Contractors, vendors, and other third parties must get insurance and keep proof with them when working on projects. The parties who hire them often require them to abide by this policy, and different states can enforce such policies. For example, the Connecticut State Department of Consumer Protection instructs residents to ask for a copy of insurance for contractors.
If you are a contractor, you must know the requirements of insurance. It will help ensure a smooth career path and even provide more work opportunities. This article has all you need to know about contractor insurance and its requirements. Let’s hop into it.
What Is Contractor Insurance?
Contractor insurance is a package of several insurance policies and coverages. It protects your business from lawsuits because of on-site injuries, equipment damage, third-party damages, etc. You can be legally obliged to carry it, and in most cases, it is better to carry it to safeguard your business.
The different coverages under contractor insurance depend on the work type and state requirements. For example, contractors and distributors dealing with alcohol need liquor liability insurance.
What Are the General Insurance Requirements for Contractors?
If you are visiting a site, the host can ask for a copy for insurance. The purpose is to check if the insurance is up to date and if you have the necessary coverages to cover losses and claims for which you may be responsible. The following are the general insurance coverages that are required from every contractor.
Commercial General Liability Insurance
Commercial general liability insurance is a must-have for contractors. It protects contractors from the financial loss they are liable to pay because of property damages, advertising or personal injury, business operation damages, and others because of non-professional acts.
Your general commercial liability should cover the following:
- Property damages and bodily injury liability (for example, if a visitor trips on loose flooring and gets injured or you accidentally damage the client’s building or home);
- Advertising and personal injury (it protects against slander, libel, false arrest, malicious prosecutions, copyright issues, wrongful eviction, invasion of privacy, and a few others types of damage); and
- Medical payments (if a non-employee sustained an injury because of your business, then this coverage pays for the medical, ambulance, surgical, hospital professional nursing, and even funeral expenses of a person killed).
The general liability coverage should have an aggregate limit of $2,000,000. It includes $1,000,000 coverage for personal and advertising injury and $1,000,000 for bodily injury and property damages.
Workers Compensation Insurance
Businesses like construction carry a high risk of injuries and bodily damage. Such accidents can lead to hefty medical bills and hospital costs that can significantly impact your business. So, worker compensation insurance is mandatory in every condition. Contractors should have at least $500,000 coverage for bodily injuries and $500,000 for accidents.
Moreover, it also covers contractors by paying partially missed wages for employees when an employee is injured or has an occupational illness. It can also pay for death benefits and permanent disability of employees.
Independent business contractors should also acquire this insurance because their regular health insurance will not provide coverage for the above. It can pay for the following:
- Immediate medical care
- Ongoing medical care
- Partial lost wages
- Death benefits to dependents if a worker dies because of a work-related injury
For business owners, workers’ compensation insurance covers attorney’s fees, court costs, and settlements. Every state has its own laws on worker compensation insurance.
Employers Liability Insurance
Employer liability insurance covers areas that are left from worker’s compensation insurance. However, it does not cover legal costs from employee lawsuits that result from sexual harassment, wrongful termination, and discrimination. These damages are covered under employment practice liability insurance (EPLI). Luckily most worker compensation policies include employer liability insurance.
Automobile Liability Insurance
Contractors with vehicles that operate under their business must carry automobile liability insurance. It pays for the injuries to a person or/and property damage caused by your vehicle when you are at fault in an accident. The policy should have the amount of $1,000,000 for each accident, and it should cover any bodily injury and property damage. This could be covered on a combined single-limit basis.
Most states require contractors to carry this insurance to operate vehicles. This insurance coverage mainly covers two parts. A property damage policy covers the damages to other people’s property. This includes damages to public properties like a light pole, other people’s vehicles, and other properties. It can also cover rental car costs while another person’s car is getting repaired.
The second component of automobile liability covers bodily injuries to other people because of an accident. It covers the following:
- Medical bills
- Lost wages
States can have different requirements and laws on who can file a body injury claim against you.
Other Types of Insurance Requirements for Contractors
Depending on the business type, contractors require some unique insurance policies. People who hire contractors can also ask for the following coverages:
- Cyber liability insurance
- Environmental liability insurance
- Excess liability coverage
- Liquor liability insurance
- Inland marine insurance
- E&O insurance
Get the Best Insurance Plans from John M. Glover Insurance Agency
Are you a contractor looking to safeguard your business from lawsuits? John M. Glover is the right place to ask for help. We have comprehensive and customized insurance plans to provide financial safety to your business. Visit our website for more information or contact us at (844) 304-7332.