From worker’s comp to builder’s risk, learn how to understand and purchase the right insurance for your contracting business. Check out our comprehensive articles and resources to discover how you can protect and grow your contracting business.
Contractors Insurance Basics
Types of Contractors Insurance
Who needs Contractors Insurance?
Whether your business is a one-man operation, or you’re a contractor with hundreds of employees, contractor insurance can protect your business from the unexpected and help you win new clients. If your business meets any of the following criteria, purchasing contractors insurance is a good idea:
- Your clients require liability insurance
- You serve as a subcontractor to a general contractor
- You hire employees
- You have valuable assets to protect, such as heavy equipment or construction materials
- Your business owns automobiles or work vehicles
- You or your employees drive personal vehicles between your office and worksites or between different worksites
Contractors Insurance by Profession
Why is Contractors Insurance important?
Clients may require contractors to have liability insurance.
- Benefits: Contractors who have the proper insurance coverage are in a better position to win new jobs. If a client sees that your business is properly licensed and has appropriate insurance coverage, your company will be taken more seriously, and the chances of a successful bid increase.
- Risks: Without the proper insurance, contractors are at risk of losing business. If a client hires a contractor without liability insurance and an accident happens, the client may be on the hook to pay for damages. Many clients will not hire contractors who do not have liability insurance.
General contractors may require subcontractors to have liability insurance.
- Benefits: If your business does work as a subcontractor for a general contractor, having liability insurance protects the work that your company does on the job site. This can help you qualify for subcontractor jobs where the general contractor requires liability insurance.
- Risks: In many states, the law allows general contractors to be held responsible for financial damages if their subcontractors are not insured. As a subcontractor, if you do not have liability insurance, you may not be able to be hired for jobs that a general contractor contracts out.
The law may require contractors to have certain types of insurance, especially workers’ compensation insurance.
- Benefits: Purchasing workers’ compensation is not only required by law, but is also a smart business decision. Although you may do your best to work safely, accidents do happen. When an accident occurs, you can rest assured knowing that your workers and your business will be covered financially, and that you’re complying with the law.
- Risks: If your employee is injured on the job, without workers’ compensation insurance, your company will be responsible for paying for the employee’s medical costs and lost wages. Additionally, your business may be fined by the government for failing to carry the required workers’ compensation insurance. In some states, failure to carry workers’ compensation insurance is a felony crime as well.
Accidents or unexpected disasters can happen in the course of doing business.
- Benefits: Insurance provides financial protection for your business. Having insurance coverage can protect the investment of hard work, time, and money that you’ve made in your business when certain kinds of disasters happen. Liability insurance can protect your business financially if it is sued for injuring someone or damaging another party’s property. Property insurance protects the property your business owns if your property is damaged or destroyed.
- Risks: Without insurance, a single accident or injury could put your entire business at risk. If your business is unable to come up with the funds to pay for damages or pay the legal fees necessary to defend your business, you may need to sell your business assets or declare bankruptcy.