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Contractor Insurance Checklist

Contractor insurance can cover just about every aspect of your trade, protecting you, your business, and your assets from unexpected (and costly) events. From an unintended auto accident to an unhappy customer or an injured employee, contractor insurance defends against the risks that could permanently put you out of business.

Because every accident, incident, and act of nature is an opportunity for a lawsuit or monetary loss that could bring down everything you have worked so hard to build.

Contractor Insurance Checklist for General and Subcontractors

Whether you’re a general contractor, subcontractor, or construction business owner, your investment is at risk. One single accident or incident could cost you everything.

Luckily, you can easily defend your construction business with the right insurance coverage. So you can keep blazing ahead, building your future.

Use this checklist to find the contractor insurance policies that you simply can’t afford to ignore.

General Liability

In today’s litigious society, any small accident or incident could result in a lawsuit. Which is why general liability insurance should be the foundational policy of any contractor insurance coverage.

General liability protects you from third-party lawsuits in the event someone has experienced injury, bodily damage, or property damage as a result of your business.

The legal costs for litigation averages anywhere from $3,000 to $150,000, according to a 2005 SBA report.

A general liability policy for your business can cover the costs of a lawsuit that could cost your business in legal fees, lawyer’s fees, settlements, judgements, and even the high price of business interruption. When you have general liability coverage, your out of pocket expenses are typically the cost of your deductible -- far less than the cost of litigation.

Inland Marine

The equipment you invest in doesn’t stay in one spot. Protect your mobile tools and equipment with inland marine insurance.

As you move your tools and mobile equipment from one project site to the next, the risk for damage or loss increases. Luckily, inland marine coverage goes where your equipment goes. Like the power tools you take to the construction site.

Workers’ Compensation

Do you use subcontractors to get the job done or do you have employees? Even a single, part-time worker could mean you need workers’ compensation insurance.

The construction industry is a high-risk one. Your employees are more at risk for illness or injury than the barista who made your coffee this morning. A slip, fall, or other accident could mean lost wages and costly medical bills for your employees.

Workers’ comp protects your employees from the high costs of medical treatment and lost wages in the event they’re injured or become ill while performing their job. Providing workers’ comp insurance is not only the right thing to do for your employees, in most states it is also required by law.

Commercial Auto

A contractor’s vehicle has many roles to fill. It’s a satellite office, a break room, a tool shed, and an equipment transporter. Your work truck (or van or suv) may even pull double-duty as your personal vehicle during the weekend; towing your family boat, picking up groceries, or taking the little league team out for ice cream after the game.

But don’t expect your personal auto coverage to work as hard as your truck does.

If you’re involved in an accident or have an auto claim while using your vehicle for business purposes, your personal auto coverage generally won’t cover it.

You’ll typically need commercial auto if you want to cover:

  • Autos used primarily for business purposes
  • Autos that are registered or leased to your business
  • Autos that your employees are driving

Don’t rely on personal auto insurance to protect your work autos from the risks of the road; commercial auto insurance is an important policy for contractors who spend more time out in the field than sitting in an office.

Commercial Property

Do you own or rent the building your construction business uses for your day-to-day operations? Either way, commercial property insurance is your key to defending it.

  • If you rent, commercial property can protect the stuff that’s inside your building, such as equipment, furniture, materials, and supplies.
  • If you own, commercial property can protect the building itself as well as the stuff that’s inside it.

No one ever plans for a fire, busted pipe, storm damage, theft, or vandalism. But with commercial property, you won’t have to pay the price for damage or loss to the place and things you need to operate.

Tip: Running your construction business from home? Even home-based businesses need a little extra property coverage. A standard homeowners insurance policy won’t always fully cover the business tools and equipment that you’ve got at home. Ask your insurance professional about a rider to your homeowners policy to protect your business investments.

Builders Risk

This one’s for the general contractors. A builders risk policy protects your investment in a project during the course of construction, which is why it’s also referred to as a course of construction policy.

If a fire broke out on a residential project and destroyed the work you had already completed, as well as some valuable tools kept onsite and materials you’d already purchased, builders risk would be there to help you recoup your loss.

Builders risk policies are typically project specific and written on a 3-month, 6-month, or 12-month term. The coverage remains with the project until construction is completed.

Tip: There are any number of parties with an “insurance interest” in a project - including subcontractors, engineers, or anyone else who could lose out on labor, materials, supplies, and potential profits if there was a loss during construction. Builders risk policies are generally obtained by a project owner, developer, or general contractor who will list anyone with an insurable interest as a “named insured.”

General contractors should consider this policy as part of their contractor insurance checklist, but subcontractors should remember that they’ll want to be included as a named insured on any builders risk policy taken out by a general contractor or project owner.

Umbrella Coverage

Extra coverage is often overlooked but an umbrella policy could be one of the most important contractor insurance policies available. Umbrella insurance is there to protect you in the event of a claim that exceeds your policy limits.

Imagine the worst case scenario. An accident leads to severe third-party injuries and a lawsuit. The final result is a million dollar claim for court costs, judgements, and medical bills against your general liability policy. Your policy limit is only $500,000. Which means you’re left footing the bill for the other half a million.

Umbrella insurance can be applied when a covered claim exceeds the limits of an eligible underlying policy, like a general liability policy.

In the example above, your general liability policy would cover the million dollar claim up to its limit - $500,000 -- and then your umbrella insurance would kick in to cover the remaining half a million dollars.

And all you’ll be responsible for is the cost of your policy deductibles.

How many of the above business insurance policies do you currently carry?

Chances are, you may have just discovered some holes in your contractor insurance defense plan. When you’ve worked hard to build up your construction business you want to protect it completely. Compare this checklist to your current insurance protection. If you’re missing any of the policies listed above it may be time to fortify your defenses so you can keep building your business without worry.

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