I’m a Contractor: What Type of Insurance Do I Need?
by Thompson Insurance, Inc.
If you’re a contractor or subcontractor in the construction industry, there are certain policies you know you’re always going to need; however, things aren’t always so cut and dry. You may not always understand the details of coverage or even things that need to be included in order to truly give you and your business the protection it needs.
CONTRACTORS INSURANCE: FROM REQUIRED POLICIES TO OTHERS THAT SHOULD BE CONSIDERED
Below, we’ll discuss what you need to know about each type of policy, plus give you some extra tips to cover you and your business even further.
1 . General Liability. As a contractor, you already know the first thing you’ll need is general liability insurance. But here’s what you need to watch for on the policy:
a. Subcontractors, make sure you have the right form of additional insured that covers both ongoing (PG2010) and completed operations (PG2037). If you only have the PG2010 for ongoing operations, as soon as the work is done, there’s no longer any additional insured status for the contractor.
b. Contractors, you’ll want a per project limit of insurance. General liability policies have an occurrence (per claim) and aggregate limit (per policy term), and if you’ve got multiple projects going on at the same time, you want to have a per project limit of insurance. This will essentially give you full limits for each project.
2. Equipment or Inland Marine Coverage. This policy covers your tools and equipment including everything from bulldozers and cranes to hammers and table saws. This will provide protection in the instance that your equipment is damaged, stolen, or vandalized.
Another good thing about equipment coverage is that it’ll also help pay for rental reimbursement. If somebody steals your bulldozer (yes, bulldozers have been stolen before), you can rent one and the insurance company will reimburse you for that expense until you can replace it with a new one.
3. Workers Compensation Insurance. All contractors are required under state law to have workers comp insurance. Of course, that protects your employees in case they’re injured on the job, but it also helps provide coverage for you, the employer, as well.
The employer’s liability portion protects the employer from lawsuits brought against them by an employee claiming that their injury resulted from the employer’s negligence to provide a safe working environment.
4. Auto Liability Insurance. While this is another policy you already know you need, a lot of times we’ll see vehicles on a personal auto policy. People say, “Well this is my truck. I bought it,” but if it’s being used for work-related purposes, it’s really a better idea to have it on a commercial auto policy. This is simply the appropriate way to do it, plus the limits are typically higher.
5. Umbrella Insurance. Claims can add up quickly and an umbrella policy gives you an additional layer of protection that goes over your general liability, auto liability, and the employers liability portion of your workers comp.
Especially with auto claims, these can easily exceed a million dollars when you start getting into hospital bills, recovery expenses, pain and suffering, mental anguish, and so on.
- Consider Cyber Liability Insurance. One type of policy that nobody thinks about for contractors is cyber and data breach insurance, but it’s becoming a bigger issue every day. As a contractor, you deal with a lot with personal identifiable information from subcontractors, project owners, clients, and employees. You’re also storing information on everything from architectural plans to perhaps even trade secrets. Since you’re in the field working from your cell phone all day, this leaves you susceptible to cyber hacks and attacks. The goal of cyber liability is to protect not only your own data but anything for which you could be held liable. If a hacker got into your vendor’s system by going through yours, you could be held liable since your security wasn’t “good enough” to keep them out. This means you could have to pay for things like identity and document recovery.
- Use well-written Subcontractor Agreements. You’ll typically see the contractual risks transfer in the form of a Subcontractor Agreement, which lays out the “rules of the game” between the contract and subcontractor. It’ll outline all the insurance requirements, including language that makes the subcontractor’s insurance policy primary and noncontributory, which means that in the event of a lawsuit arising out of the subcontractor’s negligence or intentional acts, the subcontractor’s policy is going to pick up everything before the contractor’s policy comes in as excess. It’s extremely important to have this in writing and have both parties agree to the terms.
Being a contractor in the construction industry comes with a plethora of potential risks and exposures. At the end of the day, it takes making sure your bases are covered; your i’s are dotted and your t’s are crossed to ensure your business can continue on even if disaster was to strike.