Insurance is the one business cost nobody enjoys and everybody needs. It is also sold in language designed to be skimmed, which is how contractors end up discovering a gap at the worst possible moment.
General liability
Covers damage you do to other people’s property and injuries to people who are not your employees. The drill through the water line, the ladder through the window, the customer who trips over your hose.
$1M per occurrence / $2M aggregate is the common baseline, and most commercial customers and GCs will not let you on site without it. It is also what the certificate of insurance a homeowner asks for refers to.
Workers’ compensation
Covers injury to your employees. Required in nearly every state the moment you have one, and the penalties for going without are severe — in some states criminal.
The trap: if you are a sole owner, you are often exempt, which sounds like a saving right up until you fall off a ladder and discover your health insurance excludes work injuries. Read that exclusion before you rely on it.
Commercial auto
Personal auto policies exclude business use. If the van is lettered, carrying tools, and driving to jobs, a personal policy may simply decline the claim. This is one of the most common and most expensive gaps in the trades.
Tools and equipment
Usually an inland marine policy. General liability does not cover your own tools being stolen out of your own van, which surprises people annually. If a theft would stop you working next week, insure it.
The ones worth knowing exist
- Professional liability / E&O — for design or specification advice. Relevant if you size systems or recommend solutions.
- Umbrella — extra limits over the others, usually inexpensive relative to the cover.
- Surety bonds — not insurance. They guarantee your performance to someone else, and you repay the surety if claimed. Frequently required for licensing.
The gaps that close businesses
- Completed operations excluded or lapsed. Your work can fail two years after you finished; if the policy ended, the claim lands on you personally.
- Claims-made instead of occurrence policies, cancelled without tail cover. The old years become uninsured.
- Uninsured subcontractors. Their incident becomes your claim, and your insurer may charge you workers’ comp premium for them at audit.
- Work you do that the policy class code does not describe. Picking up roofing when you are classified as a plumber is a declined claim waiting to happen.
Put the cost in your rate
Insurance is overhead, which means it belongs in your hourly rate rather than in a vague sense that things are expensive. Contractors who price properly for it stop resenting the renewal.
See how much to charge per hour for where it lands in the number, and warranty terms for what you are promising beyond it.
This is general information, not legal or insurance advice — requirements vary by state and by trade, so confirm yours with a broker who writes for contractors.