Getting Specialized Insurance for Contractors
Contractors require specialized insurance, as each job is going to have different insurance requirements.
With construction projects sometimes costing millions, specialized insurance is only a drop in the bucket compared to the loss that can be incurred if an uninsured project goes awry.
Below we’ll go into why contractors need specialized insurance, what type of insurance contractors need, and typical costs.
If you’re ready to learn more about contractors’ insurance, read on below.
Why do Contractors Need Specialized Insurance?
When doing contract work, contractors and their staff are at a high risk of injury. Considering the hazards involved with commercial and residential construction projects, not having insurance can lead to being sued and having to pay hefty fines.
Specialized contractor insurance will be able to reduce the financial cost of any accident that may occur on the job site. It’s often a legal requirement to have contractor insurance. Clients are more likely to work with insured contractors over uninsured, as it means they are prepared to take care of the legal compliance that is required.
Some contractors also own all of their equipment that is used on the job site. As time goes on, it’s more likely that an accident will happen, and the equipment can be damaged. Specialized construction heavy equipment is costly, so having insurance for your tools is going to help prevent any unforeseen costs that can make the job unprofitable.
What Insurance Do Contractors Need?
Below are some examples of the types of insurance that contractors will need to run a successful operation. It’s always best to discuss with an insurance advisor for what type of insurance suits your contracting business.
General Liability Insurance
General liability insurance will help to protect from any third parties making any general claims. This is typically property damage or an injury to a person that can be a product of the contractor’s services and operations as well as any claims involving defamation.
General liability insurance is set in place so that businesses operate safely as claims from negligence and accidents do happen. In most states, it’s required by law to have general liability insurance so contractors can get a contractor’s license.
Workers’ Compensation Insurance
Workers’ compensation insurance is necessary so the contractor is protected against any loss that they may incur from job-related incidents and/or illnesses. Employees will also be compensated with lost work if they are hurt.
Most states require workers’ compensation insurance, as accidents are always happening on job sites, and employees must be protected from getting injured and being out of a job with no income. Some states have an insurance fund that lets contractors purchase coverage, making getting workers’ comp insurance easy.
Do note that state-operated funds are more expensive than working with a commercial insurance provider. There’s a great guide from Contractornerd to learn more about not just workers’ compensation insurance, but all types of insurance contractors are required to have to run their business properly.
Builders Risk Insurance
Builders risk insurance is insurance that will cover the building while it is under construction. This can mean during a remodel or an entirely new build. Unforeseen accidents can happen, and depending on the type of damage, it can set you back months on the job. Having a builder’s risk insurance mitigates any risk that you may have when taking on a project.
Commercial Auto Insurance
Commercial auto insurance is insurance for any vehicles or requirements that the contractor may own. This means that all heavy equipment and vehicles will be insured from any theft, accidents, or damages from disgruntled employees. Commercial auto insurance is required in every state when the contractor has vehicles that are used by employees or even by the contractors themselves.
Pollution Liability Insurance
If you or your employees are working with hazardous materials or waste, then pollution liability insurance is going to be necessary. If your employees are constantly handling or disposing of hazardous waste, then pollution liability insurance is going to be required to prevent any liability issues should there be an accident on the job site.
Inland Marine Insurance
Inland marine insurance is to protect any tools or equipment that is being shipped. While heavy equipment shipping is costly, the shipping company themselves may not fully insure the load. Equipment can cost quite a lot, and depending on how it is shipped, can incur damage along the way.
How Much Does Contractor Insurance Cost?
Depending on the amount of employees and revenue that the business has will be reflected in the premium. For instance, a contracting business with 3 employees and $500,000 in revenue will require somewhere around $24,900.
A contracting business with 5 employees and $1 million in revenue will need around $42,600 in annual premiums. A business with 10 employees and $2.5 million in revenue will need around $98,500 in premiums.
All premiums will differ depending on the exact type of insurance required by the job the contractor is undertaking. Look into getting a quote to get a rough idea of what type of insurance will be needed for your contracting business.
Conclusion
Every contracting business is going to need insurance, but the type of insurance and the amount is going to differ on a project-to-project basis. It’s always best to speak with an insurance advisor so you know what type of insurance is required for your contracting business.
