If you are a contractor planning on doing business in Texas, here are ten important facts you need to know about contractor insurance.
1. Your Personal Policy Doesn’t Cover Your Business Vehicle
Personal automobile policies exclude vehicles that are used for commercial and business purposes. If you get into an accident without commercial auto insurance you run the risk of getting sued by anyone involved in the accident and facing expensive medical and legal cost as a result. Commercial automobile insurance,also called fleet insurance, protects you and pays for repairs, medical costs, and legal fees if you get in an accident.
2. Your General Liability Policy Has A Limit
Your specific policy will have a maximum amount that is paid out for a claim. Any liability that you are responsible for over and above your maximum is your responsibility. For example:
- You are sued for $350,000 in medical costs associated with an injury.
- You are responsible for an additional $100,000 in legal fees.
- You policy has a maximum claim liability amount of $400,000.
- You are responsible for the additional $50,000 not covered by your policy.
When you are selecting your policy, keep in mind that your policy will have a maximum amount the insurance company will pay, so select your policy carefully.
3. You Can Increase Your Coverage
Just because your GL policy has a limit, doesn’t mean your business has to be vulnerable. All you need to do is add some umbrella insurance. An umbrella insurance policy provides additional coverage above and beyond what your GL and other insurance will cover.
Say one of your employees has an accident in the company truck and the result is that you owe $1m in legal fees and medical bills for the other party, but your commercial auto policy has a $500k limit. This is when your umbrella policy would kick in to cover the other $500k so you aren’t left owing that money out of your own pocket. Being prepared with an umbrella policy is an easy way to protect your business from going bankrupt if an accident ends up costing more than your primary contractor insurance will cover.
4. Workers’ Comp Coverage Is Recommended
Workers’ compensation insurance is good for your employees. If they get hurt, it provides them with medical treatment, as well as payment for lost time and disability.
Workers’ compensation benefits you as an employer, as well. Workers’ compensation means your employee is not motivated to sue for help with their expenses if they are hurt on the job. It replaces legal liability with no-fault insurance, protecting you from lawsuits and getting your injured employee the help they need. In some states, carrying workers’ compensation coverage is mandatory. In Texas, however...
5. In Texas, Workers’ Compensation Is Not Required
Private employers in Texas can choose whether or not to carry workers’ compensation insurance coverage. If you choose not to carry this coverage, you are required to report your non-coverage status and work-related injuries to the Division of Workers' Compensation (DWC).
However, refer to Fact #4. This is probably not a risk you want to take.
6. Commercial Auto Insurance Doesn't Protect Your Tools & Equipment
You might be surprised to know that your tools and equipment are not covered by your commercial auto policy. For that you need inland marine insurance. Any time you transport your tools to a job site, they are vulnerable to any number of catastrophes. How are you supposed to work if your tools are destroyed or stolen?
If you have an inland marine policy, your business is protected if your tools are stolen, vandalized, or otherwise destroyed on the way to or from a job. If an accident happens when you’re on the way to work, your tools and equipment are only covered by insurance if you have an inland marine policy.
7. The Right Time to Report an Accident Is Now
Whenever you have an incident that may lead to a claim, you should notify your insurance company immediately. Before you call, be sure you are ready to describe the incident in detail, with facts including the time, date, and location of the incident, the names of any witnesses, and any other information that you think is applicable. Do not wait to get your claim started, file it right away.
8. Contractor Insurance is the Best Way to Protect Your Business in Texas
The first piece of advice the Texas Department of Insurance gives to consumers looking to hire a carpenter or contractor is to make sure he has general liability insurance. The TDI goes on to advise your potential clients to request your certificate of insurance, and to place a call to the insurance company to be sure the policy is valid.
If you don’t have a current policy, not only is your business at risk, you could miss out on new business. Letting your clients know you're fully protected in the event of a claim is a great way to stand out among your competition.
9. General Liability Insurance Protects You and Your Business
Commercial general business liability, or liability insurance, protects your company’s assets and pays for obligations in the event someone is injured or incurs property damage by you or one of your employees. If you are renting a property to run your business from, general liability will protect you from covered loss damage as a tenant.
If you are successfully sued, liability insurance will cover the cost of your legal defense and any settlement or awards for which you are found liable. Lastly, general liability insurance will cover claims of false or misleading advertising, which includes libel, slander, and copyright infringement.
10. Getting Contractor Insurance in Texas Is Easy
If all this seems confusing, or like a lot to remember, don't worry. That's what we're here for. You can call us anytime and we're more than happy to answer your questions and fit you with contractor insurance that will save you money help keep your business protected.