For $1,000,0000 of general liability coverage, including basic tools and equipment coverage, contractors insurance premiums can start as low as $67 / month.
If you are a contractor, or run a contracting business in the province of Ontario, it’s essential that you have the right insurance to protect your business in the event that work done by you, your employees or subcontractors causes an injury, damage or other loss to a customer or third party. Most customers will insist that you have liability coverage at a minimum, and depending on the kind of tools, equipment and vehicles your business uses, it’s probably a good idea to protect those things as well.
The bad news is that contractors insurance isn’t standard, so the price depends on a number of factors, including the size of your business, the kind of work you do, where you are located, how long you’ve been in business and whether you’ve had claims in the past.
How big is your business?
The good news if you work by yourself and/or if your business is relatively small, is that a smaller business with fewer employees and lower revenues will typically pay lower premiums. For $1,000,0000 of general liability coverage, including basic tools and equipment coverage, premiums can start as low as $67 / month.
What kind of contracting do you do?
Contracting is not one thing. An electrician faces different risks than a general contractor, plumber or landscaper. Depending on the type of contracting you do, your insurance premiums can vary quite a bit. To give you a sense of what kind of premiums you can expect to pay, here are a few things that are considered higher risk, and would lead to higher premiums:
- Working at heights
- Working at or near airports/railways
- Working with heat sources (welding, roofing etc.)
- Working with flammable/explosive materials
- Snow removal
- Working below ground (mines etc.)
- Working with toxic material
- Working with water sources (plumbing, pools etc.)
- Moving or raising structures
- Use of a crane
- Working on ships/docks
This is not a comprehensive list. Your broker will ask you more detailed questions in order to get you the best quote for your contractors insurance.
Where are you?
Just like with home and auto insurance, your insurance company will consider where your business is located, and where you conduct most of your jobs, when deciding on your premium. The fact is that some areas are known to have higher crime rates, and if you work in those areas, it’s that much more likely that your tools or materials will be stolen from the work site, that your van will be vandalized, etc.
How long have you been doing this?
When you talk to a broker, they will ask you how long you’ve been in business (as a company) and how long you and your employees have been licensed in your particular trade. The longer you’ve been doing what you do – both as an individual and as a business – the lower you can expect your premiums to be. (Read the next section for the exception to this rule…)
Have you had claims before?
Your premium is going to be determined based on the insurance company’s expectation of whether or not you are likely to make claims, and how expensive those claims are likely to be. If you’ve made claims in the past, you are more likely to make claims in the future, and this will probably affect your premium. Of course not all claims will affect your premium in the same way. Most insurance companies won’t ask about claims that are older than 5 years. Even if you have a recent claim, if it is fairly small, it may not affect your premium dramatically.
Tip: If you have claims that were under a different business name, it’s a good idea to let your broker know. If you don’t share all potentially relevant information like this, it could void your policy and leave you unprotected if you get sued or lose all your tools in a fire.
Minimum coverage is not the best value
When deciding how much insurance your business needs, ask your broker to provide a quote on different policy limits. Doubling your liability coverage, for example, won’t cost anywhere near double the premium, and may be well worth it.
You should also consider getting insurance for risks that may not be covered by a basic policy. Here are a few examples of coverages that you may want to add on:
- Errors & omissions insurance – Protects you if your contracts include design work, advice or other professional services that could lead to a loss.
- Legal expense insurance – Includes unlimited legal advice in relation to disputes you may have with clients or employees or answers to theoretical “what if” questions. Can also fund legal action to help you assert your legal rights, even if it’s not related to a claim on your contractors insurance.
- Cyber and data breach – Protects you in the event that you are hacked and personal client data is exposed, or if your system is infected or encrypted by a virus.
- Pollution insurance – Protects you if your customer claims that your work caused contamination of their air or water with toxins (solvents, paint, mold, welding fumes etc.)
When you talk to your insurance broker, they should make you aware of the kind of claims that would not be covered by your basic insurance policy, and go over the non-standard coverage options that might be a good idea for your business.