Insurance Coverage: What Do You Need?

From basic liability to safeguarding against employee theft, make sure your business is covered
Insurance Coverage: What Do You Need?

When it comes to insurance for your business, there are certain policies that virtually all owners need. There are also others that depend on how comprehensive you want to get and the size of your business.

Basic coverage
According to Dennis McGuire, middle market casualty underwriting director for Nationwide Insurance, there are four types of policies that contractors should consider basic.

The first is general commercial liability (GL), which covers bodily injury and property damage. “This is absolutely essential,” says McGuire. GL policies tend to be very broad, though, and there are often a number of exclusions, so it is important to identify these exclusions and see if you need to purchase other types of coverage to address them.

A second is workers' compensation (WC), which covers injuries and death of your workers. Of course, if you are a one-man shop, WC coverage will not be required.

A third is commercial vehicle coverage, which will cover accidents and injuries related to your business vehicles (cars, pickups), and other vehicles that you use to transport equipment to job sites. “It can also cover dump trucks that you use to haul dirt away,” McGuire says.

A fourth is inland marine (equipment) insurance, which covers tools, equipment and materials. “This is especially important if you have expensive equipment,” says McGuire.

Optional coverage
While not a basic necessity, a lot of business owners like to purchase property/business income insurance. “If there is damage to your property, such as offices, storage yards or maintenance areas that prevent them from being used, business income insurance provides coverage so that you can rent space elsewhere to get your work done, and also to fill in income gaps while your property is being repaired,” McGuire says.

Errors and omissions (E&O) coverage is another policy that a lot of contractors want to have. “While a general liability policy covers bodily injury and property damage, E&O covers things such as delays in projects, work that needs to be redone or impacts on another contractor on the project,” says McGuire. In sum, it protects against customer claims for negligent acts, errors or omissions committed during business activities that result in a loss for the customer.

According to McGuire, cyber-exposure coverage is a relatively new coverage, but is gaining a lot of popularity. It covers losses that occur as a result of viruses and malware that compromise information security and your ability to conduct business with customers online, banking online and retaining records online.

While some contractors may benefit from pollution liability coverage, others may not. It depends on what kinds of risks you might encounter in your work. According to McGuire, if you do the kind of work in which you might uncover some old underground storage tanks or rupture some storage units that contain chemicals or other substances that could cause damage or harm, it might be a good idea to consider this coverage.

Size of business 
In addition to the coverage discussed above, large contractors may want to consider some additional policies.

One of these is umbrella/excess liability. Most GL policies have a cap of $1,000,000, and an umbrella policy can provide coverage beyond this, such as up to $3,000,000, or even $5,000,000.

Another consideration for larger companies is employee dishonesty coverage. While it is not unheard of for employees in very small businesses to engage in workplace theft or embezzlement, it tends to be more common in larger businesses with a lot of employees with whom you aren't in direct contact eight hours a day or have close personal relationships with. This covers loss of equipment from employee theft. “It also covers office embezzlement,” says McGuire.

Two additional policies that large employers might consider are employee practices liability insurance and employee benefit liability insurance.

Buying coverage
While you can purchase individual policies from one or more insurance brokers or agents, it often makes more sense to deal with one broker and purchase your policies in “package” format. “We offer a flexible portfolio, so customers can pick and choose what makes sense for them,” McGuire says.

Where you do business can affect what kinds of coverage you may be able to purchase, and how expensive that coverage is. In general, according to McGuire, it is easier and less expensive for rural contractors to get coverage than it is for urban. “In urban areas, there are a lot more exposures, a lot more things you can hit when digging, and a lot more traffic congestion,” says McGuire.



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