Independent contractors are often engaged by homeowners and business owners to install, repair, and construct essential home systems. To guarantee their clients and ensure critical parts of their business, independent contractors are often advised to get insurance packages from brokers. The reason for this isn’t far-fetched. Independent contractors may require liability insurance depending on the nature of their business. An independent contractor may require extra insurance in addition to liability insurance, such as errors and omissions insurance, workers’ compensation, and perhaps a company owner’s policy. If you’re thinking of building a contractor business, below are the important insurance packages that you need to have.
General Liability Insurance
Every business should invest in general liability insurance, especially those in the construction industry. It shields your business from various problems, such as damage claims and related medical expenditures. General liability also protects your company from lawsuits from property damage caused by you or a product you installed, such as poor plumbing or inadequately sealed windows or doors. However, general liability does not cover losses caused by professional carelessness. You’ll need a different type of liability insurance for that. You need general liability insurance if you plan on building a contracting business as a siding contractor. As a siding contractor, you’ll frequently be exposed to the potential of liability litigation. Whether or not the courts judge your company to be at fault, a liability case can be financially taxing as you bear the costs for your legal defense and other court procedures. Liability insurance protects your siding business against these losses by covering them and any resulting financial damage, allowing you to focus on running your business and making a profit. Your broker will likely discuss the different policy types when getting liability insurance.
- Umbrella insurance: It adds additional liability coverage to all of your plans that contain liability coverage.
- Commercial vehicle liability insurance: This insurance protects your siding company’s automobiles, trucks, vans, and other vehicles.
- General liability insurance protects you against third-party property damage and personal harm to non-employees caused by accidents at your central office or on project sites.
Professional Liability Coverage
If you’re considering building a contracting business, try getting professional liability coverage. Everyone commits errors while working. Professional liability insurance covers flaws in design or craftsmanship while on the job, as well as changes made in the shop that might cause a severe problem with a project. In contrast to general liability coverage, which covers bodily harm and property damage, this covers errors that can financially impact a project. However, it does not cover the expense of rework, simply the liability for your error.
Worker’s Compensation Insurance
Running an independent contractor business, employees may fall from great heights, get harmed when moving large goods, damage themselves with hammers, drills, and other equipment, or get injured due to workplace hazards. Employee safety is crucial, but it is hard to prevent every potential incident workers’ compensation insurance can cover employee injuries. In the case of a work-related injury or sickness, workers’ compensation will cover employees’ medical bills and a percentage of their lost income if they cannot work. Physical rehabilitation fees are sometimes paid as well. Workers’ compensation also gives monetary compensation to surviving dependents if an employee is killed on the job. If you want to start a company as a siding contractor or a local roofing contractor, your state will most likely need you to get workers’ compensation insurance for your workers. Since regulations differ by state, it is critical to examine your local legislation to ensure that your firm complies. If you do not have appropriate coverage, your organization may be required to pay significant fines and penalties.
Commercial License and Surety Bonds
To guarantee that clients receive the services and that the promised work is completed, several states require contractors to acquire licenses and permit bonds. It is a legally enforceable contract that ensures the contractor will pay for all supplies and labor necessary to finish the task and will not leave the client with the bill. Most towns and municipalities need a performance and payment bond to protect their financial interest in a contract. Some private projects may even demand this to estimate the project’s investment. Bonding indicates that your organization is financially secure enough to do the needed task.
Commercial Auto Insurance
Businesses use vehicles to deliver goods, tools, equipment, and personnel to job locations. Commercial auto insurance is a must-have if you build a contracting business that will own or lease vehicles registered in its name. If one of your workers causes an accident while driving a business car, your commercial auto insurance will cover any resultant third-party personal injury, property damage, or environmental cleanup. Commercial auto insurance also protects the vehicle’s value in case of a collision or another risk, such as a falling object or theft. Independent contractors such as garage door contractors or local roofing contractors should obtain commercial auto insurance before commencing operations since it protects the vehicles or trucks used in transporting doors and roofing materials to installation sites.
Inland Marine Insurance
Looking towards building a contractor business as a residential HVAC contractor? Inland marine insurance protects your company’s property that is not permanently situated in one location and is not covered by standard commercial property insurance. This might include equipment, tools, materials, and other goods that your roofing firm needs to move or keep at client sites. If you’re a local roofing contractor, installation floaters are a frequent sort of inland maritime insurance. This insurance is designed to protect your business while construction or renovations occur. Installation floaters protect goods, supplies, and equipment while in transit, awaiting installation, and throughout the installation process. This coverage can be purchased for a single project or for all projects for a defined length of time.
Commercial Crime Insurance
Commercial crime insurance reimburses you for damages resulting from theft, robbery, forgery, burglary, and other crimes. This coverage applies to both externally perpetrated crimes and crimes committed by your personnel. Since valuable equipment may be housed at construction sites, an asphalt driveway contractor confronts a variable criminal risk. Employees or others may attempt to steal or commit fraud at your company. Commercial crime insurance can provide compensation if your company suffers damage due to various crimes.
Pollution Liability Insurance
Pollution liability is exactly what it sounds like: it covers you if you are responsible for a pollution issue on the job site. Bringing chemicals or fuel tanks onto a construction site as an asphalt driveway or concrete contractor to refill equipment constitutes a possible pollution risk. Pollution liability is normally excluded from general liability insurance. That said, an endorsement can be added to give some restricted coverage. These pollution endorsements often give substantially less coverage than a separate standalone pollution liability insurance, so determining your degree of risk is critical to ensuring you’re appropriately insured. Check with your risk advisor to see if you can combine pollution and professional liability coverage into one.
Errors and Omissions Insurance
even though general liability insurance provides thorough protection in many cases, it excludes coverage for suspected professional negligence. For this, errors and omissions insurance is required. An independent contractor who gives advice might be held accountable if something goes wrong, just like the contractors who use physical equipment and speak with clients in homes, offices, and other places. Independent contractors who function as advisors or consultants should all have errors and omissions insurance. This sort of insurance will compensate for the damages and your legal costs if the client sues you after suffering losses or harm as a result of your advice.
Business Income Insurance
If you’re building a contractor’s business as an electrical contractor and would like to cover periods when your business can’t operate due to property damage, get business income insurance. If your company needs to shut down due to property damage temporarily, business income insurance will pay for the loss of income and running costs. Business income insurance, sometimes called business interruption insurance, can give you money to compensate for your lost earnings while your company repairs harm directly brought on by one of the covered dangers. By guaranteeing that you can pay your debts while rebuilding your firm, business income insurance can assist you in starting up again. Business income insurance with a BOP often has a 12-month maximum recovery window for your company to reopen.
Extra Expense Coverage
After an accident or disaster, extra expense coverage pays for the costs to keep your business operating. It is useful for companies that must continue operating immediately following a disaster or may relocate to a temporary site to prevent closure. Anything over and above your regular day-to-day operational expenditures is covered under extra expense coverage. This includes any costs that go above and beyond simply fixing the physical damage to your business that you would not have incurred otherwise during the restoration period.
Employment Practices Liability Insurance
Plan on building a contractor firm with ethnically diverse staff as an electrical or plumbing contractor? Then get employment practices liability insurance, or EPLI insurance, which protects businesses from employee claims. In contrast to general liability insurance, it offers coverage for various events. Due to the high expense of legal defense, even litigation that your business wins can be expensive. EPLI coverage offers valuable monetary security for your company. Coverage can safeguard your company in court cases, including everything from harassment to discrimination. In modern professional scenarios, these accusations are becoming more frequent. Fortunately, an impartial insurance agent can quickly guide you in locating the EPLI coverage that best suits your company’s requirements.
Plan on building a contracting business as an asphalt driveway or landscape contractor? Then you’ll likely need a website to promote your business and improve client interactions. During client interactions, you might also need to store data provided by your clients during projects. Such data could be subject to breaches and cyber theft. Hence, you’ll need cyber insurance. Protecting the data belonging to your organization and that of your clients and third-party suppliers is one of the business insurance categories with the quickest growth. The need to safeguard all that flowing data grows as construction enterprises increasingly employ technology, whether it be software platforms to manage company operations or tools and smart technologies used on job sites. Since over half of all cyberattacks target small businesses, even small construction companies should consider purchasing cyber insurance. Only 14% of respondents think they’d successfully reduce cyber risks, vulnerabilities, and assaults. The good news is that cyber insurance is usually affordable and provides a great layer of security.
Risk Associated With Not Having Insurance
If you don’t have insurance, you run a higher chance of suffering significant financial damages due to a lawsuit. You are still subject to suit, but if you lose, you are still accountable for any damages and associated costs. Having no insurance also results in additional problems. If potential clients realize you are not insured, they might hesitate to engage you. They can also see your company less favorably if you don’t have insurance. Lack of insurance is frequently associated with a contractor’s lack of business acumen, inexperience, or willingness to take shortcuts. You might not be permitted to work in some places if you are not officially insured.
Benefits of Having Insurance
If you plan on building a contractor business, insurance might provide peace of mind since it lowers risk. Even if something goes wrong, you will be confident that you are protected. In addition to providing you with that crucial peace of mind, insurance coverage enables you to escape bankruptcy if you are sued and pay for your legal costs. Additionally, it makes it simple for a customer to hire you confidently. When you have insurance, your customers not only understand that they will be safeguarded in the case of an accident, but they also understand that you value your job and company enough to be ready for anything.