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Liability insurance for contractors

General contracting companies vary significantly in size and area of expertise. Despite the pandemic’s initial impacts, the recent rise in demand for contracting services due in part to the residential renovations boom suggests the industry is expected to make a positive recovery.

As a contractor, managing risk is inherent to your business, so it only makes sense that you have a robust risk management strategy in place for yours. At Zensurance, we know what makes your business unique. With over 50 insurance partners, we’ve helped thousands of contractors protect their businesses with flexible insurance policies customized to meet their specific needs. 

Our mission is to make insurance as accessible as possible. We wrote this guide to help you navigate the basics of contractor liability insurance for your business.

Hi, my name is Matt, and I’m a business insurance broker specialized in Contractor Insurance here at Zensurance.

Today I’d like to speak to you about Contractor Insurance for Canadians. Independent contractors, companies, and sub-contractors should consider getting insurance to protect their business, employees, and equipment.

Having contractor insurance is a smart business practice and is often mandatory to perform jobs where the client requests proof of insurance.

So what exactly is Contractor Insurance?

Contractor insurance is also known as Contractor Liability Insurance or General Contractor Insurance. It’s a package specially designed for risks associated with construction trades in Canada. These risks can include working with hazardous materials and tools, travelling to different locations, accessing private property, and potentially causing injuries to 3rd parties.

Now, let’s look at which trades need Contractor Insurance. The answer is all of them! Some of the most common are construction and renovation contractors for commercial and residential projects, carpenters, electricians, HVAC installers, roofers, and landscapers. 

So, what types of insurance policies do contractors need?

Here are some common coverages that can make up your policy—Commercial General Liability, which provides basic coverage against property damage or personal injury claims. Also, your Tools and Equipment policy usually covers tools and equipment lost or stolen on your site. 

And optionally, you can include an Installation floater policy: This covers materials used for the final project that may be damaged while being installed. For example, a window that brakes while it is being installed. 

Additional coverage for specific needs can always be added to your basic policy. You should speak to your commercial insurance broker at Zensurance for more options.

Some common scenarios where contract insurance can be useful are:

  • A homeowner trip over some materials you left behind at the site injures themselves badly, and decides to sue you.
  • Or, for example, you are performing a job, and some expensive tools that you left overnight at the site are stolen.

 Now, of course, the big question is, how much does a contractor policy cost?

The short answer is: it depends. The cost of contractors’ insurance varies according to factors such as the specific trade you are in, the number of years you have been in business, and the revenue for the past year. On average, the most basic contractor’s insurance starts at around $500 per year and can cover up to $5,000,000 in liability. Of course, as more coverage is needed or adding a specific coverage, the cost will likely increase.

Now, how do I get a quote? 

This is the easiest part. Simply head over to www.zensurance.com, click on get a quote, and in a matter of minutes, you’ll receive your contractor’s insurance quote. Get started today!

What is contractor insurance?

Comprehensive coverage that can withstand multiple projects, managing employees, and general business liability risks is critical to running a thriving construction business.

When it comes to finding the perfect coverage for your business, distinct factors, such as trade, location, and service-related risks, need to be considered. For example, snow removal will have very different types and levels of risk exposure than residential painting. 

We know what makes your business unique. Our contractor insurance policy packages protect contractors against the specific risks associated with contracting trades, such as third-party property damage and equipment theft.

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What does it cover?

Each construction practice is different, and insurance requirements will vary by service; however, contractors insurance typically include the following policies:

  • Commercial General Liability (CGL) Insurance – The most common and perhaps most important form of coverage for contracting trades is commercial general liability insurance. CGL is a liability insurance policy for contractors that protects you and your business against common claims you may run into at a job site, such as third-party property damage (e.g., damaging a client’s home) or bodily injuries (e.g., a slip and fall). Should your business be named in a lawsuit, CGL may cover medical expenses and legal fees, regardless of the outcome. Important note for contractors, your policy coverage limit applies to all employees of your business, not each employee. One option to accommodate all of your employees is to increase your limit. Hiring sub-contractors that carry liability insurance is another way to ensure all parties have adequate coverage.
  • Tools and Equipment Insurance – Your tools and equipment are likely your most important assets, making equipment and tools insurance critical. This policy provides coverage to replace or repair lost or damaged equipment and tools, accessories, or others property in your care. Anything valued at less than $1,500 is considered a tool, whereas anything above is considered equipment.
  • Pollution Liability Insurance – As an industry, construction produces more pollution than aviation. While not every project is going to have a large-scale impact, environmental liability is on the rise. Neglecting to seal a construction site or an improperly fitted pipe can lead to severe damage down the line. Pollution liability insurance covers clean-up costs, bodily injuries (e.g., respiratory illnesses), or property damages (e.g., water damage) caused by pollution or toxic substances produced due to your work on a covered job site.
  • Builder’s Risk Insurance – Also known as Construction Liability Insurance, Builder’s Risk protects your building and liability against expensive property claims throughout a project’s duration. Contractors typically require their clients to carry this coverage, although sometimes you may be responsible. When finalizing the details of a project, be sure to confirm who will be responsible for purchasing the policy and ensure all involved parties are covered.
  • Contractors do not typically require Professional Liability Insurance. However, if you offer advice or consulting as part of your services, consider adding it to your policy to protect against claims alleging you gave incorrect information or failed to deliver a service as promised.

Due to the variation across trades, finding a one-size-fits-all policy may be difficult. Speak with one of our specialized brokers to see if any of these additional coverages are right for your business:

  • Products-Completed Operations Liability – Protects you and your business against customer lawsuits alleging property damage (e.g., faulty pipes) or a bodily injury after you have already completed a service or project.
  • Non-Owned Auto Insurance – Auto coverage for vehicles used in connection with your business that you don’t own, lease, rent, or borrow. For example, this coverage could apply to an employee who uses their vehicle for company business.
  • Tenants Legal Liability – This policy covers loss or damage to property that your rent or occupy (but do not own) for business purposes, such as a temporary office space near a job site.
  • Installation Floater – This is an additional form of coverage, typically included with Builder’s Risk policies, which protect the tools and materials you use during construction from theft, loss, or damage.
  • Leased, Rented, Borrowed Equipment – Coverage for loss or damage to materials and equipment you lease, rent, or borrow.

Who needs it?

Any independent contractor or business providing general contracting services should protect their company with a contractor insurance policy package.

Not only will it protect you from financial loss, but it will also help in securing jobs. In today’s increasingly litigious society, clients want to see that they have guaranteed contracting resources that are adequately insured.

We’ve insured thousands of contractors across Canada, some of our clients include:

How much does contractor insurance cost?

Contractor insurance starts from $450 annually for a basic CGL policy with a $2 million limit for a small or medium-sized business.

When you fill out our online application, we will ask some questions about your business to understand your needs better. The following factors are taken into consideration when determining the best policy options for you: 

  • Years of experience 
  • Trade types
  • Annual and projected gross revenue
  • Number of employees
  • Previous insurance claims

We’ve partnered with over 50 insurance providers to offer you different options that suit your business needs at the best price.

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Insurance considerations for independent contractors

Working as an independent contractor has many benefits; you define your schedule and contribute your expertise to various projects. However, operating independently has unique risks from an insurance perspective. Unless you are working full-time with one company, you are unlikely to be covered by an employer, meaning you need comprehensive insurance that travels to job sites with you.

General liability insurance for independent contractors could cover any third-party injuries during a project or property damage resulting from your actions, even if you work at multiple sites. Equipment and tools insurance will provide coverage should they be lost, damaged, or stolen, and you should always confirm Builder’s Risk coverage is in place before you begin a project. Suppose you offer advice as part of your services. In that case, you may wish to protect yourself with professional liability insurance, as it protects against claims alleging negligence or failure to deliver a service as promised, which can be costly.

Not only will purchasing insurance protect you from financial loss, but it may also help in securing jobs, as project managers and planners will often ask for proof of insurance before making a hiring decision. Having liability insurance for contractor can be the difference between whether or not you secure a contract.

Suggested Coverage: 

  • Commercial General Liability Insurance
  • Builder’s Risk Insurance
  • Tools & Equipment Insurance
  • Professional Liability Insurance

Common claims scenarios

Frequently asked questions

Is contractor insurance mandatory for contractors and subcontractors before signing project contracts?

No, having Contractors Insurance is not mandatory, but here are some reasons why you should:

  • There are many risks involved in a contracting project, e.g., on-site injury, equipment, and property damage, any of which could lead to financial loss if a client files a claim against you.
  • For risk-management purposes, project managers and planners will often ask for proof of insurance before making a hiring decision. Having Contractor Insurance can be the difference between whether or not you secure a contract.

 

Do contractors need professional liability coverage in their insurance policy?

Contractors do not require Professional Liability Insurance. However, if you offer advice as part of your service, consider adding it to your policy to protect against claims alleging you gave incorrect information or failed to deliver a service as promised.

If you’re still not sure if Professional Liability Insurance is something you need, ask your broker about what types of coverage make the most sense for your business.

Are subcontractors covered by the contractor’s liability insurance?

Contractor Insurance provides coverage for full-time employees of a business. This policy does not typically include subcontractors; however, if needed, they can be added. Regardless, it is important to ensure you are meeting all insurance requirements in a contract.

Important note for contractors, your policy coverage limit applies to all employees of your business, not each employee. One option to accommodate all of your employees is to increase your limit. However, hiring subcontractors that carry their own liability insurance ensures all parties have adequate coverage.

For subcontractors, consider purchasing liability insurance to ensure you always have coverage, even when an employer can’t cover you. Having liability insurance will also allow you to work on multiple sites.

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