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Why Is Contractors Insurance Necessary?
Contractors accept various types of work that come with risks. When clients hire you, they expect the job to be completed in a certain amount of time. While you are aiming to complete the job, numerous things can go wrong, such as:
- Damage to your equipment
- Employee injury
- Third-party injury or property damage
As a contractor, you will want to protect yourself and your employees from everyday risks. It is easier to focus on work and deliver a quality product on time while getting that protection with contractors insurance.
In this blog
Who Needs Contractors Insurance?
As per Statista, the United States has one of the largest global construction markets with expenditures reaching over 1.293 billion U.S. dollars. Given that it is a large market, there are many professionals who would require contractors insurance. They are as follows.
Independent contractors: If you work as a subcontractor, there may be an option to purchase a subcontractor insurance policy for your specific field.
Landscapers: If you provide lawn care and tree trimming services, you can insure your business with landscaping insurance.
Handyman: If your business provides household chores services, then you can protect your business with handyman insurance.
Construction contractor: There are plenty of risks involved when you are working on a construction site. Thus, you might need to obtain general contractor insurance to protect yourself from the financial burden arising from a workplace mishap.
What Insurance Policies Come Under Contractor Insurance?
Some of the basic coverages you need to consider as a contractor are as follows:
Business Owners Policy (BOP):
Business owners policy is essential coverage to have for any contractor business. To point out, BOP offers a custom insurance package to small businesses that help them manage their risks. This policy is usually bundled with commercial property insurance, business interruption insurance, and general liability insurance. Additionally, it can also be paired with your contractors insurance.
A BOP allows you to cover your business from the following claims:
- Fire, theft, or natural disasters such as storms and floods
- Bodily injury: If an individual is injured on the job site, your BOP will cover the medical expenses.
- Property Damage: If a natural disaster caused property damage to your equipment, your BOP will cover the associated costs.
According to the Insurance Information Institute, if a business has less than 100 employees, generates less than $5 million annually, and operates in a low-risk industry, it is typically eligible for a BOP.
Workers Compensation Insurance:
Workers compensation insurance helps you cover an employee’s lost wages and medical expenses arising from illness or injury while on the job. For contractors, injury and illness are just a part of the job. The U.S. Bureau of Labor Statistics reported that the total recorded injury and illness case rate was 3.1 cases for every 100 full-time specialty trade contractors in 2019.
Some of the primary factors that influence the cost of workers compensation are:
- Employee risk: The level of danger that your employee typically faces in the work environment.
- Business payroll: How much your employees are getting paid annually influences the insurance cost.
- Business location: Your business location and where you operate.
Commercial Auto Insurance:
Commercial auto insurance covers vehicles that are owned by the business. The policy covers financial losses if there are any accidents or damage involving your business vehicle. Thus, having a commercial auto policy along with our contractors insurance will help your business in case of any vehicular mishap.
The coverage includes:
- Property damage: If your business vehicle causes any third-party property damage, then the policy will help cover the losses.
- Bodily injury: If you injure someone in an accident, then it will help cover the injured party’s medical expenses.
- Lawsuits: If your work vehicle gets in an accident and the other party involved decides to file a lawsuit against your company, then the commercial auto policy will help bear the cost of the lawsuit and financial losses.
Commercial Property Insurance:
Commercial property insurance helps you protect your office, warehouse, and site of business. The insurance policy will cover losses due to fire, weather calamities, theft, and vandalism. Additionally, the policy also protects your owned/rented tools, inventory, and equipment necessary for your business.
Commercial General Liability Insurance (CGLI):
General Liability Insurance protects your business from third-party claims due to unforeseen events occurring during the policy duration. The liability coverages are as follows:
- Customer injury: CGLI covers any damage to a customer that resulted from your business operations. For example, if a customer trips over equipment and hurts themselves, the insurance covers the medical expenses.
- Customer property damage: CGLI covers any physical damage to a client’s property caused by your business. For instance, if your client’s furniture breaks due to the actions of your employee, the policy will cover repair or replacement costs.
- Libel and slander: CGLI covers any copyright infringement and defamation claims made against you.
Professional Liability Insurance:
Professional liability insurance covers mistakes made by a contractor during a project they have undertaken. The policy is essential for protecting against errors and omissions claims.
For example, imagine a contractor improperly installs an HVAC system. Mold forms and the people in the building grow sick. Although the contractor is sued for their mistake, their professional liability insurance will cover the losses that may arise from the lawsuit.
For this reason, including it with your contractors insurance is essential.
Employment Practices Liability Insurance (EPLI):
Employment practices liability insurance helps your business cover legal expenses when your employees file a lawsuit against you for specific workplace issues. Some of the issues covered by the policy are:
- Wrongful termination
- Ethnic discrimination
Inland Marine Insurance:
Inland marine insurance protects your contractor equipment and tools from theft, damage, and loss while they are in transit from one location to another. Additionally, it also helps cover the cost of damage and repairs if your employee mishandles your equipment.
For example, suppose an employee is using a forklift at a job site and suddenly hits a wall. Inland marine insurance will cover the damages for the repair of the forklift.
Business Interruption (BI) Insurance:
When your contractor’s business is temporarily not operational due to covered perils, business interruption insurance will cover income loss. Specific factors affecting the eligibility for business interruption policy are:
- Nature of the business
- Business location
- Previous claims history
Contractual Liability Insurance:
When you work as a third-party contractor, there are certain liabilities that you put your business at risk for when you enter into a contract with another party. You can avoid these by opting for contractual liability insurance. As a matter of fact, including this to your contractors insurance is definitely important.
There are instances where your primary insurance policy exhausts its coverage. Commercial umbrella insurance provides additional coverage when a claim exceeds the amount of coverage from other policies that are in place.
Commercial Cyber Liability Insurance:
As a contractor business, it’s common to store your employees’ private information, clients, and other confidential information on your office computers. In case of a data breach, commercial cyber liability insurance helps your business pay for the damages caused by a cyberattack.
Secure your construction business with proper coverage. Find an agent near you right now!
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