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Contractors Insurance

What is contractors insurance?

Contractors and construction businesses face a variety of risks and liabilities, from workplace injuries to property damage. At any given moment, your business could be hit by a lawsuit or accident that has the potential to put you out of business. With the right insurance coverage, you can help mitigate risk and protect your business from unexpected disasters.

Types of Contractors Insurance

Business insurance for contractors and construction companies generally falls into one of two main categories: liability insurance and property insurance.

Liability insurance

Although your business likely pays great attention to work safety, accidents do happen. If your business causes harm or damage to another person or their property, you could be sued for damages. With liability insurance, you pay an insurance company to take on the risk of accidents. In exchange for your payment, the insurance company will pay for damages or settlements against your business if an accident occurs.

Property insurance

As a contractor, you’ve likely made a significant investment in tools, equipment, and other property for your business. Unexpected disasters like fires, windstorms, and theft can destroy your business property in a heartbeat. When you purchase property insurance, you pay an insurance company to take on the risk of these disasters. If your property is destroyed by a covered cause, the insurance company will reimburse you for the value of your destroyed or damaged property.

Get a quote on Contractors Insurance

The four most common types of business insurance for contractors are:

General liability insurance protects your business if you are sued by a third party for causing injury to someone else or for damaging someone else’s property.

Workers’ compensation insurance is a form of liability insurance that pays for medical expenses and lost wages when one of your employees is injured while working.

Commercial property insurance protects your business against financial loss if your business property is damaged or destroyed.

Commercial auto insurance protects your business financially if you or one of your employees injures someone else with a business vehicle. This coverage also protects the investment you have in business vehicles from crashes and theft.

Additional Insurance Coverage for Contractors

In addition to the common types of contractors insurance listed above, there are several other types of insurance that may be useful for your contracting business:

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:

Contractors insurance can cover contractors in a wide variety of building trades. Some common trades that need contractors insurance include:

Why is contractors insurance important?

Clients may require contractors to have liability insurance.

General contractors may require subcontractors to have liability insurance.

The law may require contractors to have certain types of insurance, especially workers’ compensation insurance.

Accidents or unexpected disasters can happen in the course of doing business.

Final Word

Contractors, subcontractors, and independent tradesmen face a number of risks in their work. From injuries at job sites to lawsuits from unhappy clients, the liabilities are vast, and every contractor should consider securing at least some minimum level of insurance coverage. While you may consider it to be just another expense for your business, you’ll be glad you invested in comprehensive insurance protection in the event that your business is hit with any unexpected lawsuits or disasters in the future.

Expert Commentary

AdvisorSmith spoke with the following experts to provide critical insight on insurance for contractors and construction businesses.

Jacob Kovel

  • Professor, Manufacturing & Construction Management
  • Central Connecticut State University
Jacob's Answers

Q. What are the most important risks for contractors and construction businesses to insure against?

Q. Should smaller businesses be concerned about liability and risk?

Q. What actions can a contractor or construction business take in order to reduce risk and liability?

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