Whether you're an electrician wiring a new home, a plumber repairing a leak, or a builder working on major renovations, your work comes with inherent risks.
Accidents, stolen tools, or unhappy customers can threaten your income and financial security. That's why having the right insurance is not just smart—it's often necessary.
Below, we'll explore the main types of insurance every tradesperson in Canada should have to protect their business and meet legal or industry standards.
General liability insurance
General liability insurance is the foundation of protection for many tradespeople. It covers third-party claims for bodily injury and property damage.
What does it cover?
General liability insurance includes coverage for:
- Bodily injury: If someone, like a client or a site visitor, trips over your equipment and gets injured, this insurance can cover medical expenses, legal fees, and even compensation for pain and suffering. Bodily injury claims are among the most common risks businesses face, highlighting the importance of this protection.
- Property damage: Accidental damage to a client's property—like breaking a window while installing HVAC equipment—can quickly become expensive. General liability insurance covers the repair or replacement costs in such cases.
- Legal defense: If a third party files a lawsuit against your business, this insurance helps cover associated legal fees, even if the claims are unfounded.
Is general liability insurance required for your business?
General liability insurance is often a baseline requirement for tradespeople bidding on contracts, and many provinces have regulations that mandate liability coverage for specific trades.
For instance, contractors in Ontario working on projects above a certain value may need proof of insurance before obtaining permits. Typically, the cost of contractor's insurance starts at $425/year for the basic $2,000,000 general liability coverage.
Also, professional groups and unions sometimes set rules for members to have a minimum amount of insurance to ensure safety and trust. By following these rules, tradespeople in Canada can protect themselves and their clients, making sure everything runs smoothly and professionally.
Professional liability insurance
While general liability covers physical damage, professional liability insurance (also known as errors and omissions insurance) protects you against claims of negligence, inadequate work, or mistakes in your professional services.
What does it cover?
Professional liability insurance includes coverage for:
- Negligence: If a tradesperson is accused of not performing their job to the expected standard, it can lead to financial loss or damage. For example, if a plumber incorrectly repairs a pipe, it could result in a severe leak that damages the property. The homeowner may then demand reimbursement for repairs and cleanup. Without this coverage, tradespeople would have to bear the full cost of these claims, which could quickly add up to thousands—or even tens of thousands—of dollars.
- Errors and omissions: Covers mistakes or oversights in the services provided. For example, if an electrician installs faulty wiring that causes damage, this insurance can cover the costs. This coverage is particularly important for professionals in service-oriented fields like electricians or architects, as even minor errors can have serious financial or reputational consequences.
- Legal defense: If a client files a lawsuit against your business for professional errors, this insurance helps cover legal fees, even if the claims are unfounded.
Is professional liability insurance required?
Not all provinces in Canada require professional liability insurance like Alberta and Saskatchewan, but it's a good idea for tradespeople to have it to protect against lawsuits.
Some professional groups and unions recommend that their members have a minimum amount of insurance to ensure safety and trust. For example, some tradespeople like electricians and plumbers might need coverage starting at $1,000,000 per claim and $2,000,000 total per year.
Read more: Professional vs. general liability insurance: What coverage does your business need?
Tools and equipment insurance
Your tools are central to your work and replacing them can be expensive if they are stolen or damaged, and for tradespeople who depend on costly equipment like power drills, saws, or welding machines, this coverage can make all the difference.
What does it cover?
- Coverage for theft: Tools and equipment insurance provides protection if your tools are stolen, whether they’re taken from a job site, your vehicle, or a storage location. Given that equipment theft is a common problem, especially for businesses in trades like construction or landscaping, this coverage can be vital. For example, in Ontario alone, it's estimated that between $15 and $20 million worth of heavy construction equipment is stolen each year.
- Coverage for damage: Equipment can get damaged in a variety of ways, from accidental drops to weather-related incidents. Tools and equipment insurance makes sure that you won’t bear the financial burden of repair or replacement in these situations.
- Coverage for loss: If tools are accidentally lost, the insurance steps in to cover the cost of replacements. This is especially important for tradespeople like electricians and plumbers who frequently transport equipment between job sites, where misplacement is more likely to occur.
Is tools and equipment insurance required?
While there is no legal requirement mandating this type of insurance, many insurance providers offer tailored plans for tradespeople, including comprehensive tools and equipment insurance. Providers often bundle this with liability coverage, making it easier to manage multiple policies under one roof.
Installation floater insurance
Installation floater insurance is tailored for contractors, builders, and businesses handling expensive or fragile materials and equipment as part of installation projects. This type of policy protects materials during transit, storage, and installation on-site.
For example, if you're a contractor transporting expensive kitchen cabinetry and it gets damaged in transit, installation floater insurance can cover the cost of repair or replacement.
What does it cover?
Similar to tools and equipment insurance, installation floater insurance provides coverage for theft, damage, and loss. It comes in handy for these common scenarios:
- Theft of materials stored at a job site overnight.
- Materials damaged in transit from the supplier to the client’s site, which is common given Canada’s unpredictable weather and the potential long distances between job sites.
- Damage caused during installation, such as scratching flooring tiles you’re placing.
Is it required?
While this type of insurance isn’t mandatory, many Canadian projects, especially those in industries like construction or HVAC installation, require tradespeople to carry this insurance to safeguard ongoing work. It offers peace of mind that your investment in materials won’t be at risk during the process.
All four insurance types are meant to offer you peace of mind by protecting your livelihood as a tradesperson, so it isn't just about compliance.
General liability insurance shields you from accidents and property damage claims, while professional liability insurance addresses concerns about the quality or adequacy of your work. Tools and equipment insurance keeps your essential gear secure, and installation floater insurance provides coverage for materials during transit and installation.
By understanding these coverages and tailoring them to your specific trade, you can focus on what you do best—providing quality craftsmanship, knowing you’re supported if the unexpected happens.
Read more: Why does your small business need worker's compensation?
