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What Does Contractor Insurance Cover? Understand Your Policy

If you own a contracting business, you are familiar with the risks that are tied to your operations, such as scaffolding failures, job hazards, and unhappy clients. Not to mention the financial and legal consequences for issues that are beyond your control.

What Does Contractor Insurance Cover? Understand Your Policy

Construction ranks among the most hazardous industries in the United States, with 144,480 injuries and illnesses. The landscaping industry is also a high-risk industry with thousands of work-related fatalities. While it’s important to implement safety measures, it’s also crucial to keep your contractors and business protected from the financial repercussions of operational risks.

Contractor insurance offers crucial protection against accidents, disruptions, and lawsuits. But how do you determine the right coverage?

We’ll walk you through the essentials of contractor insurance to help you understand what your policy protects and what remains your responsibility.

Who Is Covered Under Contractor Insurance?

Most jobs occur on a client's property. This exposes your business to potential liability for third-party injuries or damage. Contractor insurance will safeguard not only your business but also your employees, subcontractors, and clients.

What Does Contractor Insurance Cover?

General Liability Insurance

General liability insurance is essential if you operate in environments prone to accidents, such as construction sites on client-owned properties or busy public areas. Having this coverage  protects your business from financial losses due to third-party property damage, injuries, or failure to complete a job.

However, this insurance doesn't cover damages that the contractor causes intentionally, liabilities agreed upon in contracts, or injuries to employees, which should be covered under workers' compensation insurance.

Contract Surety Bonds

If you take on government contracts or large commercial projects, contract surety bonds will serve as your safety net. These bonds function as a promise that I will fulfill your obligations as outlined in your contract.

Professional Liability Insurance

Also known as errors and omissions or malpractice insurance, professional liability insurance protects your business from potential negligence claims that general liability insurance doesn’t cover.

There are two types of professional liability insurance:

When choosing professional liability insurance, consider your business activities and risks. 

If your business is vulnerable to detecting risks after a project is completed, occurrence-based coverage is beneficial.

Workers’ Compensation

Workers' compensation is mandatory insurance required by state laws for all contractors that employ staff, regardless of the project's size or nature. This insurance is critical as it covers medical expenses and lost wages for employees who suffer injuries while on the job.

To get these benefits, employees must agree to waive the right to sue their employer for injuries sustained in work-related incidents.

However, it's important to note that workers' compensation doesn't cover incidents that occur outside of work hours or self-inflicted injuries.

Inland Marine Insurance (Equipment Coverage)

Inland marine insurance safeguards equipment whether it is in transit, being used at a job site, or stored in multiple locations. This differs from traditional property insurance that covers items within a fixed location.

For instance, if a commercial-grade generator is damaged while being moved to a new job site, inland marine insurance would cover the cost of the loss. This doesn't cover damages from inadequate packing or intentional misconduct.

Additionally, if the damage or loss is covered under another policy, such as commercial auto insurance, inland marine would not apply.

Additional Coverage to Consider for Small Businesses

When running a small business, especially one that involves frequent use of vehicles, several types of insurance coverage are essential to protect your investments and ensure smooth operations.

How to Evaluate Your Contractor Insurance Needs

Before you start looking at contractor insurance policy options, jot down all the potential risks your business might face. Here’s a list to help you get started:

Many clients will have specific insurance requirements for contractors. These can include minimum coverage limits or additional insured endorsements. Make sure that your insurance meets or exceeds these requirements to maintain good business relationships and compliance.

It's also important to review the insurance requirements specific to the state where you operate. Some states may have mandatory coverage types or minimum limits that need to be met.

If still unsure, consult with a trusted, licensed advisor to ensure your coverage meets all your business needs.

Now, You Can Find the Right Contractor Insurance Coverage

What does contractor insurance cover? This ultimately depends on the risks associated with your business. When making a decision, factor in the number of your employees, the risks, and your physical assets. 

Ready to ensure your contracting business is fully protected? Don’t let uncertainty hold you back. To truly guarantee that your coverage aligns with your needs, CoverHound is here to help you in every step of the way.

Discover how CoverHound can help protect your peace of mind and support your business’s success.

Insurance shopping simplified

Review personalized quotes, select coverages, and buy online - Everything insurance, all-in-one-place.

Insurance shopping simplified

Review personalized quotes, select coverages, and buy online - Everything insurance, all-in-one-place.

Insurance shopping simplified

Review personalized quotes, select coverages, and buy online - Everything insurance, all-in-one-place.
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