What type of insurance do I need as a contractor?

2 minute read  

If you work as a contractor in a skilled trade, your job comes with a lot of responsibility — from performing your job to managing permits to ensuring the safety of your employees.

No matter what your trade — construction, home renovation, drywalling, landscaping, electrical, HVAC, or other work — any loss could sidetrack your business. Whether your tools are stolen from your truck, or a client is injured on a jobsite, it could impact your bottom line and, in some cases, your reputation.

Why do contractors need insurance?

Contractors face several risks on and off the job. Even if you’re not at fault — such as in the case of a natural disaster or theft — you could still be on the hook for thousands of dollars if you don’t have the right insurance.

Potential employers could also ask you to show a certificate of insurance before hiring you for construction or trade jobs. Having the appropriate coverage is vital: Having CGL insurance helps protect you from third-party claims of bodily injury or property damage.

But, depending on what type of contractor you are, you’ll likely require additional coverages. For example, a landscaping tradesperson has different needs than a subcontractor, while a contractor who runs their own business has different requirements too.

What type of insurance do contractors need?

While optional coverages aren’t necessarily required by law, any contractor should consider the unique needs of their business and which additional coverages could be wrapped into a customized contractor insurance policy.

Whether you’re a commercial or residential contractor, you’ll still need the same types of coverages — though your coverage limits may differ.

Optional coverages to consider:

Commercial property insurance can help to protect and replace your property, such as inventory, furniture, and computers, in the event of a natural disaster, vandalism, or theft.
Equipment insurance can help to repair or replace your tools and equipment if they’re damaged or stolen.
Cyber insurance can help protect your business from certain losses associated with cyber or data breaches.

What about auto insurance?

If you’re a contractor, you likely need to transport tools, equipment, and materials to jobsites. If you’re using a personal vehicle, don’t assume your personal auto policy will have you covered as personal auto policies may exclude business activities.

While a personal policy may cover your commute to work, it won’t cover you if you’re using a personal vehicle for work. So, if you get in an accident (or if one of your employees gets in an accident), you won’t be covered. That’s where commercial auto insurance comes in, which can help to protect you and your employed drivers, as well as any passengers.

Keep in mind that if you use a commercial trailer to tow equipment or materials to a jobsite, you’ll need to ensure it’s added onto your commercial auto policy.

What happens if you hire a subcontractor?

If you hire a subcontractor for their expertise on a project, always ask for proof of insurance before hiring them to make sure they have their own commercial general liability insurance.

This is an important step because you could be held responsible for any damage to a client’s property that results from the work a subcontractor is doing — since you’re the one who hired them. So, for example, if you subcontracted a worker to paint the interior of a client’s home and they accidentally spilled paint all over the carpet, the subcontractor’s insurance policy would kick in — not yours.

Protect your business with a tailored contractor’s insurance policy

The right coverage for your contracting business can protect your business from a devastating loss. If you’re looking for additional protection for your business, contractor’s insurance may be the right fit for you. Visit our contractor’s insurance page today!

This blog is provided for information only and is not a substitute for professional advice. We make no representations or warranties regarding the accuracy or completeness of the information and will not be responsible for any loss arising out of reliance on the information.