Imagine this: you’re a carpenter remodeling a kitchen and the homeowner trips over a power tool left out by one of your workers and hits her head. You have to call 911 and she’s transported to the hospital.
Or, you’re a plumber, and your apprentice accidentally cracks a pipe, flooding your customer’s basement.
Or maybe you’re an electrician, and you back your box truck into the side of your customer’s house, causing significant damage to the exterior wall.
Who’s going to be held responsible for these mistakes?
Can you afford to pay for these damages out of pocket? What about legal fees or medical expenses?
As a contractor, you’re responsible for the quality of your services and what happens on a job site, whether that’s an accident, negligence, or circumstances beyond your control.
Contractors insurance is how you, as a small business owner, can protect your business, customers, and employees from the unexpected.
Who Needs Contractors Insurance?
The list of professions that need contractors insurance is extensive, and if you operate a business in any of the following trades, you need contractors insurance.
- Construction Contractor
- Railroad Contractor
- Pool and Spa Contractor
- HVAC Contractor
- Alarm Contractor
- Appliance Technician
- Concrete Contractor
- Construction Worker
- Drywall Contractor
- Snow plowing
- Tile, Stone & Flooring Installer
- Tree Service
What is Contractors Insurance?
Contractors insurance is a small business insurance policy customized to cover your specific risk factors. It protects your business from the unexpected, including protection for your business’ assets and employees. It ensures that you’re protected in the event of a lawsuit or a covered loss.
A good contractors insurance policy typically protects your business from the following:
- Lost Wages
- Stolen, Lost, or Damaged Equipment
Many contractors opt for a Business Owner’s Policy (BOP), which combines three basic coverages: general liability, commercial property, and sometimes business income insurance.
Bundling these coverages can help you reduce the cost of your insurance policies while increasing coverage for your specific risk factors. A BOP also allows your insurer to customize coverage to protect against unfortunate events like accidents, lawsuits, weather damage, etc.
Supplemental policies can also be added to a BOP in some cases.
While coverage may vary based on your type of business, the following risks are typically covered in a BOP policy for contractors:
- Physical Location of Your Business
- Property Damage
- Business Equipment
- Inventory & Supplies
- Business Records & Valuable Paperwork
- Damaged Inventory
- Bodily Injury
- Loss of Income
Pro Tip: It’s important to know that BOPs don’t cover employees. Therefore workers’ compensation insurance policies are still required, and other coverage exclusions may apply, depending on your policy needs. We recommend finding an agent near you today for a customized solution that meets your needs.
Benefits of Contractors Insurance
There are other benefits to carrying contractors insurance beyond the obvious protections for your business, customers, and employees.
Simply put, uninsured contractors are a liability for homeowners, and most won’t deal with you if you’re not properly insured. Homeowners are pretty savvy these days, and they usually know that if some kind of damage or an accident occurs and a contractor is uninsured, any claims they file will likely be rejected.
They’ll be stuck paying out of pocket themselves.
Independent contractor insurance can give your customers the peace of mind of knowing their investment is protected.
Credibility is another “soft” benefit to carrying proper insurance for your contracting business. It signals to customers that you care about the quality of your workmanship and that you’re reliable.
Insured contractors might cost more upfront, but the quality of their professional services often results in long-term savings, especially for maintenance.
As an insured contractor, you have guaranteed property protection built into your business models, which can make it easier for you to secure customers and increases the value you bring to the table.
Cost of Small Business Insurance for Contractors
Protecting your contracting business doesn’t have to break the bank. According to How Much, the average cost of general contractor insurance averages around $90 per month, or $1,090 per year, for $1 million limit policies that protect against third-party injuries and damages.
What’s Not Covered by Contractors Insurance?
It’s important to understand what’s generally not covered by contractors insurance, which includes:
- Workers’ Compensation Insurance
- Commercial Auto Insurance
- Infectious Diseases
- Government Seizures
- Wrongful Termination
- Intentional and Fraudulent Acts
To get extra protection to cover these risks, talk to one of our agents today.
5 Ways to Lower Your Contractors Insurance Rates
Now that you understand what contractors insurance is and why it’s so important to the health of your business, you may want to know how to keep your costs down.
Here are five ways to pay less without sacrificing coverage.
#1 – Know Your Coverage
If aspects of your business have changed, then your risk factors may have changed as well, and you may be able to reduce your premiums.
For example, are you employing fewer people? Did you sell equipment, property, or assets? What about that vehicle you retired from your fleet?
We recommend reviewing the policies you already carry whenever your business undergoes a significant change to see if you can save money since you may carry less risk.
#2 – Increase Your Deductibles
Most of the time, a higher deductible means a lower insurance premium rate because you’re choosing to pay more out of pocket, which means your insurance company will pay less if you file a claim.
You may save more in annual premiums by having a higher deductible if you file a claim than you would by paying a monthly cost.
#3 – Stay Covered
Coverage lapses can lead to higher premiums because, in the eyes of insurance companies, you’re more likely to take unnecessary risks.
Coverage lapses can also lead to getting denied coverage in the future.
Pro Tip: Ask your insurance company if they offer discounts for no-lapse coverage.
#4 – Manage Your Risks
Do you have a risk management plan? Are you aware of the hazards your business faces on a day-to-day basis?
By assessing your risks and making plans to mitigate them, you can reduce the likelihood of claims by reducing the likelihood of accidents and injuries.
This also has secondary benefits, such as improving employee morale and increasing productivity by reducing the amount of downtime from injuries or illness.
When safety is a priority for you and your employees, it can minimize the number of third-party injuries and lower Workers’ Compensation and Commercial Liability insurance claims.
#5 – Pay Up Front
Did you know that some insurers offer a discount if you pay your insurance premiums in full rather than monthly?
It doesn’t hurt to ask, and this can be an easy way for you to save some money on contractors insurance.
Do you have the right contractors insurance for your business?
*Disclaimer: We offer content for informational purposes; Co-Op Co-operative Insurance Companies may not provide all the services or products listed here. Please contact your local agent to learn more about how we can help with your insurance needs.
Aegis Insurance Markets. 5 Common Contractor Insurance Claims. https://aegisinsurancemarkets.com/Blog/PostId/285/5-common-contractor-insurance-claims
American Insuring Group. 8 Tips to Lower Contractors Insurance Costs. https://www.aigltd.com/insurance-blog-car-auto-home-life-commercial-reading-pa/8-tips-to-lower-contractors-insurance-costs
American Insuring Group. 5 Tips to Lower Your Contractor Insurance Cost. https://www.aigltd.com/insurance-blog-car-auto-home-life-commercial-reading-pa/5-tips-to-lower-your-contractor-insurance-cost
Forbes. Contractor Insurance: Essential Costs & Types Explained. https://www.forbes.com/advisor/business-insurance/contractors-insurance/
How Much? General Contractor Insurance Cost. https://howmuch.net/costs/general-contractor-insurance-cost
Let’s Build. Why your general contractor needs to have insurance. https://www.letsbuild.com/blog/why-your-general-contractor-needs-to-have-insurance
Wallet Hub. Does a higher deductible mean a lower premium? https://wallethub.com/answers/ci/does-a-higher-deductible-mean-a-lower-premium-2140788577