As a general contractor, your business faces many risks, from injuries on the job site to project delays. That’s why general contractor insurance is so important.
Types of Insurance Policies for Contractors
As a contractor, there are a few types of insurance policies you’ll want to consider to protect your business.
1. General Liability Insurance
This covers you in case a client sues for issues like property damage or injury. It’s essential for any contractor. You’ll want at least $1 million in coverage to start.
2. Workers’ Compensation Insurance
Required in most states, this covers medical bills and lost wages for employees injured on the job. Rates vary depending on the type of work your employees do.
3. Commercial Auto Insurance
If your business owns any vehicles, you’ll need this to cover liability and damage. It’s similar to personal auto insurance but for business vehicles.
4. Umbrella Insurance
This provides extra liability coverage beyond the limits of your other policies. It kicks in when your general liability or auto liability coverage maxes out. For contractors, $1 million to $5 million in umbrella coverage is a good start.
5. Professional Liability Insurance
Also known as errors and omissions insurance, this covers you in case a client sues over a mistake or for shoddy workmanship. It protects your business assets in these situations.
6. Tools and Equipment Insurance
This optional policy covers damage to or theft of business tools, equipment, and machinery. If you have expensive tools, it’s worth considering.
As you build your construction company, the specific types and amounts of coverage you need will change. But these policies should form a solid base to keep your business protected.
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Key Coverages to Consider
To properly insure your general contracting business, there are three key types of coverage you should consider:
1. General Liability Insurance
General liability insurance protects you if a client or member of the public sues you for negligence, bodily injury or property damage. As a contractor, you face risks like a client tripping and falling at a job site or a beam falling and damaging a bystander’s vehicle. General liability coverage helps pay for legal fees, medical bills and repair costs in these situations. Look for a policy that covers at least $1 million per occurrence and $2 million in aggregate.
2. Workers’ Compensation Insurance
Workers’ comp insurance provides wage replacement and medical benefits to your employees if they are injured or become ill on the job. All states require general contractors to carry workers’ comp. The premiums are based on your payroll and the types of construction work you perform.
3. Property Insurance
Property insurance protects equipment, tools, supplies, and vehicles owned by your company. As a contractor, your livelihood depends on these assets, so property insurance is a must. Choose between actual cash value coverage which pays the depreciated value of items or replacement cost coverage which pays the full cost to replace them.
How Much Insurance Do You Need?
The answer depends on the size and scope of your construction business. At a minimum, you should have:
You may want umbrella coverage to provide an extra layer of protection over and above your standard policies.
For large or complex projects, requiring performance bonds or surety bonds may be necessary. These provide a guarantee to your client that the work will be completed.
The specific types and amounts of coverage you need depend on your business. It’s best to sit down with an insurance agent to review your operations and determine the right general contractor insurance package to properly protect your company. While it may seem expensive, the cost of not having enough coverage could be far greater.
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Tips for Getting the Best Rates on Contractor Insurance
To get the best rates on your contractor insurance, here are some tips:
1. Compare Quotes from Multiple Carriers
Shop around and get quotes from several insurance companies that specialize in contractor insurance. Compare the coverage and limits they offer as well as the premiums. Some companies may offer discounts for bundling with other policies or for safety practices. Find the policy that gives you the best coverage for your needs at an affordable price.
2. Increase Your Deductibles
The higher your deductibles, the lower your premiums will be. If you can afford to pay more out of pocket in the event of a claim, increasing your deductibles is an easy way to lower your rates. Just make sure you can actually afford the deductibles if you need to pay them.
3. Maintain a Good Safety Record
Your safety record and history of claims will impact your rates. Do whatever you can to prevent accidents and reduce claims like following proper safety procedures, training employees, and fixing any hazards. The safer you are, the less risk for the insurance company and the better rates you can get.
4. Bundle with Other Policies
You may be able to get a discount on your contractor insurance by bundling it together with other policies like commercial auto, workers’ comp, and business insurance. Insurance companies such as AIICO Insurance often offer bundling discounts since you’re giving them more of your business. Make sure the bundle still provides good coverage for your needs.
5. Review Annually and Adjust As Needed
Once you get your contractor insurance policy in place, review it annually to make sure you still have the right coverage and limits based on the size and scope of your business. You may need to increase or decrease coverages. You should also check for any discounts you may now be eligible for and get quotes from other insurers to compare. Make changes as needed to keep your policy up to date and your rates as low as possible.
Conclusion
Reviewing your contractor insurance regularly and making changes to improve your rates and coverage will help ensure you have the protection you need for your construction business at an affordable cost.
