Ready to get to work? Contractors in California have a big job to do. After seeing the most devastating and destructive fires in its history in the fall and winter of 2017, California is now facing a season for rebuilding.
There will be months and even years ahead where rebuilding California will be priority number one.
California contractors, subcontractors, and artisan tradespeople interested in joining the rebuilding effort will need to prepare for the work ahead. That means having your contractor license, insurance, and bonds in good order and ready to go.
But how much insurance is required, what additional coverage is a smart buy, and how do you choose the right coverage for your business (and budget)?
How to Choose the Right Contractor Insurance
Some insurance policies are required to get your contractor license while others are just good for business. Here’s what you need to know to get covered and get building.
Workers’ Compensation Insurance is Required by Law
If you just want to get building as soon as possible, focus on getting your license, bonds and workers’ compensation insurance. Why workers’ comp?
This is the minimum legal requirement for contractors across California, even if you only have one employee. This insurance helps compensate employees for injuries and illnesses suffered during work.
Workers’ comp covers basic expenses such as:
- Medical expenses
- Temporary and permanent disability
- Supplemental job displacement benefits
- Return-to-work supplements
- Death benefits
Workers’ compensation insurance is required for all employers in California, not just construction contractors. Proof of valid, current workers’ compensation is required in order to obtain and renew licenses.
What if you don’t have any employees?
Most contractors won’t need workers’ comp coverage if they have no employees, with the exception of roofers. If you are obtaining a C-39 roofing license, you must carry workers’ comp insurance, whether or not you have employees.
Consider workers’ comp a required, must-have policy. But don’t stop at comp, because there’s one more policy that you should add to your must-have list.
Why Should Contractors Have General Liability Insurance?
General liability insurance can protect you from the most common and frequently-occurring claims that any business owner faces: third-party injuries or property damage.
- General liability insurance is designed to protect you in the event of:
- Property damage claims
- Bodily injury claims
- Completed products claims
If workers’ comp is insurance in the event your employee gets injured because of your business, general liability is coverage in the event a third-party person (homeowner, neighbor, or passerby) gets injured or experiences a loss because of your business.
It may not be a legal requirement, but carrying general liability sets you apart from other contractors who do not carry it. This can help you get more jobs by showing clients that you are serious about protecting them during the construction process.
In fact, showing your level of insurance is required on all bids in California, so potential clients will be able to tell whether you have general liability or not. It’s a smart decision overall to have this coverage.
Three Things Contractors Need to Rebuild California
As California looks forward to rebuilding after devastating fires up and down the state, contractors need these 3 things to be ready to take on the job.
Want to Protect Yourself Against Financial Losses While Building?
Workers’ comp and general liability are like the foundation and frame of your defense structure. But there are additional coverages that you can add to further protect your business and assets as you get to work. You may consider adding the following:
Tools and Equipment Coverage
What would it cost you to replace the tools and equipment you’ve acquired over years of hard work? Tools and equipment coverage, also known as inland marine, covers damage, theft, and loss of tools and equipment so that you can replace it if something happens.
Inland marine coverage can protect you from paying out of pocket for small tool loss, tool/ equipment theft, or damage to larger pieces of equipment. (Large equipment and vehicles typically require their own policies, however.) Carrying this type of coverage can also protect leased and rented equipment.
Builder’s Risk Coverage
Also called Course of Construction insurance, this type of coverage protects against damage or loss to construction sites in progress. If a fire broke out in the middle of a project and destroyed work that you’ve already completed, or materials stored onsite, builders risk would be the policy that would protect you against the loss.
Builders risk typically covers:
- Fire damage
- Theft or vandalism
- Earthquake damage
- Damage to materials in transit or stored offsite.
Builders risk insurance is a smart move if you want to cover your investment in materials, supplies, tools, equipment, machinery, and even completed work while a project is under construction.
Builders risk policies can be taken out by homeowners, project owners, or general contractors. The coverage typically extends to all subcontractors and employees working on the project. The premiums for this type of policy are based on location, deductible levels, construction methods, location and completed value of the project.