Illinois Business Insurance Requirements
If you are starting up a business as a contractor in the state of Illinois, one of your first questions is going to be, “What types of insurance do I need to operate?”
In Illinois, you are legally required to purchase workers’ compensation. In this post, we will tell you in-depth about this requirement as well as explore other types of insurance that contractors in IL should purchase.
We will then offer you recommendations for where you can purchase Illinois commercial insurance.
Do Independent Contractors in Illinois Need Insurance?
You do need insurance to legally operate your independent contractor business anywhere in the state of IL.
There are also some other important reasons to take out insurance policies for your contractor business:
- Clients may require you to purchase insurance to be eligible to work on their jobs.
- You can protect your employees and your equipment by taking out insurance policies.
- If something goes wrong on the job and a client sues you for damages, insurance can help pay the costs.
- Just having a bonded and insured business can boost your reputation and help you get clients.
- When your business is properly insured, you can work with greater peace of mind.
What Types of Commercial Insurance are Legally Required for Illinois Contractors?
The state of Illinois only requires one type of insurance for you to legally operate a contractor business. That type of insurance is workers’ compensation.
This requirement is only applicable if you have employees. If you are working by yourself, you do not need to purchase it.
Workers’ compensation is the type of insurance that helps pay medical costs and cover lost wages if your workers get sick or injured on the job.
Are there any exceptions? Hiscox states, “Only sole proprietors, business partners, corporate officers, and members of LLCs may choose to exempt themselves—but that option typically does not apply to companies in the construction business or in other ‘extra hazardous’ industries.”
As a contractor, you are in the construction business. That means that if you have employees, you need to get workers’ compensation, regardless of your business structure.
What happens if you don’t get workers’ comp like you are supposed to? Then you get a fine. Hiscox explains, “Since 2006, the Illinois Workers Compensation Commission has collected over $7 million in fines from companies without workers compensation insurance, which can be up to $500 for every day of noncompliance, with a minimum fine of $10,000. If the company does not or cannot pay this penalty, its corporate officers can be held personally liable—and if the corporate officers are found to have knowingly failed to obtain insurance, they are guilty of a Class 4 felony.”
You might also have to deal with work-stop orders and/or civil lawsuits. These are all very good reasons to make sure you are all set with workers’ comp according to state requirements.
Types of Contractor Insurance in Illinois
Even though workers’ compensation is the only type of Illinois commercial insurance that is legally required, it is not the only type of insurance you should get.
We recommend you also get these types of small business insurance Illinois policies:
- General liability insurance: If you are accused of damaging another person’s property or injuring someone else, you can fall back on your general liability insurance to cover the costs.
- Errors and omissions insurance: Also known as professional liability insurance, this type of policy helps cover damages resulting from negligence or perceived negligence.
- Commercial auto insurance: This is like personal auto insurance, except that it is for covering your business vehicle while you are using it on the job.
- Tools and equipment insurance: As a contractor, you have a great deal of valuable tools and equipment that you rely on to carry out your work each day. Using this type of insurance policy, you can cover them in case they are damaged, lost or stolen.
- Surety bonds: A surety bond can pay out to a client if you are unable to complete a job due to weather, a fire, etc. You do need to pay back the amount, but it ensures a rapid reimbursement is possible for your client. Often, you need to purchase surety bonds with certain minimum amounts to get specific contracts. Learn more about bonding for contractors.
- Business income insurance: If there is a disruption to your business that prevents it from operating for a time, you can cover the lost income using this type of insurance.
Contractors in Illinois often purchase a business owner’s policy (BOP), which combines general liability insurance and commercial property insurance.
Note that we have only gone over some of the most popular commercial insurance products for Illinois contractors. You may find additional types of coverages that are also valuable to your business.
What is the Cost of Contractor Insurance in Illinois?
For your legally required workers’ comp, we have seen an average of around $265 a month listed for contractors in Illinois and beyond.
Other types of insurance for contractors tend to average anywhere from $8 a month to $200 a month individually, depending on the type of policy you are getting.
What can affect the cost to insure your Illinois contractor business?
- The type of contractor business you run: The cost to cover a plumbing business is not the same as that to cover an electrical business, which is not the same as that to cover a construction contracting business, and so on. The type of business you operate will impact the types of policies you need and the prices you are quoted.
- The amount of coverage you buy: You will be able to choose from varying coverage amounts when you purchase Illinois commercial insurance. Higher amounts of coverage have higher premiums.
- Your deductible: Another factor that affects the cost of contractor insurance is the amount of your deductible. Raising your deductible means paying more out of pocket before your coverage pays out. But it also can reduce the cost of your premiums.
- The size of your business: Larger, more complex contractor businesses tend to have more risk factors. As a result, they usually cost more to insure than smaller businesses.
- Your location: If you are running a business in downtown Chicago, you are probably going to be dealing with more risk factors than you would if you only operate in a small rural town. So, your location impacts your costs. The size of your area of service does as well—especially if you spend a lot of time on the road getting from one jobsite to another.
- Your payroll: The more workers you have and the bigger your payroll is, the more expensive it will be to purchase your required workers’ compensation.
- Your equipment value: The more expensive your equipment is, the more it would cost to repair or replace if something happens to it. As a result, you may have to pay more for your insurance if you have high value machinery, tools and supplies.
- Discounts: As a contractor, you may qualify for a variety of discounts through your carrier. Which discounts are available depends on the carrier you choose. One common example of a discount is savings you get by bundling multiple types of insurance policies from a single carrier.
- Claims history: If you have a long history of performing your work safely and few or no claims on your record, you probably will qualify for competitive insurance premiums. But if you have a record of frequent claims, you will pay higher premiums due to the increased risk you pose to insurance companies.
- Carrier: Finally, your choice of carrier impacts your costs for insurance in multiple ways. Both the discounts and options available may vary from one carrier to another, as might the underwriting guidelines for commercial insurance policies.
Where to Get Illinois Commercial Insurance for Contractors
Now that you know what types of insurance you need and how you can keep your costs down, let’s take a look at some top carriers for Illinois contractor insurance.
1. The Hartford
The Hartford has been in business for more than two hundred years. As you would guess, it is headquartered in Hartford, Connecticut. This carrier can offer you general liability insurance, commercial property insurance, business income insurance, professional liability insurance, workers’ compensation and other forms of commercial coverage for your Illinois contractor business.
This company receives excellent ratings and reviews from customers, so it can be a great choice to maximize your satisfaction.
Hiscox is an insurance company that specializes in providing coverage to small businesses, including contractors such as handymen, carpenters, electricians, painters, HVAC professionals, plumbers, construction contractors, and others.
Types of policies you can purchase from Hiscox for your contractor business include general liability insurance, errors and omissions insurance, business owners policies, workers’ compn and more.
When you work with Hiscox, you can fully customize your policies so you get the exact coverage you need. The company states that the coverage they provide “satisfies most standard contract insurance requirements” for professionals in this field.
Your coverage applies in the state of Illinois and worldwide, so if you expect to expand your business in the future, that is good to know. You will also appreciate being able to work with a dedicated claims representative if you need to fall back on your policies.
3. USA Business Insurance
Another option worth considering for your commercial insurance in Illinois is USA Business Insurance. Like Hiscox, USA Business Insurance specializes in working with small businesses like yours.
Some of the types of commercial insurance you can get from this company include general liability insurance, tools coverage, commercial auto insurance and workers’ compensation. USA Business Insurance also offers surety bonds.
Get the Illinois Commercial Insurance Your Contractor Business Needs
As a contractor in the state of Illinois, you need to meet the legal requirement for workers’ compensation. You also should protect your business with general liability insurance, commercial property insurance, errors and omissions insurance and other types of coverage.
To get the Illinois commercial insurance policies you need now, click any of the links in this post.
Frequently Asked Questions
Q: What are the Illinois general liability insurance requirements?
A: There are no legal requirements for general liability insurance for businesses in Illinois. But you should get a policy that will provide you with an appropriate amount of coverage for your contractor business.
Q: Does Illinois require business insurance?
A: Illinois requires business owners to carry workers’ compensation insurance policies if they have employees. Aside from that, no, there is no legal requirement to insure your business. That said, you should do so anyway for your own protection.