February 04, 2020
When talking about construction, we often think about large construction companies building huge buildings or stadiums, yet over 23% of construction workers are self-employed.
From electrical contractors and plumbers to roofers and other tradespeople, there are around 2.5 million self-employed contractors in the workforce.
Working for a general contractor or project owner frequently requires a signed contract with an extensive list of insurance requirements just to enter the job site or get paid for your work.
Generally, the larger the project, the more significant insurance requirements you have to comply with. This could include specific additional insured endorsements or large umbrella policies to increase your limits of liability.
Additionally, many projects require that you purchase a surety bond for a certain amount to take a job.
Self-employed tradesmen often need insurance due to a specific state law or statute. For example, hiring a part-time helper could lead to a situation where you need to purchase workers compensation insurance.
Additionally, if you have a work truck, you might have to purchase a commercial automobile policy with certain limits of liability.
If you are a licensed tradesman, chances are you have to purchase some form of business liability insurance or bond to maintain a license with the state.
For example, licensed contractors in Oklahoma must submit proof of insurance to the Construction Industries Board for approval.
The primary reason self-employed contractors purchase insurance is to have income protection. A significant amount of your net worth is most likely tied up in your business; losing it due to a lawsuit would destroy what you have worked hard to build up and hurt your future income potential.
There are many different policies and policy combinations you can buy, depending on the jobs you work on. We won't list everything, but here are three essential coverages that you need to get started.
General liability is the most common self-employed contractor insurance policy. It covers you from bodily injury or property damage you cause to individuals or organizations.
Since you’re in construction, make sure that you have products and completed operations included on your general liability insurance. Some insurance carriers will try to exclude it, but there will most likely be a policy out there with coverage for you.
This covers any damage that your work causes after you leave the job site. Although this type of insurance is important to nearly every contractor, it is especially vital to trades like plumbers or electricians, where a workmanship issue could lead to significant damages or even cause a fatality.
Your tools are specialized and expensive. If you have high-quality tools that you would not want to replace, contractors equipment coverage is a must-have, as it covers the loss of your equipment, whether it be on the truck or at the job site.
You can also get coverage for building materials in storage, in transit, or at the job site.
Although workers compensation is required by law, if you have employees, it is smart to have a worker's compensation policy for any helpers working for you.
Look into your state’s workers compensation laws. In some cases, if a contractor has enough control over another contractor, they could be considered an employee. We recommend talking to a local attorney about whether your independent contractors could be considered employees. If they are, you could be responsible for their medical bills if they are injured.
At LandesBlosch, we suggest purchasing at minimum a no-payroll policy (often referred to as a ghost policy). In many states, the owner of a business is allowed to exclude themselves from coverage resulting in a minimum premium workers comp policy. With this setup, if a helper of yours is injured and it is decided that you are responsible for the medical bills, the policy pays.
Tradesmen have a variety of different needs for insurance. We recommend talking to a reputable insurance broker that can let you know what coverages they recommend for the jobs you are taking.
Not a LandesBlosch client yet? We're here if you need us. Schedule a free consultation to talk about your insurance with one of our insurance experts.