Many facets of the contractor insurance game remain tried and true while some have evolved with the changing times.
Here’s what you need to know about contractor insurance in 2019.
Must-Have Policies
It’s more important than ever to carry the essential insurance policies your business needs to survive.
These bare-bones policies are essential to keep your contractor business compliant and to ensure that you won’t have to pay out-of-pocket should the unexpected occur.
Workers’ Compensation
Are you a one-man-show or do you rely on employees to help you get the job done?
Even if you only have one part-time employee you will likely need workers’ comp in order to stay compliant with state laws and protect yourself from high costs associated with on the job injury.
Not for the faint of heart, the construction industry is a high-risk workplace. In fact, most construction workers will suffer at least one injury during their career.
The Fatal Four – falling, being struck by an object, being electrocuted and getting caught-in/between – are more likely to affect you or one of your employees than a barista or office worker. From something as simple as a slip and fall to a more serious accident, you could end up covering not only lost wages but also costly medical bills for your injured employee.
You don’t want to get stuck footing the bill or facing a lawsuit if you’re not carrying workers’ comp coverage.
Workers’ comp protects your employees from the high costs of medical treatment and lost wages in the event they’re injured or become ill while performing their job.
Providing workers’ comp insurance is not only the right thing to do for your employees, but in most states it is also required by law.
For example, in California, you have to either provide proof that you carry workers’ comp for your employees or evidence that you have none in order to obtain your contractor’s license. And for some contractors - like roofers - proof of workers comp coverage is required even if you don’t have any employees.
Contractor Bonds
Contractor bonds exist specifically to protect your clients.
An agreement between the contractor, the client, and the insurance or bond company, a contractor bond guarantees that you will fulfill your contractual obligations to the client.
These bonds not only offer peace of mind but, in most instances, they keep your business compliant with state laws that require bonds for both public and private construction contracts.
When hiring a contractor, choosing one who is bonded gives clients a sense of security. Knowing that, should the contractor break not fulfill the agreed upon contract, the project will still be completed at no extra cost to the client.
For example, if you didn’t fulfill your end of a contract, leading to their financial harm, your client can make a claim against your surety bond. The company carrying the bond would then investigate the claim and pay up to the bond amount to help your client see their project to fruition.
Several different types of bonds are available for contractor businesses, the type(s) you’ll need depending on the work that you’ll be performing for a specific job.
Common types of contractor bonds include:
- License bonds
- Bid bonds
- Performance bonds
- Payment bonds
General Liability
It doesn’t take a huge event to land you in the middle of a lawsuit. Even a small accident or incident could result in a court case. With general liability insurance as the cornerstone policy for any contractor you’re protected from paying out should you be on the receiving end of a suit.
General liability insurance can protect you from lawsuits brought against you by someone who believes they’ve experienced injury, bodily damage, or property damage as a result of your business.
According to a 2005 SBA report, the legal costs for litigation averages anywhere from $3,000 to $150,000.
Contractor general liability insurance can help cover the costs of a lawsuit brought against you by a third-party, helping cover:
- legal fees
- lawyer’s fees
- settlements
- judgments
- business interruption
If you have a general liability policy, your business’ out of pocket costs will typically equal the cost of your deductible, which is far less than the cost of litigation.
Commercial Auto
Your work truck isn’t just a work truck. It’s your traveling office, your break room, and your tool shed.
Perhaps is works double-time as your family grocery-go-getter, soccer-chaffer, and road-tripper.
If so, don’t expect your personal auto insurance to cover you when you’re on the job.
If an accident or auto claim should occur while you’re using your vehicle for business purposes, it’s unlikely that your personal auto coverage will go to bat for you.
Typically you’ll need a commercial auto policy to cover vehicles that are:
- used for business purposes
- registered or leased to your business
- driven by your employees
Be sure you aren’t relying on personal auto insurance to cover the costs of an accident on the road.
For contractors – who generally spend more time out in the field than sitting in an office – commercial auto coverage is a must have policy.
So you’ve already got these essential, basic coverages in place. What else is a must-have for 2019?
WRAP Policies – a Creative Contractor Insurance Solution
Construction projects are complex undertakings, as are the insurance policies associated with them.
WRAP Insurance policies can help to simplify contractor insurance for a given project.
Centralized insurance and loss control programs, WRAP policies can protect everyone involved in a construction project, including the owner, general contractor and all subcontractors under a single insurance policy – or set of policies – for the insured project.
Benefits of a WRAP policy include consolidated coverage – a WRAP policy provides a singular program safeguarding all parties involved, cost savings, and fewer claims/ delays.
While WRAP policies can vary, they may include:
- General Liability
- Builders Risk
- Umbrella Liability
- Workers' Compensation
- Commercial Auto
- Property Damage
Cyber Liability Insurance
A common misconception – that cyber attacks are usually aimed at the big guys – can leave you vulnerable to financial losses should your business fall victim to a cyber breach.
Small businesses made up 61% of businesses that were the target of cyber breaches in 2016.
Cyber insurance is designed to help your contractor business recover in the event that you’re victim to a data breach or cyber attack.
Financial losses can add up quickly, including costs for:
- system and data recovery
- money lost due to reputation damage
- income lost during the recovery process
If your client information ends up in the hands of cybercriminals you may be taken to court. If they feel that you failed to protect their information you could face very expensive litigation.
Including third-party insurance that helps cover your liability to clients or customers whose information has fallen into the wrong hands, cyber insurance covers customer notifications and credit monitoring services, as well as defense costs, settlements, and judgments for liability lawsuits
While important, third-party issues are only part of your concern. Getting your systems, and reputation, back to where they need to be isn’t going to be cheap or easy.
Helping to cover restoration costs, cyber liability insurance also helps pay for data recovery, computer restoration, and reputation recovery.
Changing Insurance Technologies Benefit Contractors
In 2019, it’s easier than ever to get insurance when you’re on the go. If you need proof of insurance to seal a deal, get a contract signed, and be underway on a new project, you can now get a certificate of insurance in minutes.
Without even stepping foot in an office or filling out stacks of paperwork, you can simply jump in your work truck and complete the process digitally – from your smartphone, tablet, or laptop.
Insurance companies are utilizing online rating tools that allow you to instantly:
- Get a quote
- Complete your application
- Make a payment
- Sign your document
- Get a certificate of insurance
From insurance coverages that have withstood the test of time to the dawn of newer must-have policies – all now available to you in minutes through an online rater – it’s now easier than ever to be sure that you’re contractor business has the insurance necessary to stay compliant and keep operations running in 2019.