Small Contractor Insurance: Protecting Your Business From the Unexpected
Running a small contracting business requires more than skill and experience. Contractors are responsible for employees, equipment, vehicles, job sites, and customer property, all of which can create financial risks when something goes wrong.
The right insurance program can help protect your business from unexpected losses while also satisfying the insurance requirements of customers, general contractors, and commercial property owners.
General Liability: A Foundation of Protection
General liability insurance is one of the most important coverages for contractors. It is designed to protect against certain claims involving bodily injury or property damage to third parties arising from covered business operations.
For example, a remodeling contractor is working inside a customer’s home when an employee accidentally damages an expensive cabinet. Or a customer visits a job site, trips over equipment, and is injured. In situations such as these, general liability coverage may help with eligible claims and defense costs, subject to the policy’s terms, conditions, and exclusions.
Contractors should also pay attention to products-completed operations coverage, which can apply to certain claims arising after work has been completed.
Workers’ Compensation
If a contractor has employees, workers’ compensation is another critical part of the insurance program. It is designed to provide benefits for covered work-related injuries and illnesses, including medical expenses and wage replacement as provided by law.
Construction work can involve ladders, power tools, heavy materials, and other hazards. Even a routine task can result in an injury.
Contractors should also understand how subcontractors are handled. General contractors and project owners frequently require subcontractors to provide proof of workers’ compensation and liability insurance before work begins.
Protecting Vehicles, Tools and Equipment
For many contractors, vehicles and equipment are essential to completing the job.
Commercial auto insurance can provide protection for vehicles used primarily for business purposes. A contractor transporting employees, tools, and materials in a work truck may have exposures that differ from those associated with personal vehicle use.
Tools and mobile equipment deserve attention as well. A contractor could arrive at a job site and discover that equipment has been stolen from a trailer overnight. Depending on the policy, inland marine or contractors’ equipment coverage may help protect eligible tools and equipment against covered losses.
Maintaining an updated inventory and knowing the value of your equipment can make it easier to determine appropriate coverage.
Don’t Overlook Contract Requirements
Insurance requirements are common in the construction industry. A project may require specific liability limits, additional insured status, waivers of subrogation, or other provisions.
A certificate of insurance is often used to demonstrate that coverage is in place, but it is important to remember that a certificate is not the insurance policy itself. The policy and its endorsements determine the actual coverage.
Before signing a new contract, contractors should have their insurance professional review the requirements. Addressing them before work begins can help prevent costly surprises later.
When Your Business Changes, Your Insurance Should Too
A contractor’s insurance needs can change as the business grows.
Adding employees, purchasing new vehicles, acquiring expensive equipment, hiring subcontractors, or taking on larger commercial projects can all affect the appropriate insurance program.
For example, a contractor who originally specialized in small residential projects may eventually begin working on larger commercial jobs. The insurance requirements and exposures associated with those projects may be significantly different.
That is why contractors should review their insurance regularly and whenever there is a meaningful change in operations.
The Bottom Line
There is no one-size-fits-all insurance program for small contractors. A painting company, electrician, landscaper, and general contractor may face very different risks.
The goal is to build coverage around the way your business actually operates.
By reviewing liability, workers’ compensation, commercial auto, tools and equipment, property, and contractual requirements, contractors can better prepare for the unexpected and protect the business they have worked hard to build.
A regular conversation with an experienced insurance professional can help ensure that your coverage keeps pace with your business.
