Contractor Insurance: Seven Policies You Need to Protect Your Business

As a contractor, you face unique risks every day. Some of the most common include accidental property damage and on-site injuries. Having the right insurance coverage can help prevent financial disaster when your business inevitably has a minor mishap.

According to a Forbes study, 90% of all businesses experience a lawsuit at some point in their lifespan. Mistakes will happen, but without the right coverage, they can become catastrophes for your contracting business.

This article reveals the seven policies you need to secure your contracting business. With tips from Central’s Director of Small Business Underwriting, Anne Russo, and Thomas McMillan, a Central commercial lines staff underwriter, you can unlock the essentials of Contractor’s insurance.

Seven Essential Coverages Checklist

According to Thomas McMillan, contractors need the primary insurance coverages below. 

1. General Liability Insurance

This policy protects against third-party claims for bodily injury, property damage, and advertising injury. State licensure requires General Liability insurance, and most general contractors require it of their subcontractors to get on a site. There are additional liability coverages that may benefit your specific trade. Contacting your agent is the best way to ensure you are adequately covered.

Learn More: Pollution Liability Insurance for Contractors 

2. Workers’ Compensation Insurance

Contractor work can be physically demanding, and injuries are common. Workers’ Compensation insurance covers medical expenses and lost wages for injured employees, ensuring the worker and employer are protected. If you have employees, this is highly recommended coverage to ensure they are cared for in the event of a workplace injury.

According to the National Safety Council, nonfatal injuries that require days away from work cost employers $42,000 each. With this coverage, your business won’t incur the financial burden when an incident occurs.

3. Commercial Auto Insurance

Contractors often utilize vehicles to transport expensive equipment, materials, and their employees. Commercial Auto Physical Damage coverage can cover damage to your vehicle fleet, including accidents and theft.

On the other hand, Auto Liability insurance can cover expenses when you’re liable for bodily injury to others or damage to their property. Fleet safety is just as important as job site safety, so you can avoid costly claims that can put your business at risk.

Learn More: Auto Insurance for Large Construction Businesses: How to Choose the Right Commercial Policy.

4. Professional Liability Insurance

Also known as Errors & Omissions (E&O) insurance, this policy protects against negligence or faulty workmanship claims. Professional Liability insurance covers legal defense and settlement costs if a client claims your work was substandard or caused them financial loss.

5. Tools and Equipment Insurance

Contractors use a variety of expensive tools for their work. This insurance provides protection for tools if they are lost, damaged, or stolen. Suppose your tools were to get stolen from your property overnight. In that case, Tools and Equipment insurance ensures you can quickly recover and replace your tools, minimizing downtime and financial strain.

An Inland Marine policy is an option to insure your tools and equipment. This floater policy protects items and tools that are either excluded or covered on a limited basis under a standard commercial property policy. For contractors, an Inland Marine policy can cover repairing or replacing tools and equipment if they are damaged, lost, or stolen, regardless of location.

6. Builder’s Risk Insurance

Contractors work on large-scale construction projects that involve significant time, resources, and financial investment. A Builder’s Risk policy is essential for protecting these projects from various risks during the construction phase. This insurance covers property damage to the structure being built or worked on, whether from fire, theft, vandalism, or severe weather events.

7. Umbrella Insurance

Umbrella insurance provides additional liability coverage beyond the limits of a contractor’s existing casualty policies, offering extra protection against significant or catastrophic claims.

For instance, if you’re facing a major lawsuit due to a severe accident on a job site, the costs might exceed the limits of your General Liability or Commercial Auto insurance. In such cases, Umbrella insurance can cover the excess, not leaving you with debilitating out-of-pocket expenses.

What’s a BOP?

You have constant daily demands if you’re a small business contractor. While you’re focusing on serving your client base, larger companies may have entire departments to handle their insurance needs. A Business Owner’s Policy (BOP) makes things easy without skimping on coverage.

A Business Owner’s Policy is a package policy that combines multiple coverages, including business property and liability, into one. It can be an excellent option for small businesses looking to streamline the quoting process while still having the flexibility to customize their plan.

Central’s BOP

Central is excited to announce our new Business Owner’s Policy that packages a wide range of property and liability protection with small contractor businesses’ needs in mind. The BOP provides over 70 coverages, including Contractor’s Installation, Tools and Equipment, Cyber Suite, Equipment Breakdown, Employee Practices Liability, and more.

“It has all of the coverages contractors would need all in one place,” Russo says. The BOP has everything a typical small contractor needs to protect your business. There’s also plenty of room for customization  by your specific trade.

Central provides an endorsement for installation coverage for every contractor class BOP policy, covering the materials you bring onto a job site. For your equipment, there’s automatic coverage for small tools as well.

Did You Know: Insured contractors can easily add coverage when working with their agents. Insureds can also opt to cover leased or rented equipment within their pre-built Business Owner’s policy.

“We offer a functionality for insureds to easily obtain their certificate through our myCentral system rather than the old way where they would need to make calls and fill out lots of forms,” explains Russo.

“We specifically worked on this for our BOP because we understand contractor jobs move quickly.” Russo says, “Contractors may get word of a job starting tomorrow and need proof of insurance to show their general contractor fast.”

Central is committed to supporting contractors, regardless of the size of your company. For small contractors, Central designed its BOP to cater to all of your needs with a one-stop insurance solution. Contact your agent to learn how Central’s BOP can protect your contracting business.

The Central Difference

Contractors play a vital role in the U.S. economy. The construction industry generates over $2.1 trillion worth of structures annually and employs over eight million people. With such an impactful role in our world, your insurance carrier must recognize and understand your work.

At Central, we pride ourselves on our construction expertise. “We have been moving towards more specialization in the construction industry,” McMillan explains. “We have underwriters and loss control experts with decades of experience specializing in this space.” 

Learn More about Central’s construction underwriting specialist and construction loss control specialist.

“We’re careful with our agency selection here at Central,” says McMillan. “We target agents who know this business well. Who feel strongly about this business. Who are experts in the construction industry.” 

While we provide exceptional customer service and knowledge when handling construction-based claims, we also work hard to prevent them from happening. Insureds can benefit from Central’s robust loss control resources. “Our Loss Control department can assist insureds in developing loss control procedures as well as contractual risk transfer procedures and risk control,” McMillan says.

Central’s Loss Control team works with policyholders to prevent losses and claims before they happen. Our experts visit sites to identify potential exposures and then provide recommendations for improvement. ​​

Learn More about how working with a dedicated loss control specialist helps protect your business.

Work with a Trusted Expert in Contractor Insurance

Whether you’re a Central insured looking to maximize your relationship or a potential policyholder considering working with us, we invite you to learn more about our coverage for contractors or start a conversation with your local Central agent. 

Our hand-picked agent partners will provide you with all the insight you need to ensure you have the right policy for your contracting business.

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