Handyman Insurance 101
Are you working as a handyman? Then you should have handyman insurance. In this post, we are going to explain the most common types of insurance for handymen and why they are important. We will also go over factors that influence costs so you can maximize your savings while still getting great coverage.
First of All, Are You a Handyman … or a General Contractor?
Before you begin shopping for insurance, you should really make sure you understand whether you are a handyman or a general contractor. The line between the two is somewhat blurry, and depends in part on your location.
Generally speaking, handymen:
- Work on their own.
- Are not licensed.
- Handle small projects.
Technically, if you are truly classified as a handyman, you likely have no legal need for insurance, because you do not have a license to maintain.
But your state may consider you a contractor. You probably still will not be required to get the insurance to obtain or maintain your contractor’s license. But laws vary from state to state.
Next Insurance provides a rundown of states and their laws with respect to handymen, contractors and licensing. Here are a few examples:
- If you are a handyman in Alabama, you do not need a license unless you are working on a project that is worth over $50,000. At that point, you are considered a general contractor, so you have to get licensed as one. You also will need a license if you are doing anything with plumbing, electrical or mechanical elements.
- California has much more rigid requirements for licensing. If the job you are working on is valued at over $500 (yep—just $500!), then you are required to get a license as a general contractor. There are some exceptions; you will need to check with the state for full details.
- Michigan: You do not require licensing as a handyman for some types of tasks. But for others (i.e. painting, carpentry, etc.), you do.
Those are just a few examples. There is quite a bit of variation from state to state. Some local municipalities also have requirements of their own for handyman licensing, so make sure you do not overlook them.
Do Handymen Need Insurance?
All right—by now you should have figured out your classification in your state: handyman or contractor.
You probably do not legally need to purchase insurance to do your job, regardless of your classification.
But again, you need to look up the requirements for your classification and state, just to be certain. Exceptions do exist.
Now that the legal discussion is out of the way, let us say this: Even without a legal mandate, it is still very important for handymen and contractors alike to buy insurance.
Here are a few reasons why you need insurance:
- Accidents happen. While you are working, you might drop a hammer, which then falls and strikes a child or breaks a glass table. Even with the simplest type of handyman work, it is possible for injuries and property damage to result. Insurance can help to cover these costs.
- Have employees? Then you are legally required to purchase workers’ compensation. At this point, your state is more likely to consider you a contractor than a handyman. Regardless, you need to protect your workers.
- Mistakes occur. Maybe you give your client bad advice on mistake, and they end up with damage in their home as a result. They could sue you for your error. You can turn to your handyman insurance to help pay for your legal expenses and any property damage costs they are awarded.
- Insuring your business boosts your reputation. Just by advertising that you are insured, you project an air of greater legitimacy than you would otherwise. Potential customers are more likely to trust you—and hire you.
- Some projects might require certain types of coverage. By getting the insurance and bonds you need, you give yourself a chance to win these contracts.
Types of Handyman Insurance
Now that you are familiar with some of the reasons it is important for you to be insured, let’s go over the most common types of insurance for handymen.
- General liability insurance: One of the most important types of insurance for handymen is general liability coverage. This type of policy may pay out if you injure a third party or damage their property. We recommend that if you can afford to buy only one type of policy as a handyman, you get this one.
- Errors and omissions insurance: If you can afford just one more type of insurance as a handyman, we suggest purchasing this form of coverage, also called “professional liability insurance.” This type of policy can pay out if you are accused of negligence that resulted in damages.
- Commercial auto insurance: As a handyman, you probably spend a lot of time commuting around your area from one job site to another. That is a lot of time in your vehicle for something to go wrong. You can cover your commercial vehicle with a commercial auto insurance policy.
- Commercial property insurance: Just as a commercial auto policy covers damages to your work vehicle, commercial property insurance can cover certain damages to other types of commercial property. Tools and equipment may be excluded and require a separate policy (more on that shortly).
- Business owner’s policy (BOP insurance): If you plan on buying both a commercial property insurance policy and general liability insurance, you may as well roll them into a single combined policy known as a “business owner’s policy,” or “BOP.” The cost for a BOP is typically less than it would be for each of the policies purchased individually.
- Workers’ comp: If you have employees, you have to purchase workers’ compensation to abide with the law. If anyone working for you gets injured or sick on the job, the workers’ comp policies will offset lost wages and cover medical expenses.
- Tools and equipment insurance: As a handyman, you rely on your tools and equipment to be in working order each day. But what if you lose a tool, break one, or someone steals one? By purchasing tools and equipment insurance, you can protect your equipment. This policy can pay out toward repair or replacement.
- Business income insurance: To continue what we were discussing above, imagine the tool that was damaged or stolen is so critical to your daily work that you cannot do anything without it. While you are waiting to replace or repair it, you will be losing income you would otherwise have earned. You can get a payout toward that lost income with business income insurance.
- Surety bonds: A surety bond is a product that pays out in situations where you start a project, but cannot complete it. The customer receives the payout, and you must then pay back the company that provided you with the bond. The swift reimbursement to the customer helps you to maintain your solid reputation. It is common for bonds to be required to work on certain projects at all.
Note: Sometimes you will see products marketed as “handyman insurance.” These typically are bundles of several of the types of insurance you see listed above. You will need to check the details of the offerings to know exactly what is included. You can always tack on additional policies if you need more coverage than the handyman insurance package includes.
Also note that there may be additional types of coverage you can buy as a handyman that are not in this list. Investigate your options in-depth when you are comparing quotes to see if there is anything else you could use.
Now you know about the different types of insurance handymen can get. But what can you expect to pay for it?
We have seen premiums ranging anywhere from $400 a year to $1,000 a year. Typically, costs are close to $800 per year.
That is pretty affordable, but as a small business owner, you might need to save every dime you can. Let’s take a look at some of the factors that account for differences in pricing.
What Factors Affect the Cost of Handyman Business Insurance?
- The size of your business: Handyman insurance costs can range depending on how large your business is. While the majority of handymen work by themselves, some may have subcontractors or employees. With a larger payroll and more workers and vehicles, your costs for workers’ comp and other types of handyman insurance can climb.
- The types of work you perform: If you perform relatively low-risk tasks as a handyman, that will help keep your insurance costs low. But if you do particularly risky work as part of your job, you are going to see that reflected in higher costs for handyman insurance.
- Types of policies you buy: Some handymen just purchase general liability insurance and maybe errors and omissions coverage, and that is it. Their costs are often relatively low since they only have a couple of types of policies. Other handymen may pay for commercial property insurance, tools and equipment insurance and additional policies. Combined, their insurance costs each month will be higher. Starting out on a shoestring budget? You can just grab general liability coverage and add other types of coverage later when you are earning more money.
- Where you operate: If you drive around downtown and climb up on high ledges or work in construction zones or other risky settings, it makes sense that your insurance costs will often be higher. If you just work in houses in the suburbs and don’t go up on the roofs or anything, you probably will have lower costs.
- Your work experience and safety record: If you have been working as a handyman for years and you do not have a history of insurance claims or problems, you might qualify for a more competitive rate than a new handyman or one with a poor safety track record would.
- Your coverage amounts: Policies with high coverage amounts pose more risk to insurance carriers, so they are more expensive. If you want to reduce your monthly premiums, try reducing these amounts.
- Your deductibles: If you choose a plan with a high deductible, you are taking on more risk, and the insurance company is taking on less. As a result, your premiums can be lower. Consider this option to cut costs if you are up for it.
- Bundling: By bundling together multiple policies from one insurance company, you may have the chance to save on handyman insurance.
- Other discounts: Insurance companies may offer other discounts to handymen. Ask the companies you are considering what types of discounts they make available.
- Project requirements: If you are purchasing a policy for a particular project (i.e. a bond), you might need to meet specific requirements in terms of amounts. Plus, the risk involved with that particular project might have an impact on your costs.
- What company you choose: Insurance companies feature different underwriting procedures and pricing. That mans that you have to get quotes from more than one insurance carrier if you want to find the best deal for handyman insurance.
Where to Get Handyman Insurance Quotes
Now you are familiar with handyman liability insurance requirements and recommendations.
Even though there is likely no legal requirement in your state for you to insure your handyman business, you should do so in order to protect your business.