Contractor Insurance

What Is Contractor Insurance?
If you are a contractor, chances are you've had some experience with construction insurance, whether it be bonding, workers compensation, or general liability. Sometimes a policy is required by companies you are subcontracting for, and frequently it is required by licensing and construction boards.
In construction, no two contractors have the same insurance policy?your business is unique and so is your coverage. It's essential that you know the basics of what you have and what you might need in the future to ensure you have the broadest protection.
Below are three general tiers of contractor coverage. These don't represent every coverage and you might need a specific coverage from a different tier, but you can use these groupings to determine which insurance products to look into.
Tier 1 ? Contractor Essentials
This tier is for contractors or tradesmen who need the bare essentials. Their operations are small, the projects they work on don't require extensive insurance and bondings, and the business doesn't have substantial assets that could be lost.
Contractors General Liability
General liability insurance covers claims arising out of damage a contractor causes to a third party. This is one of the most important coverages a contractor can get, because it covers the liability risks associated with your ongoing operations (while at the job site).
Products & Completed Operations Insurance
This specific coverage is an essential part of a contractor's insurance program but is often excluded from general liability policies. While general liability insurance covers your ongoing construction, completed operations insurance covers the liability of your work after the project is finished.

Equipment Coverage (If You Own Tools)
Equipment coverage, formally known as inland marine coverage protects your equipment from natural events and theft. The policy can cover most contractors' equipment, from hand tools to heavy machinery, located anywhere in the U.S. It can be purchased as a stand-alone policy or an add-in to your contractor's business owner policy (BOP).
Workers Compensation (If You Hire Employees)
Workers compensation insurance covers the employees of a company if they are injured while fulfilling their job duties. In a contractor insurance program, this is oftentimes the most expensive part of insuring your business. Although rates vary based on what type of contracting trade you are in, it is crucial to find a carrier that has services to keep your experience modifier low.
Keeping the experience modifier low does a couple of things: it is a good, long-term strategy to avoid paying more in insurance and it helps you bid on projects that require certain experience modification numbers. An insurance company that specializes in experience modifier reduction will be more diligent in following up with any of your open claims and take a more proactive approach to the injured employee's medical care. For example, these insurance companies try strategies that involve opioid avoidance education, occupational medicine, and return to work programs.
Property Insurance (If You Own Real Estate)
Property insurance covers specified structures and the property within them. This business insurance isn't specific to contractors and often isn't necessary for many that work out of a leased space or home office. Larger contractors who own buildings and those who have storage facilities for their heavy machinery will need this insurance.
Commercial Auto (If You Own Work Vehicles)
Contractors often have pickup trucks or other vehicles that they use for their construction operations, which can range from one vehicle to hundreds. A commercial auto policy covers any property damage or bodily harm that was caused by those vehicles as the result of an accident.
Tier 2 ? Recommended Coverages
This second tier of coverages are ?Required By Contract??meaning most contractors purchase these additional insurance policies because they are mandatory for certain (typically big) projects. Larger general contractors or project owners want to ensure their extensive assets are covered, so they will only hire contractors with the insurance that protects them.
Many projects could require additional coverages, most of the time we see requirements for the following in this tier:
$2-5 Million Liability Umbrella
Most larger construction projects require that you purchase an umbrella insurance policy that extends your liability limits beyond the usual cap of $1 million per occurrence.
The umbrella policy usually raises the limits of your general liability, workers compensation, and automobile liabilitybased on the amount of extended coverage you purchase. For example, if you had a $1,000,000 general liability limit and you purchased a $5,000,000 umbrella, you would now have $6,000,000 in total general liability limits.
Hired & Non-Owned
Hired and non-owned insurance covers auto liability associated with vehicles that you do not own or vehicles that you temporarily rent. Although many would consider this a tier 1 coverage, we categorized it as tier 2 since this coverage does not cover owners and thus doesn't affect the self-employed tradesmen.
For example, if one of your employees got into a car accident while performing a task for your business, you will most likely be named on the ensuing lawsuit. The more damage caused by the accident, the more likely your business will face the risks and costs of litigation.
Leased Equipment Coverage
Contractors with larger operations oftentimes are required to purchase an insurance policy that covers any of their leased equipment from damage, loss, or theft.
We often see contractorsrequest this coverage with a $50,000 limit so they can rent different pieces of equipment to complete projects or offer additional services.
Employment Practices
As your construction company begins to hire employees and grow its operations, you will have to address the risk of employee lawsuits arising out of employer misconduct. Some examples of that misconduct could be sexual harassment, wrongful termination, discrimination, hiring practices, and many more. An employment practices policy can offer this protection, as well as cover third-party allegations and employee actions toward others outside of your company that put your business at risk.
This is a highly recommended coverage if you have more than a handful of employees; it is also especially important if you are rapidly growing or planning to make layoffs.
Tier 3 ? Large Projects
While the coverages in what we've categorized as tier 3 can be beneficial to contractors of any size, they are especially relevant to those trying to bid on large jobs or doing work for very large companies.
Pollution/Environmental
Although most pollution insurance policies are purchased on a stand-alone or monoline basis, sometimes pollution or environmental coverage can be added to your existing general liability policy. This insurance policy would cover a loss caused by contamination resulting from your contracting operations or during the transportation of waste materials. While larger contractors purchase this coverage with significant limits, some contractors liability insurance policies have the option to include a small limit of $25,000.
Contractors E&O
Contractors E&O or contractors professional liability insurance is important if your business regularly provides construction consulting or hires subcontractors. This policy would cover acts of errors and omissions from services you performed. For example, if one of your subcontractors does a job improperly, you can be responsible for fixing the damage that they cause



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