What is contractors insurance?
As a contractor, you are exposed to dangerous risks every day on the job. You might face a lot of misfortune and accidents in the workplace. Whether you are an arborist, a masonry, or an HVAC contractor, accidents can happen in a split second. Contractor insurance provides commercial insurance solutions to protect the business from bearing substantial financial debt. Therefore, you should consider having a contractor business insurance to protect your contractor business and the employees.
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Contractor insurance is necessary because:
Contractors take a variety of work, each with their unique risks. Clients expect you to finish the job on a desired amount of time and with precision. Amidst all this expectation, numerous things can go wrong, like:
- Damage to your equipment can cause a significant loss in income.
- Employees might slip and injure themselves while working.
- Your business might cause bodily injury or property damage to a third party.
According to Dodge: Data and Analytics, contractors struggle with site risks every day. They will be using IoT technology to mitigate them in the future. While that is good news, you might still want to protect yourself from these everyday risks. With contractor insurance, it becomes easier to focus on work. The preferred insurance company covers all the debt depending upon the coverages. Therefore, it is easier for you to deliver the desired result.
Who needs contractor insurance services?
- Independent Contractors: If you have a specialized skill and earn your income by being a subcontractor, then it is best for you to opt for subcontractor insurance or independent contractor liability insurance.
- Landscapers: If you are into a tree trimming business or you provide lawn care services, then you should insure your business with landscaping insurance.
- Handyman: If your business involves providing services for the household chores, then you must protect your business with handyman insurance.
- Construction Contractor: There are various risks involved while working on a construction site. Therefore, you may obtain general contractor insurance to avoid the financial burden if any mishap happens at the site.
Accidents can happen anytime and to protect your contractor’s business, it is best to have an insurance. An investigation by ProPublica identified more than 60 accidents since June 2015 involving Amazon delivery contractors. These accidents resulted in serious injuries, including ten deaths.
As per the insurance law, contractors must have contractor insurance. Depending on your company size, you must opt for this policy. Whether you are a small-scale business or you own a firm, keeping insurance as a priority is wise decision.
What policies are under contractor insurance?
Business Owners Policy (BOP) :
Business owners policy is a must for any contractor business. BOP offers a custom-tailored package of insurance to small companies, which helps the companies manage their risks. It is usually bundled together with commercial property insurance, business interruption insurance, and general liability insurance. A business owner policy enables you to cover your businesses from the following claims:
- Fire, theft, or other covered disasters.
- Bodily Injury: If an individual is injured while playing on the site, then your BOP will cover the expenses.
- Property Damage: If there is property damage within the work premises, then BOP will help you cover the costs for the accident.
According to Insurance Information Institute, any business that has less than 100 employees, generates less than $1 million annually and operates in a low-risk industry can qualify for a BOP.
Workers Compensation Insurance:
Workers compensation insurance helps you cover all the medical expenses that rise from illness or injury during the course of the job. Furthermore, it also includes a portion of lost wages for your employees who become ill or injured during the job.
U.S. Bureau of Labor Statistics reported that the total recorded cases of injury and illness is 3.1 per 100 full time workers.
Primary factors that influence the cost of workers compensation are:
- Employee’s risk: Depending upon the threat that your employee faces in the work environment.
- Your Payroll: Annual payroll for the calculation of insurance cost.
- Your location: Each state has a different set of workers comp.
According to the U.S Department of Labor, contractors must pay their laborers and mechanics the prevailing wages and fringe benefits.
Commercial Auto Insurance:
Commercial auto insurance or business auto policy covers the vehicle that is owned by the business. According to a study conducted by Associated General Contractors of America, 70 percent of contractors reported injuries to vehicle operators or passengers due to vehicle crash at work site. Thus, having a commercial auto policy will help a company cover financial losses if there is an accident or any damage involving their vehicle. The coverages include:
- Property damage: If you are responsible for any damage caused by your vehicle to the property not owned by you, the policy will help you cover the losses.
- Bodily injury and medical bills: If you meet with an accident and injure someone, commercial auto insurance will help you cover for bodily injury.
- Vehicle damage: The policy will cover any damages to your insured vehicle.
- Cost related to lawsuits: If your vehicle meets with an accident and someone files a lawsuit against your company, the commercial auto policy helps you bear the financial losses.
Commercial Property Insurance:
Commercial property insurance helps you protect your office space, warehouse, and place where you conduct your business. The insurance covers losses due to fire, theft, weather events, and vandalism. In addition to protecting your workspace, commercial property policy helps you protect the tools, equipment, and inventory related to the work. Even if the tools are on the lease, this policy enables you to cover the losses.
Commercial General Liability Policy
General liability insurance protects your business from claims that arise due to unexpected events during the policy period. The liability coverages are:
- Customer injury: A commercial general liability policy covers any injury caused to the customers because of your business. For example, a customer trips over a toolbox on your work premises. The insurance covers the cost of injury.
- Customer property damage- The insurance covers any physical damage to tangible property caused by your business. For example, if your client’s furniture breaks while remodeling, general commercial liability insurance covers the cost of repair.
- Libel and Slander- Any copyright infringement and defamation both written and spoken while advertising your business is covered by general liability insurance.
Professional Liability Policy :
Professional liability insurance covers professional mistakes that a contractor makes during a project. For claims of errors and omissions, professional liability insurance is a must.
For instance, if a contractor moves past his deadline for a project, the client may take legal actions against the contractor. However, professional liability insurance will cover the losses for you.
According to Suretyinfo, because of unrealistic growth 37% of contractors failed in their line of duty followed by 36% of contractors due to performance issue.
Employment Practices Liability Policy:
Employment practices liability insurance or EPLI helps you cover legal expenses when your employees take any legal action against your contracting business.
The issues that this policy covers are:
- Wrongful termination
Inland Marine Policy:
Inland marine insurance helps protect your contractor tools and other tools and equipment from theft, damage, and loss while they are in transit from one site to another. Moreover, it also helps you cover the costs for repairs or damages if your employee mishandles the equipment which results in damage to any object.
For example, your company is using a bulldozer at the job site, and suddenly it hits a tree. Inland marine insurance covers the damages.
Business Interruption Policy:
If you are temporarily unavailable to operate your contractor business due to covered loss, then business interruption insurance will reimburse you for the income that is lost. Furthermore, a contractor can even boost the coverage by adding endorsement depending upon the business.
Factors affecting the eligibility for business income policy are:
- The industry of the business
- Previous Claims
Contractual Liability Policy:
As a contractor, you might do a lot of contractual work as a third party. As a result, this could put your business into risk. Any mistakes or accidents while doing contractual work can result in financial loss. Now you can avoid these risks by taking contractual liability insurance.
Cyber Liability Policy:
Contractor businesses often store sensitive information about their clients and employees. Cyber liability insurance helps your business pay for the damage that is caused by data breach. Therefore, data breach coverage will help you pay for the costs of:
- Managing public relations
- Notifying the clients
- Advertising in good faith
How much does contractors insurance cost?
Multiple factors influence general contractor insurance cost. One of the significant factors is the type of work that is involved. There are numerous insurance packages depending upon the work that a contractor does. For example, the risk that a painter faces during the work is not the same as a concrete contractor. Therefore, the cost for them will differ.
Few other factors that affect contractors insurance are: