Operating a contracting business comes with an array of risks that can lead to substantial costs if not properly insured against. Having the right insurance coverage is crucial for contractors to protect themselves, their employees, and their companies. This article examines the key types of insurance policies contractors should consider carrying.

Workers Compensation Insurance

  • Covers medical expenses and lost wages for employees injured on the job
  • Mandatory for almost all contractors
  • Protects against injury lawsuits from employees
  • Premium costs based on payroll size and risk level
  • Overall, shields against major lawsuits and provides care for injured employees

Learn more about Workers Compensation for contractors.

General Liability Insurance

  • Covers third-party bodily injury and property damage claims
  • Examples: Client injured on worksite, property damage from contractor’s work
  • Protects if contractor is liable for others’ injuries or property damage
  • Vital protection against potentially ruinous third-party claims

Learn more about General Liability insurance for contractors.

Commercial Auto Insurance

  • Covers company vehicles involved in at-fault accidents
  • Pays for repairs to contractor’s and others’ vehicles/property
  • Higher liability limits than personal auto policies
  • Covers work-related use of vehicles
  • Essential protection for company vehicles like trucks and vans

Learn more about Commercial Auto insurance for contractors.

Surety Bonds

  • Required for many public construction projects
  • Types: Bid bonds, performance bonds, payment bonds
  • Provide financial security and construction assurance
  • Allow contractors to take on larger public sector jobs
  • Facilitate approval for public projects

Learn more about Surety Bonds for contractors.

Tools & Equipment Insurance

  • Covers essential tools and machinery against theft, damage, or loss.
  • Often complements a standard commercial property insurance policy.
  • Suitable for both small and large contractors; adaptable to unique needs.
  • Ensures protection for critical assets, from hand tools to specialized equipment.
  • Safeguards against unexpected financial burdens resulting from equipment loss or damage.

Learn more about Tools and Equipment insurance for contractors.

Umbrella or Excess Liability Insurance

  • Provides additional liability coverage above general and auto limits
  • Kicks in when claims exceed underlying policy limits
  • Especially important for larger contractors or hazardous work
  • Protects against bankrupting lawsuits with extra coverage
  • Allows contractors to take on bigger projects with less liability risk

Learn more about Umbrella insurance for contractors.

Completed Operations Liability

  • Covers liability claims arising from past projects, even years later
  • Extends coverage beyond general liability policy term
  • Essential for limiting long-term liabilities from past work

Learn more about Completed Operations Liability for contractors.

Builder’s Risk Insurance

  • Covers construction projects while work is in progress
  • Insures materials, equipment, and the building itself against damage
  • Covers losses like fire, storms, theft, vandalism
  • Keeps projects on track by paying for repair of property damage

Learn more about Builder’s Risk insurance for contractors.

Employment Practices Liability Insurance (EPLI)

  • Protects against claims like wrongful termination, discrimination, harassment
  • Covers legal defense costs and any settlements/judgments
  • Provides protection even if claims are groundless
  • Crucial coverage against potentially massive legal exposures

Learn more about EPLI insurance for contractors.

Cyber Liability Insurance

  • Covers costs related to data breaches, hacking, electronic privacy violations
  • Includes computer forensics, notification, PR crisis management, negotiating with hackers
  • Also covers damages related to stolen customer data
  • Important protection against financially devastating cyber crimes

Learn more about Cyber Liability insurance for contractors.

Directors & Officers Insurance (D&O)

  • Covers board members and top-level executives against claims made by employees, competitors, shareholders, and others
  • Protects against mismanagement claims, securities litigation, regulatory actions
  • Vital for contractors operating as corporations, especially if publicly traded
  • Ensures top-level decisions don’t risk the personal assets of the company’s directors or officers
  • Reduces potential financial strain from legal claims against the leadership.

Learn more about D&O insurance for contractors.

Environmental or Pollution Liability Insurance

  • Covers bodily injury, property damage, cleanup costs from releasing pollutants
  • Applies if operations accidentally release hazardous materials
  • Limits risk when working around hazardous materials
  • Prevents major liabilities that could financially sink a contracting business

Learn more about Environmental Liability insurance for contractors.

Errors and Omissions Insurance (E&O)

  • Also called Professional Liability insurance
  • Covers allegations like failure to meet codes, design flaws, delays
  • Protects against claims of inadequate work or professional negligence
  • Covers legal expenses and any settlement payments
  • Helps mitigate risk of lawsuits threatening finances and reputation

Learn more about E&O Insurance for contractors.

The wide range of contractor risks makes adequate insurance very important. Start with basic policies like workers comp and general liability. Consider adding umbrella, cyber, E&O, and other enhanced coverages. Consult insurance advisors to ensure complete protection. With the right insurance, contractors gain financial security and peace of mind.