policy. Here are some of its prime benefits:

Protection Against Property Damage

There is always a possibility that the property you are working on may be damaged. An accident may also result in damage, for instance failure of a product you installed, unintentionally hitting a pipe that causes flooding, or accidentally knocking over an expensive piece of art. Contractor insurance can help cover the damage caused by such incidents.

Protection Against Injury

Injury is a major reason why general liability insurance is crucial for general contractors. Whether you are working with electrical wires, using scaffolding, or handling heavy equipment, the chance of injury is always there. Moreover, liability insurance would also take care of the costs if a customer gets injured on the site.

Legal Fees Coverage

A general liability insurance policy can cover the legal fees if someone files a lawsuit against you. Court cases can get prolonged and take plenty of your time. This way you would have a backup as the policy would take care of the different legal fees, such as witness fees, attorney fees, and various court expenses.

Cost of General Liability Insurance

The day-to-day work of a general contractor entails several risks, which is why general liability insurance is vital to protect you against a major financial setback in case of an accident on the site. Here are some factors that may influence the cost of this insurance policy:

  • Type of business: Certain contracting businesses are more vulnerable to risks than others. The level of risk influences the cost of your insurance policy.
  • Physical size of the business: A physically larger business is likely to have a more costly general liability insurance.
  • Experience: The period of time you have been working as a general contractor can influence the cost at which you can purchase a general liability insurance policy for your business.
  • Location: If your business is located in a risk-prone area, it can cause the rate of your business insurance policy to increase.
  • Number of Employees: A larger number of employees implies a larger contracting business. This in turn means that more risk is involved making the cost of a general liability insurance policy higher.
  • Limits and deductibles: Typically, opting for a higher deductible will result in lower premiums every month.
  • Claims history: If you have a clean claims history record, your insurance provider is likely to offer you a lower insurance rate for an insurance policy. On the other hand, if your business has several submitted claims in the past, it would imply that it is high-risk, which may result In a more expensive business insurance policy.

Workers’ Compensation Insurance

If your contracting business contains employees, you may be legally required by your state to purchase a worker’s compensation insurance policy. This guards you and your business in case your employees get injured, hurt, or sick while working.

Having a workers’ compensation policy can offer you substantial security. It provides you coverage in case an employee sues your company on the grounds of workplace injuries. Here is what workers’ compensation insurance can cover:

  • Lost wages
  • Medical fees
  • Rehabilitation expenses
  • Death benefits

General contractors may need workers’ compensation insurance to:

Fulfill Contracts

Some organizations require people working for them to purchase their own insurance policy, which includes workers’ compensation insurance for general contractors. This restricts the organization’s liability, and saves it from being held financially responsible in case a contractor gets injured at work.

Protect Against Medical Bills and Lost Wages

Even if you carry a health insurance policy, it is not likely to cover job-related injuries and illnesses. A worker’s compensation insurance policy takes into account your medical bills in case you get injured on the site. It may also cover the wages lost as a result of an illness or injury.

Cover for Death

In case of death at work, workers’ compensation insurance can take care of the funeral costs and provide death benefits for surviving relatives, like a spouse or children. The benefits are calculated as per an employee’s weekly wages. It is typically a part of the worker’s salary at the time of death.

A surviving spouse may receive benefits until remarriage or their own death, while children may be given the benefits until they reach the age of 18.

What Does Workers’ Compensation Insurance Not Cover?

Although worker’s compensation insurance is a comprehensive policy, keep in mind that it does not take into account:

  • Drug- or alcohol-related injuries
  • Injuries while commuting to and from the job
  • Violence triggered by the employee
  • Injuries sustained when not present on the premises
  • Self-inflicted injuries
  • Horseplay or breach of company policy

Benefits of Workers’ Compensation Insurance

A sound insurance policy is vital to keep your business moving forward despite an accident or injury. Here are 3 major benefits of worker’s compensation insurance:

1.      Compliance with State Law and License Requirements

Worker’s compensation insurance is a legal requirement in many countries. Not only are employers often required to legally provide it, but licensed contractors need to carry it as well. Even if you are a contractor with no employees under you, it may be a legal requirement if you wish to acquire or reactivate your contractor’s license.

2.      Employee Protection

Construction work is riddled with risks. It is common knowledge that someone who does a desk job is far less prone to accident as compared to a roofer whose job involves working several feet above the ground. Contractors on the ground are vulnerable to injuries from above and below, such as a falling item or tripping hazard.

3.      Asset Protection

One of your workers may get injured on the site. If you do not carry worker’s compensation insurance, you may have to pay for some of his bills out of your own pocket. In a worst case scenario, your worker may sue you for not having the insurance cover required by law.

As a result, you may have to pay the lawyer fees, court costs, judgments, and medical bills yourself. In contrast, the cost of purchasing worker’s compensation insurance is quite low and it saves you from spending your hard-earned money or selling your assets to cover these costs.

Cost of Workers’ Compensation Insurance

Contractors are often required by law to carry workers’ compensation insurance. It protects the well-being of employees in case of an injury at work. Here are some factors that affect the cost of worker’s compensation insurance:

  • Number of Employees: The higher the number of workers, the higher your insurance costs are likely to be.
  • Injury Prevention Programs: A good way to lower your insurance premiums is to by enacting safety programs to prevent injury, such as heavy lifting protocols, forklift training, upholding safety committees and audits, and wellness programs.
  • Claim Management: You are likely to enjoy lower insurance costs if you have a sound claim management policy in place, for example assigning lighter tasks to an injured worker.
  • Limits and deductibles: Like most insurance

Final Word

Business insurance provides a much needed backup to contractors in case of unforeseen incidents. General liability insurance protects against unexpected events. It offers cover for lawsuits that may be filed as a result of property damage or injury at the workplace.

Workers’ compensation insurance deals with injury or illness to workers. It provides medical, rehabilitation, and disability costs to workers who sustain injuries directly due to work. Click here to know about other types of business insurance.

Business insurance boosts your credibility as a contractor and offers an effective risk management strategy. AC Insurance has been providing top business insurance services since 1991. Click here to get a free quote today!

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