Starting a Contracting or Construction Business?
Thinking about starting a contracting or construction business? Congratulations! Starting any kind of business is not an easy task nor for the faint of heart. You have been doing your research and now it is time to find out about what insurance you need and how much could it cost.
There are several different business insurances that you will or may need. You do not have to get them all up front in most cases, but as your company grows so will your insurance needs. Don’t let a insurance agent sell you the world before you even get out into it.
The most important will be the General Liability. Since you are a contractor, you will be obtaining a contractors’ general liability. Contractors’ General Liability will be the “go to” sort to speak, insurance coverage when something goes wrong on the job site. This covers bodily injury and property damage done by you, your employees, or your uninsured subcontractors. If is not a good practice to hire uninsured subs, we will discuss that in another article. Contractor general liability is the basic coverage that will protect you and your company when the worst possible thing happens. Yes, you are an experienced contractor, you take precautions and all the necessary steps, so nothing does happen, well you that stuff happens. This policy will be based on payroll or labor costs. The more you have the higher the premium will go. Keep in mind, there is not an insurance policy that covers quality of workmanship. That is considered a warranty type of event, and insurance is not a warranty product.
Then you have Inland Marine. This policy can cover your tools and equipment, contractor equipment like bobcats, excavators, etc. if stolen regardless of where they are. Whether in your office, garage, storage, truck, trailer, and even on the jobsite. Your homeowner’s policy may not properly cover your tools like you would think. Two reasons… one they are used for business and the other is most homeowner’s policies will only cover the tools when at home. You have made a big investment for your company it is vital to properly protect that investment.
Now we come to commercial auto. Commercial auto or vehicle insurance is a policy that covers physical damage and liability for amounts, situations, and usage not covered by a personal auto insurance policy. Commercial auto insurance covers several types of commercial vehicles—from automobiles used for business purposes, including company cars, to a wide variety of size and weight of commercial trucks and vehicles. You will need to have a commercial auto policy if the title or loan is in the company name or if you have it permanently displaying your company name. You will also need to consider a commercial auto policy based on the type of contracting work you do. Not all personal auto policies will cover incidental businesses.
Let us not forget worker’s compensation (WC). WC is a policy that is designed to cover your workers against bodily injury will on the job. It behaves like a health insurance policy by paying for health-related expenses if the worker is injured while working. The difference though is that a health insurance policy does not pay a part of the worker’s wages while on WC leave while the WC policy will. If you know anything about this policy, you know it is not cheap. Also, the insurance company is going to audit your payroll each year at the end of the policy to capture how much you paid out in labor during the past period.
There are several policies that we did not mention above that your business may need or you may want to investigate to make sure you have the coverages you need not if but when something happens. Remember to be legit is not cheap but pays off overall. You also will not be bidding against the contractors that are not insured, you cannot. You have an added overhead that they don’t. But, when bidding on jobs, you can proudly show you are insured and take your business seriously. You will win more by being insured then you would if you were nowadays. We hope this shed a tiny light on your contractor business insurance. If you have questions, please call us at 805-429-7223.
Written by Ed Hemmer, TRS, CCCE – Construction Insurance Broker. Specialty Insurance Partners ©2022