Insurance is a must for residential contractors — it protects you and your business if something unexpected happens. And many states won’t grant you a contractor license until you have it.
But how does residential contractor insurance work? Here’s our guide to understanding this all-important safety net for your small business and how to choose the coverage that works best for you.
Why you need residential contractor insurance
Residential contractors work in situations where a lot of things can go wrong, both big and small. In general, the construction industry is considered a high-hazard industry. According to the Bureau of Labor, there were over 16,000 nonfatal injury and illness laborer cases involving days away from work in 2020.
Accidents happen even to the most conscientious professionals, especially when you’re working on someone else’s property where you don’t have complete control over the space.
While all professional contractors try to minimize risk, you can’t reduce every risk to zero. If you have coverage you trust, your business insurance gives you the peace of mind to focus on doing your best job. It also demonstrates to your customers that you’re a reliable professional.
What’s included in residential contractor insurance?
Different situations demand different kinds of coverage. Business owners can customize every residential contractor insurance package to fit their needs.
Here are a few of the most important types of insurance for your business:
General liability insurance
General liability insurance (or commercial general liability) is the insurance coverage that most contractor business owners buy first.
It helps cover costs if you or your employees cause bodily injury or property damage — two of the most common types of accidents that happen on a residential job.
Let’s say your assistant shatters a glass coffee table, or your customer trips over your power cable and gets hurt. In these situations, contractor general liability insurance might help replace the furniture or pay medical expenses up to policy limits.
In many states, you must provide proof of general liability coverage in order to get a general contractor license. Many clients will have general liability insurance requirements before you can begin a job.
Professional liability insurance
Professional liability insurance is also known as errors and omissions (E&O). It can help pay for alleged work oversights that cause a client financial loss.
While this kind of coverage is less fundamental than general liability insurance, it can still make a big difference in protecting your contracting business.
For example, a client could claim you are responsible for construction project overruns. Whether it’s accurate or not, if someone says you didn’t deliver the services you said you’d provide, they can ask you to pay for any losses.
Professional liability insurance can help cover the costs and legal fees to defend your business or fix the problem.
Workers’ compensation insurance
If you’re a residential contractor who hires subcontractors like electricians and plumbers, you could be on the hook if one of your hires gets injured. These injuries happen more frequently than you might think.
Workers’ comp makes those situations easier by helping with medical payments and treatment for illnesses and injuries that happen to you or your employees while on the job. It can also help cover lost wages while recuperating.
This coverage is required by law for businesses with employees in nearly every state. However, the number of employees can vary. For example, in California, if you have one employee, you must have this coverage, while South Carolina requires it for four or more employees.
Commercial auto insurance
In most states, you’ll need commercial auto insurance to cover your business’s work vehicles. Even if you drive your own truck to job sites, it probably won’t be covered under your personal car insurance.
Commercial auto insurance can help protect your business from unexpected expenses if you or your employees are involved in an accident while driving a covered vehicle.
Tools and equipment insurance
Your tools and equipment are essential to running your residential construction business. If they get stolen, lost or damaged, this coverage will help cover repairs or replacements so you can get back to work quickly.
You can add tools and equipment insurance to your general liability insurance.
NEXT customizes residential contractor insurance to your business
NEXT is an insurance company that focuses on helping small business owners thrive, which is why we design our coverage around your needs.
You can view construction insurance options, get a quote and purchase a policy in less than 10 minutes. If you need more than one type of coverage, you’ll save up to 10% when you bundle policies together.
You’ll get access to your certificate of insurance as soon as you make a payment.
Get started with a free quote today.