Nature of the Business
There are many kinds of contractors-- with special skills which demand unique insurance needs. Most understand what they need, particularly if they are sub-contractors, per instructions from a General Contractor they are working for or desiring to work with. The insurance requirements are mandatory to get the job. If not met, the General Contractor will go with other sub-contractors who have met the insurance requirements and are provided in the form of a certificate of insurance.
The most common insurance coverage required: General Liability and Workers Compensation.
General Liability provides coverage for the work done, particularly if the work was done incorrectly.
Workers Compensation provides coverage for the employees who may be injured while on the job and unable to continue their regular job.
While these two are essential insurance coverages, there are other insurance coverages to help reduce risks for contractors and potentially save them money! Consider tools/equipment, company cars/employee’s cars, offices, etc. Here are a few other available insurance coverages that offer a broader band of protection for contractors.
- Extended Property Damage: If contractor finds it necessary to move an item unrelated to the job and causes damage to item. An example would be moving a cabinet full of china, and breaking dishes within the cabinet while in motion. This endorsement provides protection up to a set limit, after a deductible, for damage the contractor is legally obligated to pay. This is unrelated to their craftsmanship.
- Inland Marine for Equipment and Tools: Contractors use many types of equipment and tools in their craft. These items travel with them and can sometimes be found in a truck bed, tool chest, or on a trailer. Many contractors are self-insuring their tools and suffer a financial loss when their tools are stolen, as they are unable to work without tools and have no income coming in to replace them. This insurance protection provides the funding to aid in restoring tools and equipment to help contractors get back to work. There are options to include a sum of miscellaneous tools and to inventory/itemize larger or more valued tools; a deductible may apply. It can also include insurance up to a limit for leased and/or rented equipment.
- Commercial Auto and Non-Owned Auto: Many contractors, as well as their employees use their own personal truck or car to go to jobs. While it is okay to drive your own truck/car, it leaves you open to a claim or a lawsuit. If employees are “on the job” and have an accident, their personal insurance could potentially decline coverage. If there is no non-owned auto or a commercial auto insurance policy, you could be facing a lawsuit from your employee as well as others injured, and property damaged in the accident. Also be mindful, when employees have access to a company car/truck they use it only for business and not for personal use. It leaves the Contractor vulnerable to potential lawsuits.
- Installation Floater: It is quite frequent where materials are left at a temporary location or are in transit and may sustain damage, without this coverage, there is no protection and contractors may be out of pocket trying to make it right. For example, while transporting a new vanity into a house, it slips, and a corner is damaged. To get a new vanity could cost the contractor money out of their own pocket.
- Property (Office, Contents): Depending on the size of the Contractor’s business often determines if they have an office space at home or a free-standing business office. Many times, these spaces are overlooked, however, it can be quite costly to replace desks, computers, software, hardware, chairs, decorative features, windows, doors, walls, electricity, etc. if there was a break-in or fire. This coverage can be added to the general liability policy as a package; a deductible may apply.
- Commercial Umbrella: Layering a general liability and property policy with a commercial umbrella (Excess liability) is the next step in peace of mind and it extends beyond the general liability limits selected. For example, if while trimming a tree, it falls into your client’s roof and injures a family member inside. The homeowner sues the contractor for damage to house and for injuries to family member. If contractor only has $500,000 in liability coverage, a commercial umbrella could make up for any shortfall, subject to the policy’s coverage limits. Most commercial umbrella policies are affordable and cover medical expenses, attorney fees, injuries, and damages. There may be a minimum mandatory general liability limit.
- Blanket Additional Insured for Products Completed Operations: Contractors can be charged up to $125 per Additional Insured on their general liability policy, and this can really be costly for larger outfits. Additional Insured requests are common for Contractors and may include a General Contractor or even a homeowner/businessowner where the job is located. Blanket Additional Insured Completed Operations coverage is critical in most construction defect cases. This coverage is for claims that happen after the work has been completed, with the claim occurring within the policy period in which the work was done.
- Waiver of Subrogation: This may be included in a contract with a general contractor. This means the General Contractor’s insurance company cannot pursue a claim against the at fault contractor’s insurance company to recoup lost money. The insurance carrier with this endorsement is exposed to a greater risk. For example, if a sub-contractor is working on a project for a general contractor, and some of the sub-contractor’s employees accidently damage the property they are working on. The General Contractor’s insurance company will cover the damage caused by the sub-contractor’s employees, versus two insurance companies trying to determine who should pay.
Remember there is no such thing as one-size-fits-contractor insurance – and while having general liability and workers compensation for a job is essential, is not the best overall protection for your business. Each contractor must weigh their risks to determine the best insurance options for them and their business.
We Make It Easy
At Consultative Insurance Group, we protect contractors--our experienced Business Insurance Specialists can help any contractor review their risks and match the appropriate service with the best available insurance solution. We will make sure you have what you need for the General Contractor and what you need to protect your business for the future.