What Are All the Insurance Policies a Contractor Needs?

If you are a contractor and you are curious about what types of insurance policies you need to run your business, this blog’s for you.

Whether required by law or by a contract, every business needs some type of insurance in some form. And about 90% (rough estimate) of a business’s insurance needs are the same. It’s that 10% that makes insuring each industry unique. That final 10% is therefore what makes this list unique to contractors instead of, say, tattoo shops.

So when it comes to a Contractors Insurance Checklist, I’ll start with the mandatory policies and move down to the more conditional or optional.

 

First – Bonds

Mandatory / Absolutely Required

Before you get any insurance in place, you need to get your license. In order to get your license, you need to get a license bond. You can get one HERE.

If you are an LLC, you also need to get an LLC employee / worker bond. You only need this if you are an LLC. Get one HERE.

 

Second – Workers Comp

Legally Required Under Most Circumstances / Contractually Required Under Other Circumstances

If you have employees, you have to get workers comp. It is mandatory if you have employees.

There are two situations where you will have to get workers comp even if you don’t have employees.

1. If you have the following licenses, in CA, even without any employees, you have to get a workers comp policy :  C-8 Concrete, C-20 HVAC, C-22 Asbestos Abatement, C-39 Roofing, and D-49 Tree Service. We call these “Zero Payroll” policies or “Ghost” policies. I like calling them Zero Payroll policies, because I don’t like to think about ghosts.
2. If someone you’re working for requires it, even if you don’t have employees, regardless of the license, you will have to get a Zero Payroll policy just to get the job. This could be an upper tier contractor, a developer, a project owner, a municipality, or a property manager. If these people require that you get the policy to get the job, then you have to get it!

To get a workers comp quote, go HERE.

 

Third – Business Auto

Depends on The Vehicle, Drivers, Ownership, and Usage

Of course you use an auto in your business; every contractor does. So why is business auto not “mandatory”? Because in many cases, your personal auto insurance will be sufficient.

It all depends.

If it’s just you, the owner, driving your pickup truck to job sites and suppliers to do your work, then your personal auto can provide sufficient coverage. Just make sure you have adequate limits, not minimum limits.

There are, however, times when you will need to put your vehicle(s) on a business auto policy. Here are the most common:

1. Employees drive your vehicle(s)
2. Your vehicles are heavy – greater than 10,000lbs Gross Vehicle Weight
3. You are contractually required to have high limits and certain coverages that are only available on a Business Auto (such as $1,000,000 limits, or an Additional Insured endorsement)
4. Your vehicle is owned by a corporation, partnership, or LLC that is not a husband and wife. This means that even if your vehicles are owned by a corporation or other legal entity owned by you and your husband or wife, you still qualify for a personal auto policy.

Note that these criteria vary based on each insurer’s underwriting guidelines. That means that Insurer A may individually have a problem with a corporate owned vehicle on a personal auto policy, but Insurer B doesn’t. Make sense?

To get an Auto Quote, go HERE.

 

Fourth – General Liability

Not a Legal Requirement / Likely a Contractual Requirement / Get it Anyway Even if None of Those Apply

General liability is almost always purchased by a contractor and is a coverage we, of course, highly recommend. It is not a legal requirement, but typically a contractual requirement. The entities that make you get a zero-payroll workers comp and a business auto are typically the same ones that will make you get general liability.

Even if no one forces you to get this coverage, you should still get it. Why? Because it protects you from money you owe other people if you damage their property or injure them. This coverage will pay to defend you even if you are wrongly accused of causing bodily injury or property damage. This is the one coverage that you’ll probably want to have just to give you peace of mind. This is the coverage that helps you sleep well at night when you think about what could have happened if something goes wrong, and they sue… stuff like that.

You can request a quote HERE.

 

Fifth – Property Insurance

Lenders Require It / Good Idea to Have

What am I talking about when I say Property Insurance? I’m talking about insuring your physical tangible stuff from physical damage. I’m talking about insuring

• buildings, fixtures, office supplies, and computers
• Portable tools, equipment, and supplies.
• The items and materials you’re installing.
• The buildings in the course of construction that you are building or working on.

The only time you’re required to have insurance on these things is when lenders and mortgagees demand it. But we, of course, believe it’s still a good idea to have. There’s a lot can go wrong – everything from theft, to damage in auto accidents, to wildfires, etc., etc., etc… you get the idea. I don’t need to preach.

If you want to look at property insurance, go HERE.

 

Sixth – Management Liability

The Biggest Emerging Risks / Most Businesses Are Uninsured

What is Management Liability? It is an informal for a bundle of policies or coverages that protects the business from wrongdoings and mistakes that causes others financial losses, outside of those things that are covered on the policies above. I’m talking about:

1. Crime / Employee Dishonesty. This primarily pays for losses to covered property resulting from dishonest criminal acts by your employees, as well as pays for loss to categories of property not coverage, such as accounts, bills, and currencies. A simple example of this is: Your employee steals the copper wiring out of your air conditioning units. This coverage pays to replace the copper wiring.
2. Employment Practices Liability Insurance (EPLI): This primarily pays for claims made against you by your employees for wrongful acts such as discrimination, harassment, and wrongful termination. Often pays for claims of the same type made against you by 3rd parties such as your customers or clients. A simple example of this is: an employee you recently let go sues you for wrongful termination alleging age discrimination. Your policy pays to defend against accusations and for damages if you’re found guilty.
3. Cyber Liability. This primarily pays for loss of your data, damages incurred by others that you’re liable for once your clients’ data gets released to the public, and the costs imposed by law to notify your affected clients resulting from a computer accident or attack. A simple example of this is: someone hacks into your computer database and steals your clients’ data and releases it to the public. Your policy pays to replace the data, notify your clients, and for the defense & financial damages if they sue you.
4. Professional Liability / Errors & Omissions: This primarily pays for claims made against you by your clients holding you responsible for financial loss caused by your errors or the failure of your work to perform as promised in your contract. A simple example of this is: you advise your client to do something. They do it, and don’t get the intended results that they thought they would get based on your advice. They sue for the financial loss they claim to have incurred by following your advice. Your policy pays to defend against their accusations and for the financial loss if you’re found negligent.
5. Directors & Officers: This primarily pays for claims made against you by third parties for alleged wrongful acts committed by your directors and officers acting in the capacity of directors and officers. A simple example of this is: your board makes a decision that causes financial hardship for your company. The shareholders and employees sue the board for damaging resulting from its action. Your policy pays to defend against their accusations and for the financial loss if you’re found negligent.

If you want to look into any of the above, click HERE!

 

That’s about it. What about umbrella? Kidnap and Ransom? Product Recall? Pollution? Yes, these are all important coverages too. There are probably hundreds of other coverages out there that could be critical to your business, outside of my list, like group health, supplemental health (which you can get a quote for HERE). Remember, this list is meant to be a tutorial on the most critical insurance coverages that most contractors generally if not always need. But yeah, of course, you may need more! And we’re here to help.

If you are a contractor and you would like us to give you our professional analysis, and perhaps even provide you with offers of our own, please contact us! Our process is remarkably simple:

1. Set up a time to talk. Just click on the “Request a Quote” button below.
2. Have a conversation. We’ll learn about you and your business, gathering all the information needed to offer you a quote.
3. We’ll present you with a plan or multiple plans, depending on your needs. Once we’ve received your custom offer, we’ll reach out to you and schedule a time to discuss and review your no-pressure potential contractors insurance solutions.

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