If you have been confused on which insurance coverage you really need, you are not alone. It’s a mysterious puzzle, this insurance thing. You don’t want to tie up all of your cash in insurance premiums, but you don’t want to put your business at risk. And who has time to sit down and become an insurance expert when there’s work to do?
Which policies will best protect your business, and which coverage you can do without? Here’s everything you need to know to make the right choice about handyman insurance.
Handyman Insurance 101: How to Protect Your Business (and Increase Your Cash Flow)
All businesses need commercial insurance coverage, and your handyman business is no different. When you are a business owner or sole proprietor, accidents and lawsuits are lurking around every corner. Handyman insurance will protect you from the high costs of the risks associated with your specific trade, so you can keep working… and keep your cash where it belongs.
Here are some of the insurance policies that can protect your business, from the “must-haves” to the “might-needs”, and even a few that you might be able to do without for now.
General Liability Insurance
Topping the list of must-have insurance policies for your handyman business is general liability coverage. This is a foundational policy to build your insurance coverage around. General liability protects you from the high costs of a lawsuit if a third-party (non-employee) sues you for damage or injury.
If your customer trips and falls over the cord to the power tool you are using and is injured, it could cost you. If you accidentally damage a priceless antique dresser while doing some nearby drywall repair, it could cost you. If your social media efforts or business blog inadvertently offends someone, or infringes on a copyright, it could cost you.
The average cost of a slip and fall lawsuit is $20,000. If you don’t want to pay out of pocket for legal fees, attorney’s fees, court costs, defense costs, settlements, or judgements, then you need general liability insurance. You never know when a lawsuit is coming your way, but with general liability coverage, your handyman business can afford to face it.
For more information on how to keep your general liability costs low, check out our tips for avoiding general liability claims.
Commercial Auto Insurance
How important is your work vehicle to your business? It transports you and your equipment from job to job. It may promote your business by displaying your profession and contact information to potential customers. More than likely, your work vehicle is also your secondary office, communication hub, lunchroom, breakroom, and personal coffee shop, too.
If your personal vehicle doubles as a work vehicle, particularly your primary work vehicle, a personal auto policy is unlikely to cover it. If you are on your way to the hardware store to pick up supplies before heading to your client’s house, and a distracted driver runs a red light and smashes into you, you are going to need commercial auto insurance.
Commercial auto coverage allows you to protect your most valuable business asset, your work vehicle, from the dangerous drivers out on the road, and the high costs of repairing or replacing an auto after an accident.
Tools and Equipment
As a jack-of-all-trades, you rely on your tools and equipment to get the job done. From ladders to power tools, generators to your favorite hand tools, you need your equipment if you want to collect a check.
Imagine what it would cost if you had to suddenly replace your valuable tools and high dollar equipment. You are on your way to a client’s house, and along the way you stop for a cup of coffee and to gas up your truck. In a matter of moments, you are ripped off. Ladders, generator, and your favorite power tools are stolen from your truck. And now you have to replace it all.
If you have tools and equipment coverage (also known as inland marine), you won’t have to pay out of pocket to replace your tools if this happens. Your equipment is protected as you transport it to and from your client’s homes day after day. If you could afford to replace your most valuable tools and high dollar equipment, maybe you don’t need this coverage. But if that kind of theft would really set you back, then tools and equipment coverage goes from “might-need” to “must-have”.
What are some other policies you may want to consider for your handyman business? Depending on the size of your operation, the following policies may offer surprising benefits for your business.
As a handyman, you likely work alone for most of your projects. So even though workers’ comp insurance is required in nearly every state for most businesses, there is a good chance you won’t need to carry it. But what happens if you do hire an extra set of hands every now and again?
The factor that decides if you need to add workers’ comp coverage to your existing policies is whether your hired hands belong to an actual employee, or to an independent contractor.
Workers’ comp benefits will pay for medical expenses and lost wages if you have an employee who is injured or becomes ill while during their job. And that means if you have one single employee, even a part-time employee, workers’ comp should be a part of your handyman insurance coverage. However, if you occasionally use an independent contractor to help you complete a job, you are not required to provide workers’ comp for that person.
Be careful when you make the distinction between employee and contractor. If you misclassify your worker, you could end up owing a lot more than just insurance premiums. Failing to provide workers’ comp to an actual employee could mean fines, fees, and even jail time.
To find out if your worker is actually a contractor, or a misclassified employee instead, check out our blog: Subcontractor vs Employee for 7 signs your employee may be classified wrong.
Contractor’s Professional Liability
Contractors professional liability coverage protects against lawsuits that arise from third-party economic and financial losses. While many service professionals, such as realtors or financial advisors, benefit from the specific protections of a professional liability (also known as an E&O) policy, contractors and handymen can also benefit from this specific protection.
How do you know if you need contractor’s professional liability coverage? The biggest risk for financial loss to a customer often comes if you perform design-build work. Let’s say that your client asks you to put up a greenhouse in their yard. You subcontract the design to an architect friend, and then begin building.
Unfortunately, the electrical wiring and plumbing system for the greenhouse doesn’t work out for the client’s needs, and they want you to pay the costs of having a specialized contractor come in and re-do the entire project. They decide that a lawsuit against your business is the best way to get the money needed to have the greenhouse redone.
If you want to protect your business from third-party financial/ economic loss risks, you may consider adding a professional liability endorsement to an existing general liability or umbrella policy. But a stand-alone policy will have less restrictions and offer more protection. Talk to your insurance broker about the types of projects that you tend to do for your handyman business, and find out if contractor’s professional liability makes your must-have list, or if it remains a might-need insurance policy for now.
Are you using a computer, laptop, or tablet to do business? If you have sensitive customer information on hand, a data breach or loss of information could cost you big time.
Do you have customers’ personal information, such as Social Security or credit card numbers on your laptop? If this information was obtained by a slick hacker, cyber liability coverage could cover the expenses of dealing with this data breach. That means notifying customers, offering credit monitoring, defending yourself against legal claims, and paying for any fines or penalties resulting from an identify theft lawsuit.
Just because you are a small business, sole proprietor, or one-man shop doesn’t mean that you are safe from cyber attacks and data breaches. Often times, it is the smallest businesses that are at the biggest risks. (After all, you probably don’t employ an entire team of IT professionals to work full-time at protecting your data.) Cyber liability coverage protects your business in case you are hacked, breached, or lose sensitive customer information. Depending on what information you have on your laptop, this could be a very beneficial policy for your business.
Can you afford to pay more than the limits on your current coverage? If you have a general liability policy with a $200,000 limit, but face a lawsuit judgement totalling $250,000, you would be responsible for paying the difference. (You really should have moved that antique dresser away from that wall.) Umbrella insurance will increase the limits on all of your policies, and you only pay one low premium for that peace of mind.
The best way to select the right insurance coverage for your handyman business is to talk to someone who knows. At Citizens General, we specialize in commercial insurance and contractor coverage, so we know exactly what risks you face while running your handyman business. Not only can we help you put together the best protection for you business, but we can also give you tips on keeping your insurance costs low so you can keep more of your hard-earned cash for yourself.