There’s no two-ways around it: trades like contracting, carpentry, electrical work, plumbing, and other hand-on professions are more dangerous than your typical office job or small business career. Injuries from sharp or high-powered tools, falls, and toxic materials are all more likely when you work with them on a daily basis. Equipment is generally expensive and sees lots of wear and tear. And sometimes accidents can not only endanger you and your employees, but also clients or mere passersby.
All of these factors combined result in a tough sell to insurance companies. The chance of an accident occurring, and the potential cost of that accident if someone is seriously injured, is simply too risky for many carriers.
But there are organizations that work on behalf of trade professionals to make insurance coverage available for reasonable prices, often on the condition that the small businesses abide by strict safety regulations. But before you can figure out where you should get your insurance, you need to know what insurance coverage you require. Below we’ll review the most common kinds of trade professional insurance.
Let’s say you are an outdoor, home painting service. You finish up a job-well-done on a client’s house and are leaving in your truck. As you turn out of their driveway, your tailgate unlatches and several cans of paint spill out onto the client’s freshly-trimmed yard and rose bushes. Even though you rush to get the garden hose and wash the paint away, large patches of grass and several rose bushes die within a couple days. The client sues you for the cost of the yard-work and groundskeeping service they just had done, which is now ruined. This kind of total accident that is unrelated to the service you performed is why you need general liability insurance for your trade business. It becomes even more important should someone outside the business be injured in an event like this, because the legal damages will be much higher.
Now we’ll assume you are a yard-cleaning service that does hedge trimming and lawn mowing too. While you’re unloading your truck at the job site, the client asks you to come around to the back of the house to discuss the work they want done. A few minutes later, you return to your truck to finish unloading and find your hedge-trimmer missing. You know it was there when you arrived, so someone must have seen it from the street and stolen it while no one was looking. This is a situation that requires property and equipment insurance to cover the cost of a replacement hedge-trimmer. Otherwise, you could be out a few thousand dollars.
The most efficient way to cover both your general liability and equipment insurance is in a combined policy called a business owner’s policy. You can even find a ‘BOP’ that is specifically tailored to your type of trade, which will include other useful coverages that your business might need, and exclude ones that you don’t.
In both examples so far, we’ve mentioned the truck you use to get to your worksite. Even if that truck is technically owned by you and not your business, any accident or damage you are involved in while driving that truck for business purposes (including to-and-from a job site) won’t be covered by your personal auto policy. You’ll need a commercial auto insurance policy for that.
When it comes to professional mistakes that happen during normal operations, such as a failure to deliver what the client requested, or an employee injury, you will also need to protect yourself ahead of time with policies like professional liability insurance (also called errors and omissions), and workers’ compensation, respectively.
Not having professional liability can be devastating for a small business because you can be sued even if you did your work in good faith. While rare, that can be a nail in the coffin for a small contractor’s finances. Meanwhile, every state in the US except Texas requires any small business with employees to have a workers’ compensation policy. It just makes good sense. Without one, you are liable to be sued by injured employees, and not guaranteeing your employees are covered in the event of a workplace injury can breed a lot of mistrust. A workers’ compensation policy takes care of all of that.
And lastly, if you are particularly worried about big lawsuits (say, if your carpentry business specializes in restoring antique furniture that can be worth tens of thousands of dollars), you should consider umbrella liability protection, which extends the limits you can claim on all your other liability policies. For many businesses, it isn’t necessary, but for some, it can mean the difference between surviving a tough year and going under.
For more information on what insurance your small trade business needs, please contact a trained insurance professional.
