Contractor Insurance Plus Risk Management: A Perfect Pair

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Contractor insurance and risk management are two sides of the same coin. Relying on just one won’t fully protect your business from financial losses; they work together to keep your assets safe from the unexpected events, accidents, and injuries that threaten your business.

Let’s take a look at the way you can combine these two into an impenetrable fortress of protection for your construction business, whether you’re a single handyman, an artisan tradesman, a general contractor, or the owner of a construction company.

A Risk Management Recap

Risk management is not something best left to huge corporations with entire divisions of employees dedicated to crunching numbers and risk calculations. It is a practice that can benefit every business and business owner, even if you are a sole proprietor operating your business out of the living room of your own home.

Risk management is the process of identifying potential financial risks to your business, along with procedures to avoid or minimize their impact.

Chances are, you probably have your own risk management strategies in place already, even if you don’t label them as such. Insisting that your employee wear a hard hat on the project site? That’s risk management. Driving safely to avoid accidents? You guessed it. Risk management.

Here’s how you can put risk management to work protecting your business.

Identify Construction Risks

When you work in the construction industry, there are unique risks you face as you do business, such as:

  • Employee safety and hazards
  • Liability from construction defects
  • Project changes
  • Budget Overruns
  • Site Conditions
  • Contractual risk

If you run into project delays, cost overruns, claims, litigation and legal fees, you can often kiss your profit margin goodbye on even the biggest projects. Legal fees and judgements don’t just affect your business assets, either. If your small business is set up as a sole proprietorship or partnership, your personal assets could be at risk, too.

Measure and Control Construction Risks

What would it cost you if an employee were injured on the job? What would happen if your work truck was smashed in an auto accident and needed to be in the shop for a long time for repairs? Could you afford to stop midway through a project, and re-do all of the work you’ve just completed? Determining the impact of risks to your business is known as measuring the risks.

Controlling the risks you face means putting processes and procedures in place to reduce the likelihood of them happening. Like adhering to safety regulations, and insisting your employees make workplace safety a priority. Or putting your phone away while you drive, to reduce the risk of an auto accident.

But even though you can try to minimize some risks from happening, you can’t avoid all of them altogether.

That’s where the other side of the coin comes into play.

Transferring Risk with Contractor Insurance

When you can’t eliminate a risk completely, you can transfer the financial impact of that risk away with insurance. For example, you can do your best to be the safest driver on the road. You can obey the speed limit, pay attention, slow down when it rains, and not follow other drivers too closely. But no matter how much you play it safe, you can’t control the other drivers.

What you can do, however, is transfer the risk of an auto accident to your auto insurance. Your insurance company agrees to take on the financial risk of a potential auto accident, in exchange for a price (your premium and deductible amounts).

How do you know when a risk is worth transferring? With a simple calculation. If something unexpected happened, and you had to pay a judgement on a lawsuit; medical expenses and recovery time for an accident; or to repair and replace the damage on a project due to a natural disaster, could your business afford it? Compare the cost of your insurance premiums to the cost of paying out of pocket for an accident or injury. In most scenarios, it makes financial sense to transfer that risk away from your business.

Did you know?

  • The average cost of a slip and fall accident for a business owner is $20,000.
  • The average cost of a fall for carpenter is almost $100,000.
  • The average cost to repair property damage in an auto accident is $7,500.
  • The average cost of an injury from an auto accident is $21,000 (non-disabling injury), up to $65,000 (disabling injury).

You can use the following contractor insurance policies to transfer financial risk away from your business:

  • General liability: covers the risk of claims and lawsuits from bodily injury or property damage to other people (third-parties)
  • Commercial auto: covers the risk of bodily injury and property damage if you’re at fault in an auto accident, and even damage to your auto that’s not your fault
  • Tools and equipment: covers the risk of replacing tools and equipment that is stolen, damaged, or destroyed on the way to the jobsite.
  • Builders risk: covers the risk of damage to a project from fire, vandalism, or other events, as well as your materials, supplies, tools, and equipment on (and off) the project site.
  • Umbrella: covers the risk of a high claim exceeding your policy limits and costing you big.

Some Things Work Better Together

There’s some things in life that are great on their own, but are even better together. Like cold beer and hot wings. Or peanut butter and chocolate. And that’s how you should think about risk management and contractor insurance.

On its own, risk management is an essential part of any successful business. After all, you can’t turn a blind eye to the potential risks that could cost you everything you’ve worked so hard to build. Risk management allows you to see the threats on the horizon, and to prepare for the impending storm. Sometimes you can do enough to get through with minimal damage, and sometimes that storm may completely pass you by. But other times, watch out. No amount of preparing can help you when it hits. Which is why transferring risk to your insurance policies makes your risk management practices even more effective.

The same could be said for your business insurance policies. On their own, they’re an effective solution to unexpected events, accidents, and other risks that you face while doing your job. But if you never implement risk management practices, you run the risk of letting your insurance take the brunt impact of every single accident and event that comes your way. And if you are constantly filing claims for avoidable incidents, your premiums will rise and you may even lose coverage. If you incorporate risk management practices, however, you can avoid some of these events altogether. By avoiding claims in the first place, you can keep your policies affordable and your safety net (insurance) strong and intact.

Having insurance for your contractor business is not a good reason to ignore risk management, even if your business is small. And practicing risk management alone won’t fully protect you from the risks that could lead to a financial loss. But put together, insurance and risk management can work together to protect your business the best possible way. In other words, they’re a perfect pair.

Contractor insurance quotes

Liability Insurance for Contractors: Understanding Waivers of Subrogation

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Waivers of subrogation are clauses found both in construction contracts and in contractor insurance policies, so this term may sound familiar. But if you aren’t exactly sure what a waiver of subrogation is or what it does, don’t worry. We are going to take you beyond the basics of your contractor insurance to give you a clear picture of what all this subrogation waiving is about.

Why Does My Liability Insurance Have a Waiver of Subrogation Clause?

First off, let’s talk about subrogation. Subrogation is assuming the legal right to collect a debt or damages on someone else’s behalf. Which really means to step into someone else’s shoes and collect payment in their name.

Here’s an example of how subrogation works within the confines of an insurance policy:

You are a subcontractor using a forklift to move a large piece of equipment on a jobsite. The load was improperly secured by an employee of the general contractor, and the equipment falls onto a neighboring home. Your insurer pays out for the property damage claim, but wants to recover their losses from the general contractor, whose employee was at fault for improperly securing the load. If legal action is needed to recover damages, your insurance company may bring that claim in your name, just as if you were bringing that lawsuit against the general contractor yourself.

Another example of subrogation can be found in an auto accident. Let’s say your insurance company is paying to have your truck repaired after you were involved in an accident (which wasn’t your fault). After your insurance company pays for your repairs, it “steps into your shoes” and makes a claim against the driver who was at fault for the accident. Your insurer uses the right of subrogation to bring a lawsuit against the other driver in your name.

In both instances, your insurance company is taking action in your name to collect damages that is has paid out for your claim. That’s subrogation.

So why would a waiver of subrogation be included in a construction contract or insurance policy?

A waiver of subrogation clause is often included in a contract to reduce the amount of claims and lawsuits among parties.

In other words: “The risk stops here.”

Let’s say you are a general contractor entering into a construction contract along with the project owner and design firm. Your contract contains a waiver of subrogation clause, which will prevent the insurers from various lawsuits, counter-suits, and cross-suits in the event something goes wrong during the construction process.

Not all insurance policies allow waivers of subrogation, because they limit an insurer’s ability to receive reimbursement after they pay out a claim. The policies where you are generally able to add a waiver of subrogation include:

Waiving subrogation rights often makes things easier when multiple parties are working together on a single project, but they limit your insurance provider’s ability to be reimbursed on a claim, and may not be available to add a waiver to every policy.

If your policy allows a waiver of subrogation endorsement, it can only be added before a loss occurs. You won’t be able to do so after a loss. Before you enter into a construction contract that requires a waiver of subrogation, you may want to review your insurance policy carefully, or consult with your insurance provider. When it comes time to sign a contract, best practices is to fully understand what you are signing away — including your insurer’s right to subrogate.

Handyman Insurance Terms Decoded

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Building your handyman business from the ground-up is no small job. You have the skills to tackle almost any job, from repair work to more complicated projects. You know more about painting, wiring, plumbing, and carpentry than most. And that’s just the beginning. Because as an independent contractor building your own business, you also have to know the ins-and-outs of details such as licensing, taxes, and insurance, too.

To help you out on that last point, we’ve decoded the insurance terms and policies that you need to know to successfully protect your handyman business.

Here’s your cheat sheet of handyman insurance terms, decoded.

Handyman Insurance Policies

These insurance policies provide a wide-range of protection for your handyman business, from the truck you drive to the tools you use, and from unexpected lawsuits you may never see coming.

General Liability

An insurance policy which provides protection from lawsuits. General liability coverage typically covers lawsuits arising from third-party (non-employee) injury or property damage. General liability is considered a foundational policy, and the most basic coverage you need to operate your handyman business. You can’t always prevent an accident, but you can prevent a lawsuit from costing you big time if you have general liability protection.

Commercial Auto

An insurance policy which provides protection for your auto if you use your personal vehicle for work purposes. If you are relying on your personal auto policy to cover your auto, you may be surprised to hear it may not cover your “work truck.” For full protection against accidents and road hazards, consider adding commercial auto to your insurance policies.

Professional Liability

Do you work with businesses or commercial clients? Professional liability is an insurance policy which provides protection from lawsuits arising from financial loss as a result of your handyman business. Your general liability policy may not cover you in the event your work causes an economic hardship to a client. If a third-party brought a lawsuit against you, professional liability insurance covers the costs of defending yourself, and any settlements or judgements you may owe. (Not every handyman will need professional liability coverage, but if you have commercial clients you may want to consider the protection this policy offers.)

Inland Marine

An insurance policy which protects your tools and equipment while in transit from one client and/or project to the next. When your business is mobile, you can’t rely on property insurance to protect your assets and investments the same way as someone who does all their work in one place. With inland marine protection, your tools and equipment are covered from theft, damage, loss, vandalism and other risks as you transport them to different locations. A unique insurance policy which benefits handymen, contractors, and other skilled trades professionals.

Handyman Insurance Terms

Know the lingo. The following terms are often used when discussing your insurance policies and protection. Here’s a quick reference guide to keep you in the know.

Accident: An unforeseen and unplanned event or circumstance; an unfortunate event. (Ok, we know that you already know what an accident is. But we’re including it because accidents are the primary reason you need insurance in the first place, right?)

Additional Insured: A person, party, or organization not included in your insurance coverage who is added to your policy at your request.

Aggregate Limit: The maximum dollar amount an insurer will pay to settle your claims in a given time period, such as a year or the entire period of your contract.

Certificate of Insurance: A document providing verification of your insurance coverage, such as policy types, numbers, and effective periods. Often provided to potential clients as “proof of insurance.”

Claim: A demand for payment from an insurance (or bond) provider for the estimated or actual amount of a loss.

Coverage: Protection against a specific risk or liability.

Deductible: The amount that will be subtracted from a loss which the insured (that’s you) has to pay.

Effective Date: The date your coverage starts on your insurance contract.

Endorsement: A form that changes or adds to the coverage in your insurance policy, such as limiting the scope of coverage, adding other parties, or clarifying coverage.

Exclusion: A provision in a policy referring to risks, hazards, circumstances, property, or other factors not covered.

Liability Limits: The sums in which an insurance provider no longer protects the insured on a particular policy. The maximum amount that a specific policy will cover for a claim.

Premium: The amount an insurer charges to provide policy coverage. Often paid as a monthly premium payment, but may also be paid at one time as an annual premium payment.

Subrogation: The insurance provider’s right to pursue legal action on your behalf against the party responsible for a loss or damage.

Quote: An estimate for the premium (amount) of insurance coverage based on the policy you select and information you provide when you request your handyman insurance quote. Citizens General can provide instant pricing when you request a quote online, anytime.

We know that insurance isn’t always the first thing on your mind when you are trying to build your handyman business. You are more focused on the job at hand, and lining up your next paying gig. But the right coverage can help you protect the assets you’ve invested in, such as your automobile, your tools, and your equipment. And insurance protection can help you hold on to the assets you’ve earned in the unfortunate event that an accident (and lawsuit) occurs while you work.

Don’t overlook this important part of your handyman trade, and you can continue to grow your business with the peace-of-mind that your assets are protected.

Construction Insurance

10 Must Know Facts About Contractor Insurance in Texas

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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.

Construction Insurance

Liability Insurance for Contractors: Understanding the Basics

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Liability insurance is the foundation of your contractor insurance coverage. It’s the most basic coverage, the one you simply can’t do business without, and the policy which you can build on to further reduce your business risks and strengthen your protection.

If it’s been awhile since you’ve visited the issue of liability, or are just starting off as a new contractor, here’s a return to the basics of liability insurance: what it is, what it does, and why you need it.

What is Contractor Liability Insurance?

Liability insurance protects contractors from the risks of potential lawsuits that could arise from accidents, injuries, illnesses, or damages to other people. Liability insurance is a safety net for your construction business, because no matter how much you prioritize safety on a project site, there’s no way to tell if or when someone might sue you.

Why Contractors Need Liability Insurance Coverage

Let’s face it, you work in a high-risk industry. And you often times take this risk straight to your clients. If you specialize in new construction projects, there’s a risk that your finished product could cause an injury down the line. If you specialize in renovations or repair work, you could be taking dangerous tools and construction equipment to the home of a client, putting them in harm’s way.

And you never know when a passerby might trip over an extension cord attached to your favorite hand tool, or what kind of injury someone could sustain if you happened to drop a roofing shingle from ten feet overhead.

Risks to other people (third-party persons, aka non-employees) are part of doing business for any independent contractor or small business owner. But when you are a contractor, subcontractor, or construction business owner working, the risks intensify.

General Liability for Contractors

Contractor general liability insurance, which is also known as commercial general liability insurance, offers coverage for the kinds of potential lawsuits that you could face as a contractor.

Did you know? The average cost of a trip and fall accident to a business owner or independent contractor is $20,000.

That’s one client who trips over a 2×4 that you’ve left on the ground, one passerby who gets tangled in an extension cord, or one person who slips on a plastic sheet left carelessly on a slippery laminate floor. Whether you are actually at fault or not, could you afford the costs of defending yourself in court?

When you have general liability insurance, you don’t need to have tens of thousands of dollars on standby to cover your legal defense.

What General Liability Covers

When you think of what your general liability covers, think “damage and injury to other people”. Third-party persons are those who aren’t your employees; they are your clients, the people you do business with, or even complete strangers.

What kind of damage is covered to these “other people”? General liability covers:

Property damage

You accidentally run your excavator through the neighbor’s fence, and across their (newly installed) landscaping. Oops.

Bodily Injury

Your ladder falls on a client who is walking past, leading to a broken leg, missed work, and some pretty hard feelings.

Illness

The paint that you selected for the interior of residential home is causing your client to experience dizziness and headaches which are preventing them from going to work.

Reputation Injury

You proudly put up a website to advertise your services as a renovation specialist, and blog about the other guys in town that clients should steer clear of. They find out, and lawyer up.

Copyright Infringement

The marketing flyer you are distributing is a little bit too similar to a competitor’s, and they aren’t flattered by the imitation.

In all of these situations, the “other person” (third-party) could very well bring a lawsuit to your front door.

Your liability insurance is there to pay for the costs associated with a third-party lawsuit, such as

  • Lawyer’s fees
  • Evidence expenses
  • Settlements
  • Judgements
  • Miscellaneous court fees

Your liability coverage may even cover the costs of time away from work if you need to meet with lawyers or be in court.

What General Liability Doesn’t Cover

Your liability insurance isn’t a catch all. There will be situations where general liability isn’t enough. Your liability insurance may not cover:

  • Injuries or illness to your employees
  • Damage to your own property
  • Economic damages (financial losses) to a third-party
  • Data breaches or identity theft

General Liability Insurance vs Professional Liability Insurance

There are two different liability policies that you may want to consider as a contractor, general and professional. General liability doesn’t cover a financial loss or economic damages to a third-party, but that’s exactly what professional liability insurance does.

Let’s say that you completed a residential project for a client, constructing a small dwelling detached from the main house. Your clients have big plans for this tiny cottage; they want to rent it out to the vacation-crowd that swarms their town every summer and fall. Unfortunately, you and the client have had problems every step of the way with this project.

Progress slows to a crawl as you argue over change orders and costs, then stops altogether. Before you have a chance to smooth things over and get the project back on track, the client terminates your relationship, and brings in a new contractor to finish the job. Your client also phones a lawyer, because the project wasn’t completed in time for the summer tourist season, and the new contractor is going to charge him even more than you did to finish the job.

When you client thinks his economic loss is a result of your work, the lawsuit would only be covered by a professional liability policy. General liability wouldn’t protect you from the high cost of a lawsuit for your clients alleged financial losses.

Liability insurance is part of doing business as a construction professional. It offers you protection from a risk that you often can’t do anything about: the risk of a third-party lawsuit. There may be ways you can try and avoid general liability claims, but there’s no guarantee you can always prevent accidents from happening.

As a contractor, there are various insurance policies that you can put to work to protect you from losses, but your contractor insurance coverage will always start with general liability. Depending on the scope of work you do, how large your business operations are, and what other assets you have to lose, you probably want to consider adding additional policies to your liability policy. But with the strong foundational protection of liability coverage, you know your business is protected from the uncertainty of “other people”, and the strong likelihood that one day a lawsuit may find its way to you.

Liability Insurance for Contractors: Understanding Exclusions

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Sometimes what’s not covered in your contractor liability insurance policy is just as important as what is covered. We want to take you beyond the basics of liability insurance for your construction business, so let’s talk a bit about the exclusions you may have in your policy, how they may limit your coverage, and why they are there in the first place.

Beyond the Basics of Contractor Liability Insurance: Understanding Policy Exclusions

Insurance Term Definition

Exclusion:
A policy provision that eliminates coverage for certain risks.

You may be wondering why your liability policy has exclusions to begin with. The purpose of an exclusion is to limit risks that may otherwise be included in your policy, for reasons such as:

  • The coverage may already be provided for in a different policy
  • Claims may be considered uninsurable (such as certain catastrophic events)
  • Claims may be against public policy (such as breaking the law or harming a person)

Here are some examples of exclusions you may find in a general liability policy.

Expected or Intended Damage Exclusion

Your general liability coverage is meant to cover accidental property damage or injury. It should be of no surprise then that intentional damage is excluded from your policy. If you intend to damage someone else’s property, or cause them bodily harm, don’t expect your liability insurance to kick in and pay for the offense.

There’s really no policy or endorsement available that will cover you for intentional damage to another person or property. If you accidentally cause damage or harm to another person, that’s one thing. Willful misconduct is quite another. The best protection you have against expected or intended damage to another person (or their property) is to behave like a professional, keep your cool, and expect your employees to do the same.

Contractual Liability Exclusion

Have you ever signed a contract with an indemnity agreement, or “hold harmless” language? Your contractor liability insurance may have an exclusion for contractual liability if you sign a contract or agreement in which you assume liability for bodily injury or property damage. In other words, when you’ve assumed the liability (and financial consequences) for another party in a contract or agreement.

There are exceptions to a contractual liability exclusion, however. One notable exception is liability that would be imposed by law if there were no contract or agreement. In more simple language, that means not acting carelessly in a way that might risk the health and safety of another person. Again, acting like a professional is once again key to your risk management strategy.

Damage to Property Exclusion

While your liability policy will cover claims for third-party property damage, this exclusion means there is no coverage for any property owned, rented to, or occupied by you. This exclusion also includes property loaned to you, as well. If you borrow a hydraulic lift and damage it, you cannot file a claim against your policy to repay the cost of fixing the equipment even though the lift technically belongs to a third-party. If you have borrowed something, it is considered your property and therefore is not covered by your liability coverage.

Talk to your insurance provider to find out what policies you can use to protect your property, such as equipment and tools that you’ve borrowed, leased, or bought. For example, an inland marine policy may protect your tools and equipment in transit to a project site, and a builders risk policy may protect your tools, equipment, materials, and supplies stored on a project site.

Electronic Data

The property covered by your general liability policy is “tangible” property, and electronic data is not considered tangible in a general liability policy. Your general liability policy may exclude any damages as a result of loss of, damage to, or inability to access electronic data.

If your laptop is stolen from your work truck, and the customer information that you had inside lead to identity theft, your general liability policy won’t cover the costs of a lawsuit. That doesn’t mean you can’t protect your “intangible” data property, however. Cyber liability insurance is available to keep this kind of accident from costing you big. You may be able to add an Identity Theft endorsement to your general liability insurance coverage as well.

Workers’ Compensation & Employers Liability Exclusions

If you failed to provide workers’ comp insurance for your employees, your liability insurance will not cover any claims resulting from an employee injury or illness. Whether you have workers’ comp coverage or not, your liability coverage may exclude any lawsuits from employees (or their families) for injuries.

Your liability insurance doesn’t cover employee injuries because this coverage is already provided for in another policy. In most states, you are required by law to carry workers’ comp insurance for your employees. If your employee is injured or becomes ill doing their job, the claim would be covered by your worker’s comp policy.

Professional Liability Exclusion

Contractor general liability policies often include a Professional Liability exclusion. This exclusion eliminates coverage for “bodily injury, property damage, and personal and advertising injury arising out of the rendering of or failure to render any professional services by you or on your behalf.” This exclusion applies to engineering, architectural, or surveying services in connection with the work you perform, but not allegations of faulty construction through your normal operations, techniques, and methods.

If you want to protect your contractor business further, you may want to consider adding a professional liability policy to your insurance coverage. A professional liability insurance policy may cover you in the event of a lawsuit from economic or financial loss to a third-party.

Exclusions in your liability insurance don’t necessarily mean you are exposed to risks that could cost you in the long run. The right combination of contractor insurance policies and the occasional added endorsement may be all you need to reduce the risks facing your business and keep you protected from unexpected and unintended accidents that you face as a contractor.

How Builders Risk Insurance Protects Your Tools and Materials

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Do you know that builders risk insurance does more than protect the building you are working on? Most contractors understand the value of a builders risk policy when it comes to the building itself; after all, paying out of pocket to repair a damaged structure could be devastating to your budget. But the protection of builders risk coverage goes beyond the structure, protecting the materials and equipment you need to complete the project itself.

Protecting Your Tools & Equipment on the Project Site

Your equipment is important to you, and it’s critical for getting the job done. And it doesn’t always make sense to transport your tools and equipment to and from the project site every day either. Your builders risk insurance coverage extends to your equipment, protecting your tools from many of the risks they face while they are on the site.

Let’s say you are renovating a residential home, adding a new master suite above an existing garage. You’re leaving some compressors, table saws, and other tools locked in the garage at the end of the day.

Or so you thought.

When you arrive at the project site one morning to find the unlocked garage door wide open, and your high value tools missing, your builders risk policy will most likely cover the loss. (Which is a relief, since your client’s homeowner’s policy isn’t going to foot the bill.)

The new excavator that you bought this year has been a sound investment. But when you drive by your project site on a Sunday morning and see that it is gone, you can’t help but start calculating the costs even as you call the authorities and report it stolen.

If you have builders risk coverage, the loss gets a lot less complicated. Instead of adding up what it will cost you to replace the heavy equipment, plus the other soft costs associated with the theft, all you need to worry about is filing a claim and paying your policy deductible.

Your builders risk policy is your safety net that protects your tools and equipment stored on a project site.

Protecting Your Materials & Supplies On- site

You’ve won the bid for a new construction commercial retail space, and your contract states that you are responsible for obtaining a builders risk policy (with your subcontractors added as named insureds). You’ve begun work, and everything is right on schedule.

Unfortunately, one morning you arrive on site to find that your metal materials have been stolen off the project site. Copper wiring, aluminum I-beams and flashing that you thought were securely locked up are now gone without a trace.

Construction site theft is nothing new. Theft and vandalism are the most common crimes in construction, and replacing expensive materials or stolen equipment can lead to substantial unforeseen project costs.

Protecting Your Off-site Materials & Supplies

What about the materials and supplies that haven’t made it to your project site yet? You may not realize it, but you can add coverage for materials in transit to your builders risk insurance policy. And if any of the following circumstances happened to you, you’d be glad you did:

  • A load of ceramic tiles falls of a truck on the way to your project site, shattering all over the freeway.
  • Your insulation materials are stored off-site, but a leaky ceiling and sudden rainstorm causes irreparable water damage before they can be installed.
  • The copper wiring being transported to the project site is stolen right off the truck in broad daylight at a gas station.
  • Vandals have a field day expressing themselves artistically, “decorating” the cement masonry that you’ve stored off-site with spray paint.

Adding coverage for materials in transit to your builders risk insurance can give you an extra layer of protection against unexpected risks to your tools, equipment, supplies, and materials. Because it’s not always the materials that have already made it to the site that need protection.

Construction site theft and vandalism are, unfortunately, all-too-common. Unforeseen emergencies, like an electrical fire, can happen to anyone. Mother Nature could unleash a destructive windstorm, or hail the size of baseballs without notice. These are risks that every contractor faces on every project.

Replacing the materials, supplies, equipment, or tools needed to complete a job in the face of one of these situations could be devastating to your project budget. If you had to reach into your own cash reserves to replace stolen equipment or vandalized supplies, it could eat up all of your profits or worse. Luckily, your builders risk policy can extend protection to your tools and materials, on site, off site, and even in transit.
Construction Insurance

Handyman Insurance 101

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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.

Workers’ Comp

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.

Cyber Liability

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.

Umbrella

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 totaling $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.

What Determines Your Builders Risk Insurance Cost?

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You know that no two projects are ever the same. Which is why there is no standard builders risk (course of construction) policy… and no easy formula for determining your policy costs. You can, however, have a good understanding of what your insurance provider is looking at when they calculate the risk factors of your project, and what exactly goes into your policy price.

Here are some of the factors which may be used to determine your builders risk insurance costs:

Which Parties will be Insured?

The builders risk coverage for a project is generally obtained by the owner/ developer or general contractor. In addition to providing coverage for the general contractor and owner, the policy should also cover any subcontractors (this eliminates the need for waivers of subrogation between contractors and subs). Any person whose materials, supplies, and time is going into the project has a valid insured interest, and is most likely to be listed. If there is a loan issued, the Bank may also be listed as an Insured Party on the policy.

Did you know? If one of the parties listed on the policy has filed bankruptcy in the last 10 years, it may have an affect on the policy costs.

What Property will Your Builders Risk Insurance Cover?

A builders risk policy is a very unique type of property insurance, so it should be no surprise to hear that property is a big consideration for the policy costs. Whether the project is new construction or a renovation on an existing structure, and even the size and square foot of your project scope can factor into your overall costs.

The “property” considerations that can affect your policy costs include:

Existing Structures

What is the value of any existing structures? Many policies provide actual cash value coverage for the existing buildings, and replacement cost coverage may increase your policy costs. Other risks that may increase your costs include existing structures with a value more than double the value of the new work.

New Construction

Insuring your property on a new construction project may include coverage for foundations, site preparation, excavation, underground pipes, and temporary structures.

Building Materials

Your policy may cover materials such as fixtures, supplies, and even tools and equipment. The actual materials you are using on the project can have an affect on your overall policy costs. Your costs may increase, for example, if you are using unconventional materials and supplies, such as earthen materials, fabric structures, or wooden frames rather than steel.

Off-site Property

What about the materials that haven’t arrived to your project site yet? Additional coverage for your builders risk policy can protect materials in transit, or even materials stored off-site. If a fire breaks out in the storage facility where your materials are stored, or if they are damaged on their way to the project site, this additional coverage will be worthwhile. Additional protection for off-site property will factor into your overall policy costs.

Which Perils will Your Policy Insure Against?

What’s covered in your builders risk policy? Most policies are written on an “all risk” basis, which means anything is covered unless it is specifically excluded in your policy. However, some of the more common exclusions on a policy can be added in as supplemental coverage. So your policy costs may change depending on whether or not you add items such as Earthquake Coverage or Flood Coverage for your project.

Does Your Builders Risk Insurance Include Soft Costs?

If your project was delayed due to a covered peril, the cost of covering your “property” is only the part of the picture. There may be a risk of economic losses from the resulting delay, such as the costs of keeping workers on site, extended equipment rentals, increases in labor wages, or even additional storage costs. If you want to ensure against economic losses from a project delay, you may need to add a “soft cost” endorsement to your builders risk policy. Adding this endorsement to your policy can increase your overall costs.

Additional Factors that Determine Builders Risk Insurance Costs

We’ve covered your basics, such as the parties, property, and perils insured on your policy. What else is considered when calculating your policy costs?

  • Time Elements: How long will the term be on your policy? Builders risk coverage is available for various time frames, and a term greater than 12 months may increase your costs. Another time element to factor is if the construction project has already started more than 60 days before coverage begins.
  • Location: The specific geographic location of the project may impact the costs of your policy, depending on the risks associated with that area. Construction within range of wildfires, in a flood zone, or in Tornado alley, for example, could significantly increase your coverage costs. Projects with close proximity to coastal waters or brush may have higher premiums than a project outside of those areas. Your rates can even vary depending on the state in which you are building.
  • Type of Construction: A single-family residential home will generally have coverage costs less than a multi-family residential residence, or even a commercial project. The project type may be one of the biggest, if not the most simple, consideration when determining your policy costs.
  • Deductibles: Like any other construction insurance policy, the amount that you pay in premiums can be affected by the deductible limits you choose. Generally, selecting a higher deductible can lower your monthly premium payments. If you want to lower your premium amounts, select the highest deductible that you are able to pay.

With so many elements that go into constructing a builders risk policy, and so many changing variables to consider, it is no wonder there is no “standard” formula for pricing. The best way to determine your builders risk insurance costs for your next project is to contact an experienced construction insurance professional to discuss your project needs and receive a quote for your builders risk policy.

Home Based Business Insurance: What your Homeowners’ Policy Doesn’t Cover

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Are you running a home based business? Whether you call yourself a consultant, independent contractor, freelancer, or entrepreneur, “home-based” is big business in the U.S. More than half of all small businesses in America operate out of someone’s home. There are lot of benefits to running a business out of your home, but there are also some pretty big risks involved, too And if you are relying on your homeowner’s property insurance to cover your business, you may be setting yourself up for a disaster.

Because whether you are a real estate agent, piano teacher, or graphic designer… your homeowner’s policy isn’t going to cover all of the potential threats to your home-based business.

Why you need Home Based Business Insurance

One of the reasons you are operating out of your home is to keep costs low. After all, why would you pay for business expenses you don’t need, such as rent on an office space, or a warehouse you haven’t grown into yet? But avoiding the expense of business insurance is risky business.

If you think you don’t need insurance because your homeowner’s policy has you covered, you are making a mistake that could cost you big.

Here’s why you can’t afford to rely on your homeowner’s policy to protect a business that you operate from home.

#1: You have Assets to Protect

Are you the sole proprietor of your business? Your business assets aren’t the only thing on the line. When you are a sole proprietor of a business, your personal assets could be at risk, because a sole proprietor is personally responsible for all business debts and obligations. And one of the biggest risk to your assets is the high price of a lawsuit.

If you think your business is too small for a lawsuit to find you, think again. Even if you are operating out of a home office, garage, or even the kitchen table, your business could be sued.

If your business has a website, blog, marketing materials, or social media accounts, the lawsuit that you should be most worried about is advertising injury. You may not realize it, but your efforts to market your business online could be infringing on copyright laws, you could unintentionally be invading someone’s privacy, or your efforts to “rise above” the competition could be seen as libelous.

Unless you’ve added an endorsement to your homeowner’s policy, there’s a good chance it may not cover any advertising injury claim as a result of your business.

If you have a general liability policy for your business at home, however, you have a safety net to protect you from these situations.

General liability coverage is there to pay for the high costs of third-party lawsuits for advertising injuries, bodily injuries, or property damage that results from your business. Whether you are at fault or not, the cost of defending your business in court can add up fast. A stand-alone general liability policy may cover costs ranging from lawyers’ fees, court costs, defense fees, settlements, and judgements.

Bonus! The cost of general liability insurance for a business run from your home is likely to be much lower than if you operated outside of the home. Ask an experienced business insurance professional to show you how low your rates can go.

#2: There are Holes in Your Homeowner’s Policy

Your homeowner’s insurance policy is meant to protect your home as a residence, and not necessarily your home as a place of business. That means your coverage may not necessarily extend to business assets. If a fire or theft takes out thousands of dollars worth of inventory you had stored in your garage, don’t be surprised if your homeowner’s policy leaves you footing the bill.

Expecting a delivery? If your delivery person slips on your icy driveway hauling a package up to your door, your homeowner’s policy may not cover the costs of his injuries if the package contained inventory or supplies being shipped to your “business.”

Wow, right?

Unless you have added an endorsement to your specific policy, the typical coverage a homeowner’s policy provides for business-related claims is usually zero.

A homeowner’s endorsement may only be available if your business has very-few business related visitors, such as freelance writers or graphic designers. On the other hand, if you regularly have clients in and out of your home, your homeowner’s policy may not allow a liability endorsement to cover your business activity. In this case, you may want to look into stand-alone policies to be sure your business is protected.

#3: You Provide a Product or Service

Does your business provide a product or service? From widgets to doodads, consultations, advice, or the world’s most beautifully designed logos, businesses typically offer something to paying clients and customers. But what happens if your client is less than satisfied with the product or service you’ve provided?

Let’s imagine that your client sent in an order, and you made a small mistake inputting the shipping date. When you missed your deadline to ship ten boxes of gizmos, this misunderstanding cost your client big time. And now they have lawyered up, with every intention of making you pay for your mistake.

Maybe you don’t have any products to ship. Perhaps you offer a service to clients as a real estate professional. Imagine the following scenario…

You help your client find the home of their dreams. You work up a contract, and they hand over a sizeable deposit check. But you made a small mistake on the contract, and this small mistake led the client to lose the home and their non-refundable deposit. Your clients want you to reimburse them for their financial loss, and they want you to pay the difference in sales price between this home and the (higher priced) home they finally end up in.

When your business is facing a lawsuit that arises from a client’s financial loss, you can protect yourself with professional liability insurance. Professional liability, which is also known as Errors & Omissions (E&O) coverage, is the only policy specifically tailored to cover lawsuits from third-party economic loss. And if you are a service professional, such as a consultant, real estate agent, for financial advisor, professional liability is a must-have for your business.

Professional liability fills in the holes in your general liability coverage, which may protect you from a third-party injury lawsuit but may not cover you if your client tries to recoup a financial loss. And a homeowner’s policy, even with an added liability endorsement, may cover you in case a client is injured in your home; but that doesn’t mean the protection will cover a third party lawsuit seeking damages for economic losses.

#4: You Use a Computer

Do you use a computer, laptop, tablet, or other technology to help you run your business from home? If there was a break-in at your home, and your work laptop, desktop, or tablet was stolen, there’s a chance your homeowner’s policy may not cover the full cost of replacing your business equipment. But that’s not the biggest risk your business laptop faces.

Physical equipment theft is only the beginning. What kind of customer information do you have? Sensitive customer information, such as Social Security or credit card numbers, is always at risk from potential hackers. There is a very good chance that your homeowner’s policy is not going to cover the costs of a data breach, such as notifying customers, monitoring credit, or the costs to defend your business in a stolen identity lawsuit.

Cyber liability insurance offers protection for your business from exactly these scenarios. Whether your laptop or computer is hacked or stolen, the information inside it is often times a more valuable asset than the physical item itself. Cyber liability may offer coverage for this sensitive material that your homeowner’s insurance wouldn’t.

#5: You need a Helping Hand

When the busy months roll around, do you have a helper who pitches in to get things done? Whether it’s packaging up extra baked goods to take to the farmers’ market, updating listings and setting your appointments, or getting you caught up with your filing; a helper may be putting him/ herself in harm’s way. All it takes is one slip on your wet kitchen floor, or a trip and fall over a box of files to land your helper into a costly medical situation.

Could you afford to pay for a trip to the emergency room, a surgery to repair a broken bone, physical rehabilitation, and missed wages for your employee after they accidentally fall down the stairs at your home office? Who would you turn to for help with the mounting pile of medical bills that need to be paid?

Your homeowner’s policy may not cover an injury at your home if the injured person is an employee who is working for your business. If your employee is hurt or becomes ill while doing their job, the only insurance protection that can help cover their medical expenses is workers’ comp. And, depending on the state that you do business in, you may be required by law to provide workers’ comp for your employees. Even if you only have one, part-time person helping you out.

When your business begins to experience growth to the point that you need to hire help, it can be a good thing. But it’s important to know what your responsibilities are to your employees, and that includes providing workers’ comp insurance to protect them from accidents, injuries, or illness from the business you run from home.

Home based business insurance doesn’t have to be expensive. You can begin with a general liability policy, and then customize your coverage to best meet the needs of your specific business. You may be surprised to find the small business coverage you never even knew you needed. There are easy ways to keep your business insurance costs low, allowing you to benefit from even more coverage with affordable premiums. But thinking that your home based business is protected with your homeowner’s policy is a mistake that you simply can’t afford to make.