A Guide to Contractors Insurance

Are you looking for a guide to contractors insurance?  Working as a contractor comes with its fair share of risks – especially if you’re in the construction industry. There’s a lot of room for error; if you aren’t prepared, a single accident can cost you thousands of dollars.  We have put together an exhaustive article regarding a guide to contractors insurance.

Fortunately, in the modern-day world, insurance can act as a backup plan by cushioning your financial burden in case of an unforeseen event.

What type of insurance do contractors need to apply for? This comprehensive guide to contractors insurance will explain everything you need to know.

What Kind of Insurance Does a Contractor Need?

It is recommended that contractors apply for contractors’ liability insurance. This umbrella term covers several policies and protects contractors from financial liabilities for work-related accidents.

This is why, due to the immeasurable number of risks involved, construction businesses apply for contractors’ insurance more frequently than any other business.

Why do you Need Contractors Insurance?

Aside from contractors’ insurance is mandatory in some states, a small accident can lead to everlasting consequences and even potentially put you out of business at any given moment. While you can’t control what happens in your surroundings, you can control how you prepare for it.

Securing a contractor’s liability insurance protects you from financial liabilities if a lawsuit hits your business. Similarly, it also shoulders the costs for accidents and injury claims by the affected parties.

Also, contractors’ insurance shows your sincerity towards employee and client safety. This coverage can act as a stepping stone for your business’s success by helping you bag larger commercial contracts. Using this as a guide to contractors insurance will be helpful.

The majority of the professional contractors out there have contractor insurance. Not only can it make you look more credible, but it can also do wonders for your reputation.

Would you be ready to get started? Our insurance agent can walk you through the process of applying for contractors’ insurance at extremely market-competitive rates.

How to Know You Need Contractors Insurance?

Whether you’re an independent contractor or run a full-fledged business with hundreds of employees – here are some questions to ask yourself to determine if you need contractors insurance:

• You have Plans for Business Expansion

Even if you’re working on small-scale projects now, that doesn’t mean you’ll stick with them forever. If you have any plans for business expansion shortly, then make sure to first apply for contractors insurance.

Regardless of the size of your business, disasters come unannounced. Small business owners and entrepreneurs often do not prioritize purchasing contractors insurance. However, that’s one of the biggest mistakes one could make.

Start-ups usually have small cash reserves they could rely on in case things go south. So, paying for financial liabilities from your pocket can bring you to the brink of bankruptcy. Applying for contractors insurance early on can help you prevent that altogether.

• You Have Valuable Assets to Protect

Builders and contractors must purchase thousands of dollars of assets before starting working on a project.

After that, you must remember the possibility of those assets getting lost, damaged, or stolen. If this does happen, you need a backup plan to get compensated for the loss – and this is where contractors insurance comes in.

Your contractor’s insurance policy may also include the builder’s risk coverage. Depending on your insurance provider, this coverage will provide monetary reimbursement for any stolen, lost, or damaged equipment, materials, and tools.

• You Hire Employees

Managing a small team isn’t that difficult. However, the moment you decide to expand, it becomes necessary to apply for workers compensation.

If hundreds of employees work under you, ensure you have a workers’ compensation policy to back you up.

It covers the costs of on-the-job injuries sustained by your employees and also compensates the family of the employee for work-related deaths.

Fortunately, most insurance providers include workers’ compensation in their contractor’s insurance policy.

• You Work as a Subcontractor 

Although a subcontractor doesn’t directly deal with the project owner, getting contractors’ insurance can be great.

If you’re a subcontractor in the construction industry, you likely specialize in a certain niche. This commonly includes supplying or operating construction equipment.

Regardless of your services, contractors insurance can help you prepare for unforeseen circumstances. Judging by how common worksite accidents have become, staying safe is always better than apologizing.

• You Regularly Use Automobiles for Work-Related Purposes

According to the U.S. Bureau of Labor about 40% of automobile accidents are work-related.

So, regardless of the industry, if you frequently use vehicles to transport equipment, materials, or tools, don’t neglect the importance of commercial auto liability coverage.

Fortunately, a contractor’s insurance policy often includes commercial auto liability. It will help you cover the costs for any work-related property damage or injuries caused by you or your employees.

Is General Liability Different from Contractors Insurance?

You may have seen general liability and contractors insurance used interchangeably. So, are they the same? Pretty much.

Contractors often wonder what type of insurance they should purchase, so they could refer to contractors’ insurance as just an umbrella term.

A contractor’s insurance policy always includes general liability. But is general liability insurance for contractors enough to smoothly run your business? Usually, it isn’t because of the uncertainty of running a construction business.

You should always check with your insurance provider to see what other coverage your contractor insurance offers and evaluate whether it meets your business requirements.

What does a Contractor’s Insurance Cover?

As we mentioned earlier, contractors insurance comprises multiple policies. The following coverages are the most common among them:

• General Liability Insurance

General liability is always included in contractor insurance policies. It is a prerequisite to ensure you can successfully run your business.

It protects you from third-party claims for property damage and physical injuries at the worksite by providing adequate financial compensation. Depending on your provider, general liability insurance may include other legal expenses.

• Builders Risk Insurance

Construction projects involve thousands of dollars worth of materials, tools, and equipment. These aren’t uncommon to be damaged, lost, or stolen.

This is why builders, contractors, and equipment owners always need to ensure that their contractor’s general liability insurance covers builders’ risk.

• Workers Compensation 

One in ten construction site workers get injured every year, as reported by The Occupational Safety and Health Administration. Regardless of your safety measures, accidents occur in the blink of an eye. This is why contractors should always look for workers compensation in their insurance coverage.

As the name suggests, workers’ compensation covers the costs of medical treatment for employees injured on the job. The policy also includes rehabilitation costs and compensation to the employees’ families for work-related deaths.

• Roofers Insurance 

Roofing contractors are at a higher risk of injury as they work at precarious heights. A small misstep or even a tool falling can lead to significant damage.

So roofers’ insurance is quite similar to general liability insurance as it covers the costs for any workplace accidents that may result in property damage or physical injuries. It’s often a part of contractors’ insurance.

• Automobile Insurance 

A variety of heavy-duty vehicles and trucks transport construction materials and equipment to the site. During transportation, if these vehicles cause property damage or bodily injuries, automobile insurance will cover the costs of the claims filed by the affected parties.

Depending on the policy, it may also include costs incurred during litigation and other legal expenses in case the matter is taken to court.

• Contractors Pollution Insurance

Although it isn’t common, there’s a chance that your coverage may also include contractors pollution insurance. Considering how construction projects usually pose a prevalent risk of contributing to pollution, this coverage can protect you in case you violate an environmental law and get sued.

While most contractors do not focus on this, some cities have strict environmental laws and such claims can negatively affect a construction business.

Does an Independent Contractor Need Insurance?

Regardless of the size of your business, having contractors insurance is essential because of the following reasons:

• Keeps You and Your Business Protected 

Independent contractors are just as likely to be sued as larger firms. In fact, in an unforeseen event, the latter often has enough financial reserves to compensate for the costs incurred.

So, in case you’re involved in an accident or held liable for damages, you would have to cover the costs from your pocket.

On the other hand, independent contractors normally do not have the funds to shoulder the claims. In the worst-case scenario, not having contractors’ insurance can even potentially cause you to run out of business.

However, having contractors insurance will address such issues, help you cover the costs, and financially protect business owners from lawsuits and legal issues.

• Most Clients Require It

The larger the project, the higher the chances that your clients will require you to have general liability insurance for contractors. You must have one to be able to get the contract. And it is only fair because insured contractors make clients feel financially secure.

Contractor’s liability insurance protects your clients in case of wrongdoing or on-the-job accidents where your team is at fault.

• Required by Law in Some States

As per some state laws, independent contractors must have at least general liability insurance – especially if you run a construction business. Normally, the risk rate is higher in the construction industry as opposed to any other.

So check the laws of your state to ensure that you meet the minimum insurance levels.

What are the Insurance Requirements for Contractors?

There are two common ways for contractors to get insurance:

• Apply for your Insurance Policy

This is the traditional way and pretty much how most insurance policies work: You search for a reliable insurance provider, get a quote, pay the premium, and get insured.

Depending on your chosen provider, they streamline the process by making everything online. However, remember that before you trust an insurance provider, always ensure they’re licensed.

Once you purchase the insurance policy, you can ask your provider for a certificate that you can show to your clients. This option is more straightforward and cost-effective.

So, if you’re searching for a reliable insurance provider in the Southwest, specifically Arizona, Nevada, Colorado, and nearby areas, we’ve got you covered!

• Let your Client Add you to Their Policy 

Your clients also have the option of adding you to their insurance policy during the duration of their job. However, we don’t recommend this.

It is easier for businesses to add multiple contractors to their insurance policies. But for your client, the additional paperwork can be a hassle and feel like an unnecessary burden.

To top it off, including a contractor in their policy will be more expensive for them. So, unless there’s no other option, you’re better off getting your own insurance coverage.

Why is Buying Contractors Insurance Better than Individual Policies?

People often wonder if it is necessary to buy contractors’ insurance. Can’t you simply get individual policies instead? Well, you can, but we do not recommend it.

Here are some reasons why contractors insurance is better than individual policies:

• Meets your Particular Needs

The coverage you need may vary depending on the industry you’re working in. However, if we strictly speak about the construction industry, it’s safe to say that just commercial general liability wouldn’t protect you.

You’ll also have to purchase a variety of other policies, such as workers’ compensation and commercial auto liability, separately.

Alternatively, contractors insurance can enable you to get everything you require under a single policy. This would help you avoid the hassle of individually contacting insurance providers.

• Lighter on the Pocket

You probably already know that things often come cheaper in bundles—the same applies to insurance.

Individually purchasing policies can astronomically increase costs and put a huge dent in your bank account.

Considering that contractors require multiple coverages, purchasing contractors’ insurance will help you find a more affordable deal.

You can also read about saving on general contractors insurance for small businesses.

• Deal with Only One Carrier

Purchasing individual policies often comes with its fair share of troubles. For starters, you might have to deal with multiple insurance carriers.

This includes ensuring that you are clearing the payments of each of your insurance providers in a timely fashion – which, at times, can be challenging to keep track of.

Instead, if you apply for contractor insurance, you’ll only deal with one carrier. As a result, managing your policies will become much easier for you.

What Industries Normally Apply for Contractors Insurance?

Contractors insurance isn’t only valid for construction businesses. As it covers a wide variety of policies, the following industries can also significantly benefit from it:

• Carpenters
• Appliance Repair
• Flooring and Renovations
• Electricians
• Landscapers
• Plumbers
• General Contractors
• Heating and Cooling Contracts
• Stucco Contractors
• Framing Contractors
• Concrete Construction
• Asphalt Contractor
• Excavation Contractors

Apart from the ones mentioned above, dozens of other industries can apply for and benefit from contractors’ insurance. However, it’s mainly popular among construction businesses due to the nature of their jobs and the high risks involved.

Why Choose Professional Insurance Strategies?

Starting a business comes with its fair share of challenges and risks. That’s why good planning can be the key to success in the business world. This also includes preparing yourself for the unforeseen. While you can’t prevent what’s meant to happen, what you can do is have a backup plan so an accident doesn’t drain all your funds.

This is why every business owner needs contractor insurance, especially those in the construction industry. Depending on the coverage you purchase, it can prepare you for just about any obstacle that may come in your way.

At the same time, contractors insurance can give you peace of mind in case of an accident involving you or your workers.

That said, the biggest problem contractors face is finding an insurance provider who understands the demands of each business and then preparing coverage tailored according to those specific requirements. This is where Professional Insurance Strategies truly excels!

Working as an independent insurance provider for more than 20 years in Phoenix, AZ, we’ve helped numerous businesses secure a contractors insurance coverage. So get in touch with us today for a market-competitive quote!