Types of Insurance You Need as a Contractor
As a contractor, you are probably aware that you need to have insurance before you begin any job. However, you probably are also aware that while you should have it, you are not always legally required to.
This has created a huge dilemma over the years, because insurance can be expensive to have, and this expense can be too large for those just starting out in the industry. Plus, many contractors look at it from the viewpoint of why spend the money if they never need to use it!
We want to encourage you to sidestep all those thoughts though and purchase the insurance that will keep you, your employees, and your clients safe for as long as you are in the business. Yes, we understand that you are safe on the job, that your employees are safe, and that your work is always done correctly. However, there is always that one time, when an accident will happen to you, one of your employees, or your client, their property, or their neighbor’s property. And one time is all it will take to sink you and your business permanently!
Here are the types of insurance you need as a contractor:
A general liability insurance policy will cover you and your business when property damage, injury to a person, or defective work occurs. Most quotes for a general liability insurance policy will cover bodily injury, property damage, personal injury, advertising injury, medical payments, damage to premises that are rented to you, and the products that have been completed during the project. This type of insurance policy will help you pay for all medical expenses, as well as any legal fees that you may incur while dealing with a pending lawsuit.
Yes, we understand that you already have automobile insurance on your personal vehicles. However, this insurance policy will cover all the vehicles that are used for your business and even includes the vehicles that transport all your equipment and tools. A commercial auto insurance policy is often quoted to include liability, physical damage, medical payments, hired automobiles, any automobile in use, and even uninsured motorists. We recommend that you have your commercial auto insurance policy customized to fit your current needs and have it reviewed every year to ensure that all the vehicles you use for your business are covered completely.
Business Owners Policy
A business owners policy is normally shortened to BOP, so you may have heard one of those two phrases mentioned when you have considered insurance for your business. This type of insurance policy is more of a package plan that includes your general liability insurance, as well as property coverage. The general liability portion of this package will include everything that you would normally receive within a general liability insurance package if you would have purchased it separately with one exception. That exception is the fact that all your employees would not be covered. That means that you would need to purchase a separate workers’ compensation policy to ensure that you have the coverage necessary if they are injured on the job.
The property coverage of this insurance policy will include all commercial buildings and movable property that your business owns and uses solely for the work that you do. These items are normally referred to as business personal property, which means if damaged occurs, those items are covered. This policy will also cover your loss of income, debris removal, and pollution cleanup if something happens. There are always a few exclusions for this type of insurance, but those can be quickly included with the help of numerous policy endorsements. We recommend that you always find out all the exclusions before you agree to the policy, so that you can have those endorsements added if necessary.
If you choose to go with a business owners policy, or BOP, for your insurance, then a workers’ compensation plan is also going to be necessary. After all, you are going to want to protect your employees if they get injured or ill while they are on the job. This type of insurance will cover medical expenses, a portion of an employee’s lost wages while they are out of work, rehabilitation, and even death benefits if the unthinkable happens. Workers’ compensation insurance is different from state to state, due to each state’s different laws, however, employees will never need to worry about anything when you have this coverage.
Errors and Omissions
An errors and omissions insurance policy, or E&O, is not something that every contractor is going to need for their business. However, it is important to mention, as you may decide that your business has a need for it. This type of insurance policy will cover you and your business when a client chooses to sue for either a negligent act, or an error or omission that occurred while you were doing work with them. The policy will not only cover the mistakes that were made, but also the legal fees and settlements that may be necessary through the entire process. Most contractors like yourself do not think that this insurance is necessary, but again, you will need to decide whether you will need it.
Tools and equipment are quite expensive, which is why you may want to consider obtaining an insurance policy that will cover them if they are damaged on the job. Most of the time, contractors will cover items like pumps, compressors, saws, and other portable equipment with this type of insurance policy.
Rented or Leased Equipment
You may not own all the equipment that you use on job sites, which means that you will probably want to consider purchasing an insurance policy that will protect those items that you rent or lease. This will ensure that you are covered if something happens to that forklift, dump truck, backhoe, or any other piece that you need on occasion.
Only you can decide which insurance is best for you and your company, but a great way to find out about them all is to talk to your local insurance agency. They can tell you about each one and give you quotes, so that you have all the coverage you need. And if you already have a policy or two in place, it wouldn’t hurt to check in with your agent to see if you need to make any changes to existing policies.