What Insurance Does an Electrical Contractor Need?
Electrical contractors provide a vital service, but as valuable as their skill may be, their work is inherently dangerous. Having the right electrical contractor insurance will help protect against financial risk if an accident or injury occurs while working a job.
But what type of insurance do these contractors need? Let’s take a closer look.
Electrician Insurance Requirements
As an electrical contractor, your state likely has insurance requirements that you must meet in order to obtain your license. Every state has its own requirements, so be sure to do your research and understand your local laws before obtaining your insurance.
Many things can go wrong on a job, and accidents can happen. Working with electricity is a dangerous job, and the risk of injury or damage is high. Without the right coverage, you will be financially responsible for damage and injuries if an accident happens on the job.
Even if your state does not have insurance requirements, general contractors and customers will.
Generally, electricians carry $500,000-$1 million in liability insurance. However, you may need more or less coverage, depending on your location and the services you offer.
Along with liability, you will likely need other types of insurance to cover all of your financial risks.
Electrical Contractors Insurance Coverage
Electrical contractors will need a wide range of insurance coverage to protect their business. The types of insurance you need will depend on whether you have employees and a physical place of business.
Some of the most important coverages for electrical contractors include:
General liability is one of the most important types of insurance for electrical contractors. It covers:
- Damage to third-party property
- Injuries to third parties
- Legal fees and judgments
- Reputational harm
- Advertising injury
If you’re installing a new sub-panel and damage the wall or a piece of art hanging on the wall, your general liability insurance will cover the cost of repairing the wall or replacing the artwork.
Many states require electricians to have this coverage in order to get licensed. Even if not, customers will likely want to see that you’re insured before they hire you. And if you’re leasing a commercial space to run your business, your lease may require you to have insurance.
General liability provides coverage for some of the most common incidents that affect businesses. Having this coverage can help you grow your business and land more jobs. It allows you to work with peace of mind that you’re covered if the worst should happen.
Errors and Omissions (E&O) insurance is sometimes referred to as professional liability. It’s important coverage to have if you’re working as a contractor.
Even the most experienced electrical contractor can make mistakes, and those mistakes can be costly.
Contractors’ E&O can help protect your business if you’re accused of making a mistake and it costs the customer more money to fix the issue.
Professional liability can cover:
- Claims of professional negligence, mistakes or missed deadlines
- Legal judgments and defense
If a customer claims that you overloaded the circuit and caused a failure, your professional liability policy can cover the cost of resolving the problem.
Depending on your business model and the services you offer, you may be required to have this coverage to land jobs. General contractors will often require this insurance before signing a contract with electrical contractors.
As an electrical contractor, you likely have a work vehicle that you use to get from one job to another. Your personal auto insurance likely won’t cover an accident if you’re using your vehicle for commercial purposes.
To protect your work vehicle, you will need commercial auto insurance, which will cover:
- Medical expenses
- Collision repairs
- Reimbursement for rentals
Commercial auto insurance is vital for electrical contractors, and it will also cover additional company vehicles that employees use to travel to and from job sites.
Workers’ compensation is required in most states if you have employees. You may even need this coverage before getting your electrician’s license. This form of insurance will cover employees’:
- Medical expenses
- Lost wages
However, one of the key benefits of workers’ comp is that it removes liability from the employer for injuries or sickness that occurs on the job.
Tools And Equipment
You and your employees will need tools and equipment when on the job. It’s up to owners to have tools and equipment insurance to protect all supplies and equipment necessary in their day-to-day operations.
A tools and equipment policy will cover things such as:
- Damaged equipment past the warranty date
- Borrowed equipment from other contractors
- Stolen tools
If you or your own employees must bring tools to a job, you need tools and equipment coverage. Items such as drills, ladders, safety gear and others are covered. However, your insurance will not extend to basic wear and tear, such as rust, corrosion or equipment that breaks during normal use.
As an electrician, you may have thousands of dollars in equipment covered under one of these policies.
Electricians often need a physical address to operate from. If you own or rent a commercial space, commercial property insurance is a good option and may cover things such as:
- Business equipment and tools
- Building itself
- Major equipment failure
- Business income interruptions
In the event that the property is damaged by fire, flooding, wind or other incidents, commercial property insurance may help absorb these costs. A few of the many items covered by commercial property insurance include:
If the structure sustains damage, you’ll be covered. It’s crucial to work with an insurer who can customize your policy to ensure your most important property is covered when you file a claim.
How Much Does Electrical Contractor Insurance Cost?
Business insurance for electrical contractors has a wide range of prices. If you’re a solo electrician, your costs will be significantly lower than someone who has a team of employees.
Additionally, your costs may be different based on:
- Personal property protection limits, such as the value of your tools
- Number of commercial vehicles that you have in operation
- Total number of employees
Also, there may be a per-incident limit, and you’ll pay more for higher limits.
For example, you’ll pay:
- $550 annually for general liability insurance with a $1m occurrence limit
- $3,300 per year for worker’s compensation
- $1,700+ per year for commercial auto policies
- $500 annually for tools and equipment coverage
- $1,100 per year for professional liability insurance
Of course, you may have commercial property insurance, which will only add to this total. Based on the estimates above, you’ll pay somewhere near $7,200 per year for insurance premiums. Commercial property is likely to add an additional $1,200+ to this total.
Add in a bunch of autos, more equipment and workers, and this figure is likely to rise even higher.
However, with costs varying greatly from state to state, these figures may be lower or higher than what you will pay for insurance.
Note: You’ll find plenty of companies willing to sell you an assortment of electrical contractor’s insurance, including things like business interruption insurance. You’ll need to go through each of these additional forms of business insurance for electrical contractors to determine if the coverage is worthwhile for you.
Filling out quote forms and comparing insurance options from multiple companies will help you learn the going insurance rates for your business. It’s always better to have too much insurance than be held liable for larger liabilities.