Contractors face many risks on the job, from property damage to accidents. Yet, some contractors consider whether they can avoid the added cost of contractor’s business insurance. Confusion about whether contractors need insurance can lead to costly claims putting their business and livelihood at risk.
Whether you’re a handyman or a large-scale contractor, insurance can protect you from lawsuits and financial loss. Suitable contractors’ insurance helps you to maintain financial stability for your business. Let’s explore why contractors need insurance and what can happen if you skip this important step.
Why Do Contractors Need Insurance?
Contractors need insurance to protect them from costly errors. Without proper coverage, even small mistakes can turn into costly legal issues. If you accidentally damage a client’s property or someone is injured on the jobsite, you could be held financially responsible. Contractor insurance acts as a safety net, helping to cover damages, legal fees, and even medical expenses.
Risks of Not Having Contractor’s Insurance
Clients may be weary of hiring a handyman without insurance. Contractors need insurance to protect against these risks:
- Property damage costs. If the contractor accidentally damages client property, you may have to cover the repair costs yourself.
- Injury liability. If someone is injured as a result of your work. you could be held responsible for medical expenses.
- Lawsuits. Without contractors’ insurance, any legal claims for damages or injuries might be directed at you.
- Project delays. Uninsured contractors may not have the financial safety net to fix mistakes, causing delays or unfinished work.
Independent Contractor Insurance Requirements
Independent contractor insurance requirements depends on the type of work and location. While some states or clients may need insurance by law, often, it’s up to the contractor to decide.
Common independent contractor requirements include:
- General liability insurance covers property damage and injuries.
- Professional liability insurance protects against claims of poor workmanship or mistakes.
- Worker’s compensation insurance may also be required if you hire employees or subcontractors. In Vermont and New Hampshire, worker’s compensation insurance is required.
- Tools and equipment coverage protects your tools from theft or damage.
- Commercial auto insurance covers vehicles used for business purposes.
What Does Contractors’ Insurance Cover?
Private contractors’ insurance covers you from a variety of risks on the job. It depends on what contractors need insurance for. The following endorsements are often added to a contractor insurance package:
- Environmental insurance. provides protection against claims related to pollution or environmental damage. This is especially important where there’s a risk of contamination or improper waste disposal.
- Inland marine insurance. covers tools and equipment while they’re being transported or stored off-site. If your tools are stolen or damaged, this policy helps recover the costs.
- Product liability insurance. protects contractors who supply products or materials. If a product causes injury or damage, it can cover the costs of legal claims.
How to Get Contractors’ Insurance
Follow these steps to get contractors’ insurance based on your needs:
- Consider your needs. Determine what type of work you do and the specific risks involved. For example, do you need coverage for tools, vehicles, or potential client lawsuits?
- Compare different policies. An Independent Agent represents several different insurance companies. They can provide multiple quotes to find you the insurance package that best fits your business.
- Check for deals and discounts. Some insurance companies offer discounts for bundling policies. They may offer better rates if you haven’t made previous claims.
- Apply for coverage. Once you find the right policy, submit an application. You’ll need to provide details about the type of work you do, the size of your business, and any previous claims.
Private contractor insurance shows professionalism and provides financial security, and peace of mind. You won’t be stuck with unexpected costs if something goes wrong.
Learn more about our general contractor insurance policies today.
