5 Questions to Ask When Shopping for Contractor Insurance

March 2018
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Contractor insurance policies and levels of coverage can vary significantly, which can make it confusing to figure out what your business needs.

These are 5 frequently asked questions from contractors who want to properly protect their clients, employees, equipment and themselves:

1. Does Contractor General Liability Cover Damage?

Accidents can happen to even the most careful contractors – so contractor general liability insurance is a must.

Although general liability isn’t required by California state law, it is a very smart choice for your business.

What if you or one of your employees accidentally damaged customer property during a job? Without general liability insurance, you’ll be responsible for all legal fees and damages should something go wrong. General liability coverage is designed to pay for legal defense or repair/ replacement costs for third-party damages, protecting your bottom line.

Even if everything goes as planned, carrying general liability contractor’s coverage can benefit your business by showing potential clients that you are professional.

Bids require you to state whether or not you carry general liability insurance. When clients see that your business is covered, they will be more likely to put their trust in you than other bidders who aren’t.

Contractor general liability insurance shows them that you are looking out for their needs, as well as your own.

2. Do I Need Workers Comp if I Work Alone?

In some states, workers’ comp is a legal requirement.

California law requires employers, including those in the construction industry, carry workers’ comp insurance -- even if they only have one employee. Contractors are required to provide a valid workers’ compensation certificate of insurance in order to obtain or reactivate a contractor license.

Even if you work alone and do not have any employees, you may still be required to carry workers’ comp.

For example, the California State Licensing Board states that all C-39 (Roofing) licencees are required to carry workers’ compensation insurance or a valid Certification of Self-Insurance, whether or not they have employees.

Although contractors are not required to have workers’ compensation if they are self-employed and work alone, in many cases, it still makes good sense.

For example, a self-employed roofing contractor, electrician, or any other lone contractor who does a hazardous job, should absolutely carry workers’ compensation insurance to cover medical costs in the event of an accident.

Hope for the best, but protect your contractor business by being prepared for the worst. Incurring medical bills while you’re recovering from injury – and therefore unable to work – can put your business in jeopardy. Play it safe and make sure you’re covered.

3. How Do I Protect My Tools and Equipment?

Construction tools and equipment can be very expensive to replace – to protect them, consider Inland Marine Insurance.

An Inland Marine insurance policy will help you recoup the cost of replacing lost or stolen tools and equipment, covering everything from smaller tools up to large pieces of equipment.

Also known as Tools and Equipment Insurance, this coverage provides extra peace of mind as it can also cover equipment that you rent or lease.

Inland marine coverage was designed to protect assets that are transported from place to place, like the high-value equipment that you take from one job to the next. When you have this specialized coverage for your tools and equipment, you can rest easy knowing you won’t have to pay out of pocket if your valuable tools are lost, stolen, or damaged when they’re not stored safely on your property.

4. What Kind of Insurance Does My Work Truck Need?

Any vehicles you and your employees use specifically to carry out contracting work (such as transporting tools, equipment, and employees to and from job sites) should definitely carry commercial auto insurance.

Personal auto policies typically will not cover vehicles driven in the course of running your contracting business.

Different employees may drive different vehicles on any given day. They may carry expensive and heavy equipment and tools, or require special modifications related to the business. The vehicle itself may be part of the equipment you use.

If your construction business owns a fleet of vehicles, or if any of your vehicles are registered under the name of your business, you’ll also need commercial auto coverage instead of personal auto.

While a commercial auto policy will also cover many of the basics that a personal auto policy covers (bodily injury, property damage, uninsured passenger coverage, etc.), a commercial auto policy covers the situations mentioned above that do not fall under a private automobile insurance policy.

5. How Do I Protect Projects During Construction?

You never know what could happen when working on a project. To cover fire, earthquakes, vandalism, theft, or damage to materials, equipment, and completed work during the course of construction, you should consider “Builder’s Risk” or “Course of Construction” insurance.

Not usually covered by a general liability policy, these disasters can cost you a lot when they do happen. Carrying course of construction insurance can protect your business from the financial ramifications associated with this kind of destruction.

It’s important to discuss the particular needs of your business with an insurance agent who specializes in contractor’s insurance. There are a wide variety of coverages available to you, as well as different policies and premiums.

What will be the best insurance fit for your business? That depends on how many employees you have, the type of work you do, where the work is done, the value of the completed project, and will be unique to your business’ circumstances.


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