Types Of Insurance That Help You Protect Your Contractor Small Business
Business & Finance, Law

Types Of Insurance That Help You Protect Your Contractor Small Business

If you are a business owner, you want to make sure that you have taken care of your business as well as possible. There are different ways that you can take care of your business, including making sure that you have business insurance. There are a lot of reasons that you should get business insurance. 

In 2019, roughly one out of every five job fatalities in the United States came from the construction industry. The OSHA (Occupational Safety and Health Administration) lists among the top violations by construction companies scaffolds and ladders. The presence of electrical tools, heavy machines, wires, and hazardous materials contributes to the prospects that your employees, subcontractors, or others may become seriously injured.

Contractor insurance policies afford coverage against losses that often come as part of the construction trades. Below are three good reasons to get insured and four common types of coverages in contractor policies.

Lawsuits Happen

There is no way that you aren’t going to have a lawsuit as a business owner. No matter what you do, there is going to be something that someone doesn’t like or that someone does. You can end up with a huge bill from the lawsuit if you don’t have business insurance. Your insurance can cover a settlement or judgment against you up to a certain amount. If you have to come up with more money than what the insurance covers, then you are only responsible for coming up with that amount of money instead of the whole total.

Gives You Credibility

You want to make sure that your business looks credible and stable. Having business insurance is one way to make sure that you look like you have a stable business. If you care enough to make sure that you are covered if anything happens, then you are going to care enough to make sure that you are doing everything else correctly. Having that credibility will do a lot of things for you when working with banks and other organizations. It can help you get a lower interest rate on loans, since the insurance can help you pay if something happens and you end up defaulting on the loan, as well as get more credit from a supplier. A business insurance consulting agency can help you learn more about the credibility benefits of insurance.

Your Employees Matter

Being a business owner who has employees makes you responsible for those employees. You need to make sure that you can cover their medical costs if they are injured on the job as well as taking care of them if you are having a cash flow issue and are having a hard time making your payroll. Your employees have put in their time, and they deserve their pay. You can get business insurance that will help you with being able to make payroll.

Commercial Liability Insurance

Liquids, nails, tools, and cords negligently left on grounds or floors create slip and fall hazards for your customers and other occupants on the construction site. A bobcat or crane operated without skill and care can damage nearby buildings and vehicles and injure bystanders.

With these and other acts of negligence come personal injury and property damage liabilities. General commercial liability coverage pays the damages of those harmed by you or your employees’ or workers’ carelessness. Victims may claim compensation for lost wages, past and future medical expenses, and pain and suffering.

Liability insurance represents more than a matter of preserving your company’s financial health. Your building contract with the owner likely will require you to carry general liability insurance. As a rule of thumb, the minimums stand at $1,000,000 per occurrence and $2,000,000 in aggregate damages according to the Tufts.edu website.

Workers’ Compensation

Your employees and subcontractors (and their employees) face many of the same risks of injury as do members of the public. Contractors insurance pays on your company’s behalf benefits to workers or subcontractors injured while performing construction work. The compensation includes lost wages or earning capacity based upon the level and duration of the injured worker’s disability. Workers’ compensation insurance also affords coverage for medical treatment.

Unlike commercial general liability coverage, the claimant under workers’ compensation insurance need not prove fault. The no-fault nature of workers’ compensation comes with a trade-off that injured workers cannot claim non-economic damages such as pain and suffering from your business.

Depending on your construction contract or state law, general contractors must carry workers’ compensation coverage on subcontractors.


Your contracting business relies on tools, heavy equipment, safety equipment, work clothes, and machinery. The equipment portion of contractors insurance reimburses you for losses to these items from fires, theft, storms, and other calamities. Policies may also cover remedial and cleanup costs for oil spills and other pollution caused by the equipment.

With equipment coverage, you may receive reimbursement for damages or losses to equipment you rent from others. Often, equipment rental contracts require the renter to assume responsibility for damage to the rented equipment.

Errors and Omissions

Contractors can be held liable for mistakes in the performance of the job. These errors may involve faulty or incorrect materials, not grading land at the correct dimensions, or inadequate nailing.

If you err with materials or methods, your general liability policy will pay for resulting damage to property. However, you will need errors and omissions coverage to respond to potential liability for replacing and/or repairing the defect or malfunction itself. General liability coverage does not pay for repairs to the subject of the construction.

As a business owner, there are a lot of decisions that you are going to have to make for your business. Getting business insurance should be an easy one. Contracting carries numerous risks of losses from unsafe conditions, faulty work, theft by employees, fires, and natural disasters. Contractors insurance seeks to mitigate the disruptions to your contracting business when accidents or other unfortunate events rear themselves in your projects. If you are interested in learning more about it or getting quotes, call around to speak with a representative from different providers. You can compare rates and coverage before making and decisions.