What You Need to Know About Getting Contractors Insurance in 2021

The category of artisan contractors, also known as casual contractors, includes many occupations that involve skilled work with tools at the customer’s premises. Carpenters, plumbers, electricians, roofers, and tree surgeons are some of them. Also included are diverse other skilled service providers, such as interior decorators, piano tuners, and exterminators.

A contractor drawing a project he is working on.

Contractors insurance needs of this group include coverage for equipment and tools that are often moved around and for the value of work done for a customer until it is finished. For many artisan contractors, the most cost-effective and efficient way to obtain property and liability coverage is with a Businessowners Policy (BOP) especially tailored to their needs. Although marketed under a variety of names, these policies will typically have provisions similar to the BOP’s.

Because every business has specific needs, commercial contractor insurance can range from standard contractor insurance policy to a more detailed mix of coverages. The type of contracting business you own, its size and location are some of the most common factors that affect the type of contractor insurance coverage you may need. Here’s what you need to know before you make a decision.

Contractor Property Insurance

The BOP covers real estate and other property that your business owns that is located at the described business premises. If your business rents or leases its premises, the BOP provides coverage for tenants’ improvements and betterments. These are fixtures, alterations, installations or additions that you have put into the space that cannot legally be removed from the landlord’s premises. 

However, your biggest personal property loss exposures may involve valuable machinery and equipment that moves around from job to job and is not covered by the standard property insurance. Such movable property is insured by contracts that insurers call “floaters.” 

An installer’s floater covers all kinds of machinery and equipment during transit, installation and testing at a customer’s premises. Even building materials may be covered, but the more usual coverage is for equipment or machinery that only contractors install, such as heating or air conditioning. 

The contractor insurance policy can be written to cover a single job or on a reporting form, meaning that you provide the insurer with information about each new contract you undertake. A tools and equipment floater covers the insured property wherever it is used and may include such items as hand tools, power drills, hoisting machines and power pumps.

Contractor Liability Insurance

Given the possibility of a lawsuit should someone claim to have been harmed by your work, you will almost certainly need liability insurance for contractors. If working as a subcontractor, your customer may require you to have Owners and Contractors Protective Liability (OCP) coverage. This protects either a property/business owner or a general contractor from possible liability arising from the negligent acts of an independent contractor or subcontractor hired to perform work on behalf of the insured. 

The actual purchaser of the policy is the independent contractor or subcontractor, but the protection is for the benefit of the property/business owner or general contractor for whom the work is being done.

Business Vehicle Insurance For Contractors

Your personal auto policy probably provides coverage for some business use of your truck, van, or another vehicle. A personal auto policy is unlikely to provide coverage; however, if the vehicle in question is used primarily in business, it will not provide coverage for any vehicle owned by a business. 

For those vehicles, you must have a business auto policy. If you’re driving a truck you own personally for a business purpose and get into an accident for which you are liable, an injured person could sue you personally.

Will your personal auto policy have enough coverage to pay all the damages? If not, a lawsuit may be filed against your business. If you use personal vehicles for business, you want to be sure you have high enough limits to protect your business.  It would help if you discussed this with your insurance agent.

Contractors Workers Compensation Insurance

Different states have varying rules about when an employer must provide workers compensation insurance. If you have three or more employees, you should check with your state department of workers compensation to see if you are required to provide workers compensation insurance. 

This type of commercial contractor insurance policy covers the employees of a company in case they are injured while working. Often, this is the most expensive part of insuring your business. 

Does a Subcontractor Need Insurance?

Having business insurance is always a good idea, even if the law doesn’t require it from you. Every business should protect its services, goods, and workforce, even if they are just starting out. And that includes subcontractors too. It would be best to keep in mind that insurance can help you land more significant projects. After all, many contractors require insurance if you are going to work for them. 

How Much Does Contractors Insurance Cost?

One of the factors that affect contractor liability insurance cost is the type of work that’s involved in your specific business. For example, a carpenter and a mason aren’t exposed to the same risks while working on-site. That’s why you can expect different rates from contractor insurance companies. Other factors that affect contractors insurance cost are vehicles, coverage needs, location, claims history, and employees. 

Another important factor that impacts your contractors insurance rate is your policy limits. Liability limits refer to the maximum amount a contractor insurance company is willing to pay for a loss.

You decide the level of limits on your policy. So if your business is considered to be low risk, you may feel comfortable choosing a lower liability limit. That means the price of your insurance policy would also be lower. 

For example, contractors can often save money by bundling general liability insurance with commercial property insurance. However, one of the best and most secure ways to find out more about the contractor insurance quotes that fit the needs of your business is to talk to an insurance specialist directly. 

Luckily, the price of contractors insurance is usually worth the value. To provide the scope, the average cost of someone slipping and falling on-site can amount to $20,000. If you consider that a simple rate of $35 per month could make a big difference for your business in case of an accident, then having contractors insurance makes financial sense. 

Finally, remember that you are not alone in this process. Let East Insurance Group help you choose a policy that will fit your contractors insurance needs. Protecting your assets, whether personal, business or both, is our goal. A well-chosen policy can lessen the impact of some of life’s most common yet unforeseen perils. We’re here to help when you are considering contractors insurance coverage.

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