When it comes to your contracting business, commercial insurance is an essential tool to minimize risk. Unlike an office where most of the work takes place in one location, a contractor’s job is spread out to different sites and includes several clients, subcontractors, and workers. This multiplies the number of potential claims. Claims that could very easily put you out of business. Why? Because even if the claim is dropped the legal fees alone could mean bankruptcy.
What Is Commercial Insurance for Contractors?
Commercial insurance is a policy package designed to protect contractors against financial loss associated with their professional activities. Any individual or businesses providing contracting services should protect their business with commercial insurance.
What Is Covered?
A comprehensive commercial insurance policy for contractors begins with four core policies:
- Commercial General Liability (CGL) is a business insurance policy that protects you and your contracting business from some of the common risks you can expect to face as a contractor, such as third-party bodily injury and property damage.For example, you are hired to install new kitchen cabinets for a client and accidentally damage their hardwood floors in the process. Your client successfully sues you for property damage and your CGL policy covers the cost of repairing the floors, totalling $20,000. CGL also covers legal and medical costs; should you be successfully sued.
- Commercial Property Insurance is a policy that protects both your workshop and the physical assets inside, such as equipment, tools, and supplies. Commercial property insurance may cover the cost of repairing or replacing equipment that has been damaged or lost due to an external source, such as a fire or theft. This policy may also cover loss of income or additional business expenses incurred due to the damage. Commercial property insurance does not typically include earthquakes or floods, so if you work in a city with a high flood rate, such as Toronto, it is worth speaking with your broker to ensure these events are listed as insured perils.
- Commercial Auto Insurance, also referred to as fleet insurance, is an insurance policy that protects your commercial vehicles in the same way personal auto insurance protects your personal vehicle. You may also consider adding non-owned vehicle coverage, which is coverage for vehicles used in connection with your business that you don’t own, lease, rent, or borrow — for example, an employee who uses their truck for company purposes.
- Equipment Breakdown Insurance is an additional form of coverage you can add onto your policy to cover the cost of repairing or replacing tools and equipment that suffer a mechanical or electrical breakdown. For example, the day before you begin a small-scale kitchen renovation, your electric saw breaks down. You purchase a new one and your equipment breakdown insurance covers the cost of the replacement saw, totaling $500.
Every business is unique, and in an industry, as varied as contracting, there is a multitude of risks specific to the individual trades. You may require more or less coverage, depending on your business. Speak with your broker about the different types of coverage you can add to your policy to cover your unique business risks.
Why Do Contractors Need Commercial Insurance?
Contracting is a high risk industry, and accidents happen. There are a number of reasons why contractors need commercial insurance, are a few of the most common:
- Protect your project
A jobsite has a lot of moving parts and there are many risks involved in a contracting project, e.g., on-site injury, equipment, and property damage, any of which could lead to significant financial loss if a client files a claim against you.
- Securing a contract
While having commercial insurance is not mandatory for securing a contract, the majority of project planners will ask for proof of insurance before making a hiring decision. Having commercial insurance could be the difference between whether or not you secure a contract.
- Protect tools
Commercial insurance provides coverage for the most important aspects of your business – your tools and equipment. Coverage for equipment and tools covers equipment and their accessories, the property of others in your care, and portable business tools from loss or damage, including theft. Anything valued at less than $1,500.00 is considered a tool, while anything above is considered to be equipment.
- Protect your team
Commercial insurance provides coverage for full-time employees of your business. However, 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.An 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.
How Much Does Commercial Insurance Cost For Contractors?
Much like the variation in the industry, the cost of insurance varies as well. For a basic commercial general liability policy, you can expect to spend around $500 a year. The more coverage you have, the higher the price. For a package that includes CGL, property insurance and tool and equipment coverage, the cost would be closer to $1000. The type of services you provide, as well as the level of risk inherent to your trade, will influence the cost of your policy as well.
Ready to see what commercial insurance looks like for your contracting business? Start an online application today.
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