Top 13 Insurance Coverages for Trade Contractors

Tradesmen are in the business of fixing things.  When it goes right, you’re helping someone figure out why the sink in their master bathroom won’t drain, or the light in the hallway won’t turn on.  Or you’re adding a section to someone’s home to bring their dreams to life.

But when those dreams turn into nightmares, insurance is the backstop that makes sure your business baby stays alive.

With that in mind, here are the 13 insurance coverages you need to consider as part of your insurance program.  Whether or not you buy them is up to you, but you should make an active decision about all of them.

1. Business Personal Property

This is coverage for all the physical assets in your office… but only when they stay in the office.  Think about desks, chairs, computers, and everything that stays in the home office.  If it all went up in smoke, how much would it cost to replace?

2. Contractor Equipment

The difference between “Contractor’s Equipment” and “Business Personal Property” is where the equipment will be located.  Equipment coverage is for everything that you will take to a job site.  This can come in a couple of categories:

• Owned equipment
• Leased equipment
• Borrowed equipment
• Employee’s equipment

It’s important that you consider all 4 of these categories when you design your insurance program.

3. Installation Floater

Installation Floater is coverage for customer’s goods that you are transporting to the job site.  It’s different from the Business Personal Property and Contractor Equipment because it’s owned by the customer, and it’s being transported from one location to another.  Everyone’s business is different.  Take time to think about the value of any equipment you’re transporting for other people.

4. Employee Dishonesty

This coverage is sometimes referred to as “bonded”.  Think of this scenario: a technician makes their way into the master bedroom and swipes a necklace.  Three days later, the customer is screaming that your technician made off with a $10,000 piece of jewelry.  Employee Dishonesty and Theft of Clients Property are the coverages that will protect you.

5. General Liability

This coverage protects you for Bodily Injury and Property Damage that you cause to others: hurting someone, or breaking something.  There are two parts to General liability insurance that you should be aware of:

Premises Liability insurance – This liability is associated with a place.  It is slip-and-falls on your job site.  Imagine a kid sneaks into a construction site and gets hurt in a partially constructed home, then the family accuses you of improperly securing the site.

Product and Completed Operations Liability – This liability is associated with the work you do.  For example, a plumber improperly installs a nut, and a pipe bursts.  The subsequent damage costs $400,000 to repair.

6. Environmental (Pollution) Liability

Insurance defines a pollutant as anything that comes to be in the ground that shouldn’t be there.  If you are disposing of waste or chemicals, that can result in clean-up costs, which may require a special kind of liability coverage.

7. Contractor Errors & Omissions

Have you ever had a customer displeased with your work, or claim that you ruined their dream home?  Perhaps they say the work you did was so poor, they needed to pay for it to be redone.  No property damage was caused, but your customers experienced a financial loss as a result of your work.  If the accusation can’t be tied back to someone you hurt or something you broke, it may be better categorized as an error or omission.

8. Employee Benefits

If you offer benefits to your employees, consider liability in the case that you mismanage them.

9. Auto

Auto insurance is a broad enough topic that it deserves its own blog post.  To keep it simple, let me outline some general principles:

The business can only insure vehicles that it owns.

The difference between a Business Auto Policy and a Personal Auto Policy generally has to do with who is allowed and assumed to drive the vehicle.  Business Auto Policies are for employees of the business.  Personal Auto Policies are for families.  When you mix the two, it gets complicated.

Make sure to include these parts of your auto insurance program:

• Liability limits
• Uninsured and underinsured motorist
• Comprehensive and Collision coverage
• Hired and Non-owned Auto Liability

10. Umbrella

Depending on the size and complexity of your operation, you may be concerned about causing more than $1,000,000 in damages.  You can use an umbrella to increase the maximum amount that will be paid out in a lawsuit.  If you are taking large jobs, or have a large fleet of vehicles, it’s worth considering an umbrella policy.

11. Workers Compensation

Workers compensation pays for on-the-job injuries experienced by people you pay to be on the job.  This can be a paid employee, or an uninsured subcontractor.

I address uninsured subcontractors in several other blogs.  To keep it short and sweet, if your subcontractor doesn’t have insurance, you should assume you’ll be paying for them at the time of an audit.

The premium for a workers compensation policy is generally determined by the work done by your employee and how much you pay them.

12. Employment Practices Liability

Hiring and firing.  It’s the worst.  It’s hard to hire good help.  And when you fire the bad help, they claim you did it wrongfully.  Employment Practices pays for an attorney and a settlement when that employee you fired in an “at will” state claims you did it because you were discriminating against them.

13. Cyber Liability

Think about a few scenarios:

First, could a cyber threat actor get into your customer’s systems through your network?  This is what happened at Target in 2014.  The result was a breach that compromised approximately 40 million debit and credit card accounts.

Second, what would happen to your operations if a cyber threat actor locked up your systems?  Would you be able to continue work on schedule?

How much personal information do you keep on file for your clients?  How many people would be impacted if your records were breached?

These are real-life scenarios.

Conclusion:

This post is intended to be a crash course “how-to” guide for buying insurance.  Each line of coverage has its own nuance, but my hope is that this gives you a broad outline for what you should buy and why.