What Business Insurance Do Contractors Need in California?

Nov 19, 2020 · 4 minutes to read

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There are around 300,000 licensed contractors in California, according to the CSLB. Out of those 300,000, there are 44 different types of contractors. Now, regardless of the type of contractor your company falls under, accidents in this business are not uncommon. One mistake could spell a lot of trouble for general contractors and cost you money in the process. Getting the right business insurance for your company can protect it against various liability claims in the event of an accident. So, what business insurance do contractors need in California? Let’s find out!

What types of insurance are available for contractors?

There are a few different types of business insurance for contractors. Each one protects the company in a specific way. If you have a contractor business, here are some types of insurance you could purchase for your company.

General Liability Insurance

General liability (GL) insurance is a common form of insurance contractors get in California. It covers risks such as third-party property damage and injuries.

General liability insurance covers:

  • Client injuries
  • Client property damage

If a client falls and injures themselves at your office, your company may be liable for their injury. In that case, your company may have to pay their medical bills. GL insurance will cover these expenses along with legal fees you may have to pay if the injured party sues your company.

Do contractors have to hold GL Insurance to get their license in CA?

Contractors are not required to have general liability insurance to secure their license. However, it can save you from paying for damages in the case of an accident. In many cases, commercial leases require contractors to have this type of insurance.

Workers’ Compensation Insurance

Any business must have workers’ compensation insurance in California if they have one or more employees working at the company. Your business will still need workers’ compensation insurance if your employees operate primarily in California, but your company’s headquarters is in another state.

Workers’ compensation insurance covers

  • Medical bills for an employee when they’re injured during work
  • Lost wages for injured employees

What Happens if Your Business Doesn’t Have Workers’ Compensation Insurance?

If your business doesn’t have workers’ compensation insurance, you may have to pay a fine of $10.000 or more. In addition to that, you could be imprisoned in county jail for a maximum sentence of one year.

Does Your Business Need Workers’ Comp Insurance for Part-Time Employees?

Yes, workers’ comp is mandatory for part-time employees as well. This type of business insurance for contractors is a requirement in the state of California.

Contractor’s Tool and Equipment Insurance

Contractor’s tools and equipment are expensive. So, contractor’s tool and equipment insurance will protect power tools, hand tools, and heavy equipment, including backhoes and excavators in case of damage, theft, or misplacement.

Thus, this type of insurance covers:

  • Small tools
  • Mobile equipment

If someone steals your toolbox at a construction site without your knowledge, your contractor’s tool and equipment insurance will cover the costs of replacement. The type of insurance also covers the cost of repairs or replacement if a third-party vandalizes your tools and equipment.

Professional Liability Insurance

Another useful type of business insurance for contractors is professional liability insurance. This insurance can protect your company when a client accuses your company of negligence.

Professional liability insurance covers:

  • Negligence in providing construction services
  • Failure to meet deadlines that were agreed upon
  • Oversights and errors when completing the project

Your client can sue your company if your contract business makes a mistake in a project that causes them financial damage. Examples of such mistakes include not following the blueprint completely or installing the plumbing system improperly. An oversight on your part could result in high legal fees that your company will have to bear. Therefore, a professional liability insurance policy can cover those risks for your business.

Commercial Auto Insurance

If your contracting company owns vehicles, a commercial auto insurance policy will cover its repair costs and employee medical expenses in case of an accident.

Last Few Words

While purchasing various insurance policies for your contracting company may put a dent in your budget initially, it can help you save a considerable amount of money in the long term. Looking for an insurance agency for your contracting company? Find various insurance policies at competitive prices.

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