What is contractor insurance?

Contractor insurance is an umbrella term for a group of policies, also known as a contractor insurance package, which protects your business from a variety of risks you may encounter during one of your projects. From your company van breaking down, theft of tools, faulty installations, or even unintended damage to your client's property, general contractor insurance will protect you, your team, and your company's finances in case of emergencies.

While some coverage types are mandatory, you can choose which additional types of coverage you need, and how much you want to be covered for. Understanding the different types of contractor insurance available is essential for selecting a policy that best fits the specific needs of your business and the nature of your work.

Is contractor insurance mandatory in Canada?

In all the provinces in Canada, if you or your company use a vehicle for work, you will have to purchase commercial auto insurance. Also, if you are in Ontario and work in the trades industry, whether you are an independent contractor or running a trades-based business, you must also have commercial liability insurance to receive your business licence. And although commercial liability insurance is not mandatory for the rest of Canada, it is highly encouraged. These two policies - commercial auto and liability insurance - will protect your company, your company vehicle, and your clients in case of accidents or mishaps.

While commercial auto and liability insurance may be legally required, many professionals also choose to get extra coverage for their equipment, storage facilities or any unexpected events that can interrupt operations. In some instances, clients may even demand proof of insurance before signing a contract, ensuring that both parties are protected against unforeseen events.

Who needs contractor insurance?

Contractor insurance is applicable to many trade professions operating in high-risk environments. This includes general contractors who oversee construction projects, electricians who work with live wires, plumbers who navigate potential water damage and landscapers who may use heavy machinery. Even those in low-risk jobs like painters and flooring installers should consider contractor insurance, as injuries can occur, equipment can break down and a client's property can be accidentally damaged.

Here is a list of some of the professions that have insurance.

• Carpenters: Tradespeople involved in precise construction work susceptible to accidents.
• Construction: Those who are working on constructing buildings for both residential and commercial purposes.
• Concrete: Professionals involving concrete work that can pose safety hazards.
• Demolition: Contractors specializing in tearing down structures, facing risks associated with heavy machinery and falling debris.
• Drywallers: Tradespeople who handle plasterboard and other materials in often precarious positions.
• Electricians: Professionals who work with potentially hazardous electrical systems.
• Excavation: Workers who operate heavy machinery and deal with ground risks.
• Flooring installers: Professionals dealing with heavy materials and equipment that may pose risks.
• Handymen and women: Those who provide installation, repair, maintenance an oddjob services.
• Home inspectors: Those who provide home inspection services for potential homebuyers and sellers.
• HVAC technicians: Specialists dealing with heating, ventilation, and air conditioning installations.
• Independent contractors: Freelancers in various trades and services that require liability coverage.
• Junk removal: Services that handle waste and debris, potentially exposing workers to hazardous materials.
• Landscapers: Professionals using heavy machinery and tools that can cause injuries or damage.
• Locksmiths: Professionals who deal with locking mechanisms that may require liability for accidental damage.
• Movers: Usually in groups of two or more, these individuals help with moving and transporting furniture from different locations.
• Painters: Individuals who may work at heights or with hazardous materials.
• Pest control: Technicians dealing with chemicals and potentially hazardous situations when managing infestations.
• Plumbers: Professionals installing or servicing plumbing fixtures in private or commercial buildings.
• Pressure washing: Services that may involve equipment hazards or potential damage to properties.
• Renovation: Contractors managing home improvement projects that could lead to accidents.
• Restoration and remediation: Contractors involved in fixing damages from disasters like floods or fires.
• Roofers: Contractors tasked with roof installation and repairs in high-risk environments.
• Snow removal: Contractors providing snow clearing services who face risks associated with winter conditions.
• Swimming pool contractors: Specialists involved in the installation and maintenance of pools, facing risks associated with water and heavy equipment.
• Tree removal: Workers dealing with potentially dangerous situations while removing trees.
• Welders: Professionals using high-temperature equipment that may cause burns or other injuries.
• Window cleaners: Contractors and businesses who provide window cleaning services.

What type of insurance policies do general contractors need?

• Commercial general liability insurance: This policy is the most common across all business types. It protects your company from any claims of property damage or injury to third parties, which can result from negligence or defective work.
• Professional liability insurance: Also known as errors and omissions (E&O) insurance, this coverage will protect you if a client claims financial loss due to a service you provided, such giving poor advice, missing a deadline or failing to deliver on a service as promised.
• Equipment and tools coverage: Ensures that the equipment you use for your business operations, such as tools or machinery, is protected from theft, damage or vandalism. This coverage will help pay in case anything needs to be repaired or replaced.
• Commercial auto insurance: If you use a vehicle for your business, such as a car, van or truck, this policy will be mandatory. Like car insurance, it will cover replacement or repair costs if one of your company vehicles is involved in an accident. The cost can vary depending on how many vehicles and drivers you want to insure.
  *If you’re company owns more than five vehicles, consider getting fleet insurance as well.*
• Builder's risk insurance: Also known as course of construction insurance, this is a specialized type of property insurance that protects buildings while under construction. It covers different types of damage that can happen during the construction process, which are usually not covered by other policies and out of your control, such as damage or loss from wind, fire, theft or vandalism.
• Business interruption insurance: Also known as business income insurance, it covers you in the event of lost income due to your business operations being interrupted by a covered event, such as a fire or a natural disaster. This may cover your bills for operating expenses, rent, utilities and payroll, depending on the situation. It is meant to help business owners recover and resume operations without falling into debt from a lack of income.

How much does general contractor insurance cost?

On average, contractors can expect to pay between $500 to $5,000, for a small to medium-sized business, annually for a basic policy.

What factors determine your contractor insurance premiums?

The quote for your general contractor insurance is calculated by your risk profile, which includes factors like your specialized industry, the size of your business and the equipment you use. The more risk your business faces, the higher your premium will be. Examples of the factors that insurance providers consider, include:

• Business size and revenue: Larger businesses with higher revenue typically pay more for contractor insurance.
  
• Type of work: The nature of your projects matter. For instance, residential projects will usually have lower premiums because they usually present less risk than commercial projects.
  
• Claims history: Businesses with an eventful claims history will be deemed a greater risk than businesses that have never filed a claim, and this will be reflected by the cost of insurance.
  
• Coverage limits: If you are operating expensive and heavy machinery, or working on large-scale or public works projects, you will want to get higher coverage limits, which will come at a higher premium.
  
• Location: Insurance costs can vary by city and province. Some high-liability areas, such as those that are prone to natural disasters or those that have strict regulations, will come at a higher price.