Contractor insurance is an essential element in the construction industry. However, it would be wrong to believe that these insurances are only associated with large construction companies; small companies dedicated to reforms or other types of smaller construction tasks can also benefit from the advantages of this type of insurance.
What is contractor’s insurance?
They are insurance policies aimed at small and medium-sized companies. Actually, they are insurance policies aimed explicitly at any type of risk that may arise from the company’s professional performance.
Usually, in this insurance policy, we will find different coverages ranging from protection against accidents to legal response to lawsuits, stolen materials, loss of income, etc. In addition to covering those eventualities directly related to the job performed, these insurance policies can protect the worker against other issues.
Who is the contractor’s insurance for?
There is no single target profile, but there are two main groups for whom this type of insurance policy is intended.
The first one is contractors. They are expected to be responsible for overseeing the completion of a project and being in compliance with contracts. Imagine, for example, that you have carried out an extension work on your house: the general contractor will be responsible for executing and fulfilling such work.
The second is the subcontractor. They are a professional hired by the contractor to execute the projects. Following the previous example, this could be any of the trades involved in the extension of the house. In the same way that a contractor reports directly to the client, a subcontractor reports to the one who hires them: the contractor.
Although this all may seem like gibberish, it is essential to understand this aspect since both profiles, which can benefit from professional insurance, are different and have varying responsibilities.
However, it doesn’t matter as much whether one or the other profile is met, as the insurance model will usually be very similar.
The coverage of this insurance
When we talk about contractor’s insurance, we refer to a group of coverages or differentiated insurance framed in a single policy. That is to say, within the same contracting, we have different associated insurances, each with its coverage and separate protection tools.
These are the most common types of coverage:
- Commercial Liability: This coverage can cover property damage and injuries caused to third parties (non-employees). It is one of the most common coverages and may have different amounts depending on the type of insurance.
- Commercial property: in this case, the coverage refers both to the commercial equipment and the location of the company or business itself. It will cover the leased equipment, tools, materials, office furniture, computers, etc. Also, by extension, it may cover the contents and the building, although this is generally protected in property insurance.
- Cessation of business/revenue: this is an increasingly common coverage in most contractors’ insurance policies. It protects the insured in case of a temporary business closure due to some incident contemplated in this policy, such as theft or fire. This coverage provides income in relation to that which will not be received during the closure. Different coverage levels can reach up to a valuation of 100% of the losses.
Although these are the most common additional insurances or coverages, they are not the only ones. We can also find other coverages, for example, the builder’s risk, that covers property and construction materials, usually applied in new construction projects or remodeling.
Another insurance that can be included is commercial vehicle insurance, intended for the insurance coverage of company vehicles. Although it is important to differentiate, this is not automobile insurance, instead, it is meant for a vehicle used to transport materials and such.
Finally, it is also relatively common to find commercial insurance that can respond to claims arising from the company’s professional performance. These insurances can cover legal expenses and fines or indemnity payment costs.
What does the Contractor’s insurance cost?
Being a type of insurance with different conditions depending on the additional insurance and coverages, there is no single price. Those other aspects must be considered before a specific rate can be obtained.
The elements that will influence the price of your Contractor’s insurance the most are:
- The amount of coverage included: adding the number of covered subjects and the cost of each. For example, a liability of $100,000 is not the same as a liability of $500,000.
- The number of employees: this is another essential factor. The higher the number of employees, the higher the compensation insurance will cost.
- Insurance history: The company’s history is also an element that can make the policy more expensive. A history with many insurance claims could not be a better ally of an economic policy.
It is also frequent that the insurer may value other factors such as business assets, whether the commercial property is owned or rented, the location of the business, etc.
To get a more accurate picture, we should add up average prices for the coverages or insurances that make up a contractor’s insurance policy.
For example, general liability can run around $1,000 per year, worker’s compensation about $3,000 per year, and errors and omissions insurance can cost about $600. With these measures, we can get a more or less complete policy.