Contractors insurance in Texas is a big deal. It’s no secret that Texas is a growing state. And, as such, many contractors are needed for the new residential and commercial growth that is spurred by folks moving to Texas from other states.
Many of these contractors may be new to Texas and will typically buy just the insurance protection required for the state license. In many cases, these policies are purchased quickly from a busy agent and the contractor is not well-informed about coverages and exclusions.
To make matters worse, many small contractor businesses will get insurance advice from other contractors which may or may not be the best way to learn about protecting your business.
The most common insurance mistakes are typically due to bad advice so in this article, we’ll discuss the 10 most important facts about contractors’ insurance in Texas.
Your Business Vehicle should be Covered Under a Commercial Auto Policy
In most cases, a personal auto policy will exclude any vehicles used regularly for business. A commercial auto policy is the best way to protect your business vehicles because it provides higher limits, pays for repairs and medical costs, and most importantly, will pay for legal fees if you are sued because of an accident.
Neither Personal nor Commercial Auto Insurance covers Your Tools and Equipment
This is a mistake that many new artisan contractors make. They think that if a tool is in their truck and is damaged or stolen, the commercial auto policy covers it but unfortunately, such is not the case.
To protect your valuable tools and equipment while in transit, at the job site, or in storage, a contractor should purchase Inland Marine insurance (tool & equipment coverage) so if your tools or equipment are damaged in a crash or stolen, you’ll be able to replace them after a claim.
Your Contractors General Liability Insurance has a Limit
Don’t make the mistake of finding out after a claim that your general liability limit is not high enough to pay damages after a claim. You pick the limits when you purchase the policy and if they don’t offer more than $1mil in liability, consider an umbrella policy.
Remember, any liability amount that you are responsible for that will not be covered by your policy will be covered by you and/or your business. Why take the chance of losing everything you’ve worked for to save money on your insurance policy?
Always consider a Commercial Umbrella Policy
It seems like anytime you hear about a contractor going under because of a customer claim, that contractor did not purchase enough insurance to protect himself and his business.
If your general liability coverage maxes out a $1million, get an umbrella for at least another million. The same rule should apply to your commercial auto policy. Get the umbrella to protect your business!
Always carry Workers’ Compensation whether it’s required or Not
If you have employees or subcontractors that work for you, it would be foolish not to carry Workers Compensation insurance even if Texas doesn’t require it.
If you decide to forgo carrying workers’ comp, you must report it to the state and any work-related illnesses or injuries to the Texas Division of Workers’ Compensation.
If your employee or uninsured contractor is hurt on the job, it is your business’s responsibility to foot the bill for their medical expenses. Knowing this, every Texas contractor should carry Workers’ Compensation and make sure any subcontractors they hire carry Workers’ Comp also. Get a verified certificate of coverage and update it every year.
If, however, you are an artisan contractor with no employees and no uninsured contractors, it makes sense to forgo the Workers’ Comp if you have health insurance that doesn’t exclude work-related injuries or illnesses.
Texas will do everything possible to protect its citizens from Uninsured Contractors
The Texas Department of Insurance takes great efforts in warning Texans about uninsured contractors. Knowing this, every contractor should have copies of current insurance certificates for their customers and prospective customers.
And, to show how careful you are, invite the customer to call your agent to verify that the certificates you provided are valid. Since the local news loves to show stories about contractors accused of ripping off consumers, let your customers know that you and they are protected under your insurance policy.
Beware of “dirt-cheap” policies from shady Agents.
In Texas and almost every other state, there are good agents, not-so-good agents, and scoundrels. Make sure you do business with an experienced and reputable agent who represents only highly-rated insurance companies.
You can easily check with the Texas Department of Insurance to make certain an agent is licensed and in good standing with the department.
Unfortunately, with today’s technology, almost anyone can fake a certificate of insurance and declaration page, so don’t get caught with a bogus policy that provides no coverage.
Never put off Reporting a Claim or Potential Claim to Your Insurance Company
Anytime you think a customer is going to report a claim about an incident related to your business, CALL THE INSURANCE COMPANY AND TELL THEM WHAT HAPPENED.
Your general liability policy is responsible for your defense costs if a claim is filed against you, and keeping a possible claim a secret could put you at risk.
Right down all of the facts concerning the incident before you call and be prepared to answer an adjuster’s questions truthfully. The insurance company doesn’t want you to be liable for a claim they have to pay for so help them help you.
Your General Liability Insurance Protects Your Business and You
Your general liability insurance is designed to protect your business and you as the business owner from property damage or injuries that you or your employees might cause while working for a customer.
Even if you are renting an office or shop for your business, your general liability policy will cover you and your business as a tenant.
Finding the Best Contractor Insurance in Texas is Easy!
There are hundreds of licensed insurance agents in Texas who will be happy to sell you a policy for your contracting business, but are they experienced in the construction and contracting industry?
Fairbanks Insurance Brokers are experienced and reputable agents who know about the construction and contractor industry backward and forwards.
We are license in almost every state and represent highly-rated insurance companies that will meet your needs at a price that you can afford.
Here is What We Recommend
General Liability: Contractors General Liability will be the foundation of protection for your business. The coverage will respond if you or your employees are found liable for bodily injury, property damage, or have a products/completed operations complaint. The coverage also covers defense costs for your business to respond to any lawsuits brought by a third party.
Workers’ Comp: Many states will require contractors to provide workers’ compensation coverage for their workers before they can begin a project. Accidents will happen at the job site that can result in an employee becoming injured and missing work. Your workers’ compensation coverage will provide financial assistance for medical expenses and lost wages.
Surety Bonds: It’s very likely that your state will require you to be licensed before you can begin operations. Most states and customers will require contractors to offer a license or surety bond before you are allowed to bid on a job or begin working.
Commercial Auto: Typically, most contractors will have light and heavy vehicles that require commercial auto insurance to make certain their vehicles can be repaired or replaced in the event of an accident, vandalism, or theft.
Tool Coverage: Also known as Inland Marine Insurance, this policy will provide for reimbursement for expenses to repair or replace tools and equipment. Your tools represent an important part of your livelihood, so we always encourage carpentry contractors to consider this valuable coverage.