Contractors need insurance to protect their business assets from unexpected injuries and unintended damages. When comparing the cost of insurance against the potential for time consuming and costly litigation, an insurance policy will always be the more affordable and secure option.
What Kind of Risks Do Contractors Face?
No matter the size of the operation, contractors face liability exposures and legal obligations to other parties, such as general contractors, project owners, or individual homeowners. Due to those obligations, one of those third parties can potentially sue or hold a contractor liable for bodily injury or property damage.
Other potentials risks to a contractor’s business include:
- Injuries or property damage involving a company vehicle
- On-the-job employee injuries
- A loss to commercial property
- Stolen, lost, or damaged equipment or materials
- Unfinished contracted work
What Kind of Insurance Do Contractors Need?
While each contractor faces unique risks, the most frequently asked questions are about what is covered under a contractor policy. The most common coverages include:
General Liability Insurance
General Liability insurance protects a contractor’s business assets from third party claims alleging negligence. Alleged negligence may have resulted in bodily injury and/or property damage that occurred while operations are either ongoing or after the work is completed.
Many states have licensing requirements for contractors, particularly for residential construction, which may include being required to have General Liability Insurance. Contractors may also enter into contracts with project owners or general contractors that require General Liability coverage.
Having a comprehensive insurance policy is an advantage to attract new customers. Customers feel secure when they know their contractor has coverage, should an incident occur on their property.
Contractors typically have a commercial space such as an office or warehouse, to store equipment or other business property. Property insurance covers damage to the building, office equipment, and any materials stored inside.
Inland Marine Insurance
Most trade and site improvement contractors have equipment for use at their job sites including tools, larger items such as scaffolding, site work equipment, or other types of machinery. They also typically buy and transport materials for installation at their jobsites. Contractors Equipment Insurance and Installation Coverage protect equipment and materials.
For contractors building a structure, Selective can provide “builders’ risk” coverage for incidents such as fire or vandalism that occur while the building is under construction.
Commercial Auto Insurance
Commercial Auto insurance provides coverage for bodily injury and property damage to a third party as well as property damage to the contractor’s vehicles.
Workers Compensation Insurance
Workers Compensation is required in all states and covers medical expenses and a portion of lost wages for employees that have work related injuries or illnesses, including resulting death.
Bonds are a binding contract between three parties, a principal, an ‘obligated’ party and a surety. The principal is the contractor who is seeking the bond for his business, the ‘obligated’ party is the organization imposing the bond requirement on the contractor and the surety is an insurance company which guarantees their obligations.
Contractors are sometimes required to provide a bond to a project owner or developer, commonly a government type agency or municipality (not as common for residential work.)
Simply stated, a construction bond is a legal guarantee to a project owner/developer that a project will be completed according to the agreed to terms and on time.
How Does Selective Help Contractors?
Selective supports contractors by actively anticipating the specific risks they face. Along with our comprehensive Insurance for Contracting Business, we also offer resources to help contractors control those risks. Safety management, free standardized contracts for use with subcontractors, flexible billing plans and easy claims management are all a part of what it means to Be Uniquely Insured.
To learn more about the unique insurance solutions Selective provides to contractors, contact an independent agent today.