Top 3 Insurance Policies Every Contractor Needs

As a contractor, it’s always better to be safe than sorry. Insurance premiums may seem like just another overhead expense, but without it, you risk paying out-of-pocket costs from unforeseen incidents, including job site injuries and property damage, that can occasionally reach 6- or 7-figure sums.

We know that there are a lot of different insurance coverage options out there, but for contractors, there are three in particular that we always recommend: general liability, workers’ compensation, and inland marine.

1. General Liability Insurance for Common Perils

General liability insurance will protect you from common risks that most businesses face, including, but not limited to, on-site accidents involving third parties, damage to others’ property, and slander or libel.

While these are common protections that businesses across many industries need, it’s important to get a general liability policy specifically designed for construction or other trades. The terms will be tailored for the particular types of on-site and property damage risks that contractors face.

For example, many contractors need coverage that extends to “attractive nuisances.” An attractive nuisance is something potentially dangerous that kids might play with unsupervised. Construction equipment is a classic example, and one that many non-specialized general liability policies wouldn’t cover.

Legally Required in Many States

Many states require contractors to carry general liability insurance (and often a bond) in order to be licensed. However, particular requirements vary by state and trade. 

Also keep in mind that states aren’t the only ones who may require coverage. Local municipalities often have their own requirements, and commercial or government customers frequently do, too, so you should also check with your municipality’s city clerk and county clerk.

Coverages & Protections

Contractor general liability insurance policies typically have a few coverages. The most common ones are:

• Bodily Injury Coverage: Covers injuries sustained by third parties (not workers) on the job site.
• Property Damage Coverage: Covers damage to third-party property that you aren’t working on. Damage that a forklift causes to an existing retaining wall might be covered.
• Personal Advertising Coverage: Covers false advertising claims and defamation lawsuits. This is a less common issue, but a fairly standard protection.

Because general liability is for claims and lawsuits where another party is harmed, it’s often wise to get a substantial amount of coverage. Many policies have $1 million worth of coverage to start with. You may want to add more via a Commercial Liability Umbrella or Excess Liability Policy, especially if you’re working on large-scale construction projects.

2. Workers’ Compensation for Job-Related Injuries

Workers’ compensation insurance is for job-related injuries and illnesses that employees sustain. In the event of a covered injury, a workers’ comp policy will typically pay medical bills and a percentage of lost wages. Death benefits are paid in the worst tragedies.

Legally Required in Almost All States

All states require employers to carry workers’ compensation for their employees to some degree. Texas is the only state where workers’ compensation is optional, with the exception of construction companies that contract for a government entity.

How a state defines an “employee” may be different than how you, as an employer, define an “employee.” There are certain circumstances in which you could be required to provide coverage for independent contractors and/or sub-contractors if they fail to meet certain criteria. It’s always best practice to require your ICs and subs to provide you with Certificates of Insurance naming your company as ‘Additional Insured.’  This not only verifies that they have their own insurance coverage in place but also serves as an effective way to transfer risk. 

Coverages & Protections

Workers’ compensation insurance covers virtually any workplace injury or illness that’s directly related to an employee’s duties. The most common risks for contractors are job site accidents, and for office workers, repetitive motion injury. Inhaling asbestos or mold repeatedly over many years would possibly also be covered.

3. Inland Marine Insurance

Although this coverage has the word ‘marine,’ in it, it’s not limited to companies operating in the marine industry. Inland marine insurance, as opposed to standard marine insurance, covers equipment, tools, and materials that are being transported to, from, or between job sites, including construction equipment and computers.

Not Required, But Highly Recommended

Although inland marine isn’t legally required in any state, and most customers don’t ask about it, we highly recommend this coverage because some of the materials and equipment contractors transport are worth thousands or tens of thousands of dollars.

Coverages & Protections

An inland marine and installation floaters (for contractors) will typically cover different types of equipment and materials, including heavy equipment, smaller equipment, specialized and general tools, and building supplies while they are being transported and on job sites.

Get Help Determining What Coverage You Need

It’s important to keep in mind that there are other coverage options beyond general liability, workers’ compensation, and inland marine insurance that you’ll need based on your location, the types of projects you’re supervising, and the size of your company.

To get a complete picture of recommended coverages for your business, contact our expert agents at Allied Insurance Managers. As independent insurance brokers, we partner with a wide array of carriers and can help you find the most cost-effective protection.