The electrician business involves lots of potential unique risks. That means business insurance coverage is not only advisable but it’s also required by law.
Insurance coverage needs vary for electrician insurance. For example, some electricians may store all the business equipment in a vehicle, some may rent a commercial property for storage. Some may keep electrical equipment at a job site. Some may work alone; some may have employees.
You need to protect your business by having the proper insurance policies. Here is information that business owners need to know to get the proper insurance coverage while saving on insurance costs.
Why Should Electricians Be Insured?
A basic type of business insurance that electricians need is liability insurance. Professional liability insurance protects the electrician who causes property damage or bodily injury to a client. For example, improperly wired electrical boxes could cause damage to a home entertainment system, and the same error in a customer’s house could cause bodily harm to the customer.
In order for an electrician to be licensed as a business, he or she must obtain liability insurance coverage. No savvy customer should hire an electrician who does not have business liability insurance.
Electricians who have an employee or employees must get worker’s compensation insurance for the business. That is also legally required coverage for a business.
What Does Business Electrician Insurance Cover?
Business insurance coverage can be broad or specific. The type of coverage varies by the type of policy.
Here are details about each type of insurance policy that is required for business purposes:
Business General Liability Insurance
General liability insurance is basic business insurance that is required by law. General liability coverage protects the electrician who causes property damage or bodily harm to a client because of professional negligence. The policy would include covering medical payments claimed by a customer.
General liability insurance is the basic business insurance that electricians – and other contractors – need. As small business insurance needs go, this is a must.
Commercial Property Insurance
Commercial property insurance would be required for an electrician who owns or leases a space to store equipment, and would also include office furniture. This type of electrician insurance policy may be required if the electrician keeps business property on personal property – such as in a shed or garage at a residence. A homeowner’s insurance policy most likely won’t cover commercial property, but it’s possible to get a “rider” to expand the homeowner’s policy.
Business Interruption Insurance
Electricians often add this to their general liability insurance. Business interruption can be caused by Mother Nature – such as a windstorm or flood which makes it impossible to conduct business. It will also cover business interruption caused by theft of equipment, and is advisable as an additional policy to protect your business, both to protect equipment and cover lost wages. The coverage can often be bundled with general liability insurance.
Workers Compensation Insurance
Worker’s Compensation insurance is required for a business that has one or more employees. It would cover medical bills for employees. Worker’s Compensation insurance is required by law.
Commercial Auto Insurance
Commercial auto insurance is needed for the work vehicle, even if it’s a vehicle also used for personal use. If there’s a car accident involving a personal vehicle filled with work equipment, a personal policy won’t cover damages to the equipment. An electrician or contractor shouldn’t let an employee – who is not listed on the insurance policy – to operate the vehicle, even to take a lunch break.
Other Types of Insurance Coverage for Electricians
General liability insurance is the place to start for an electrical contractor. In addition to the general liability insurance, there are “add-ons” an electrician may need. Fortunately, these “add-ons” can often be bundled at a discounted rate with general liability insurance, combined within a Business Owner’s Policy, or BOP.
Commercial umbrella insurance – Also known as a BOP, this type of policy lets a business owner add on to general liability insurance with other specific types of coverage. Although there is a wide range of insurance combinations that are available under a business owner’s policy, the worker’s compensation insurance policy will not be included under a BOP. The Worker’s Compensation insurance policy is always a stand-alone policy.
- Equipment breakdown insurance – This type of insurance policy doesn’t include breakdowns that are due to normal wear and tear of equipment. But it will provide coverage to repair or replace equipment that breaks, and also cover lost income.
- Hired and non-owned auto insurance – If the business vehicle is in a shop for repairs, using a personally owned vehicle, employee vehicle, or client’s car for business use isn’t the way to go. To avoid having to wait for repairs to be completed, the electrician may need to temporarily rent a vehicle.
- Contractor’s tool and equipment insurance – This type of insurance coverage is a must for electricians who leave mobile equipment at a job site for business use. You’ll protect your business and valuable equipment against financial losses caused by damage or theft.
- Installation floater – This type of business coverage protects items that aren’t equipment. It would include coverage for supplies, such as copper wires, conduits, and electrical boxes.
- Errors and omissions insurance – This type of business insurance covers you if a client sues you, claiming faulty work, property damage, and/or coverage for medical expenses. Coverage will be monies for legal defense and other legal costs. E and O insurance are also sometimes called professional liability insurance.
- Surety bond – A contractor typically must be “bonded and insured” before obtaining a business license and beginning to provide services. It’s a payment bond, a guarantee that the business will conduct the work (performance bond). A small business owner should consider getting a surety bond from the Small Business Association, which provides such services.
How Much Does Electrician Insurance Cost?
Electrician insurance costs can be discounted if combined under a BOP. A basic BOP would cover general liability, business interruption services and commercial property coverage.
Here are some basic starting numbers:
- General liability $500
- Commercial Auto $1500
- Tools and Equipment $500
- Worker’s Compensation $3,000
There are companies that specialize in business insurance policies. Here’s a look at our top picks.
Best Places to Get Electrical Contractor Insurance
Before you start to shop, join your local or state electricians association. You may get insurance information from its members by networking.
1. State Farm
State Farm is a well-known insurance provider that has a long history of providing business insurance. It is a company that may provide a “rider” for business owners who keep equipment on a portion of personal property.
2. Biberk
Biberk can provide instant and specific electrician insurance coverage. It’s favored by part-time contractors who need coverage for specific lengths of time, even for as short as a day or two.
3. Progressive
Progressive is a choice that provides affordable coverage. It offers discounts for combinations, such as general liability with commercial auto insurance.
4. Next
Next insurance is popular for small businesses and self-employed contractors. Next insurance offers a number of choices.
5. The Hartford
The Hartford is another long-established company with decades of experience providing insurance coverage for businesses.
6. Nationwide
Nationwide offers discounts when business insurance policies are combined.
Are Electricians Legally Required to Carry Business Insurance?
Yes. In order to become licensed, an electrician must have business insurance.
Does Electrical Contractors’ Insurance Cover Employees?
No. An electrical contractor must obtain Worker’s Compensation insurance in order to cover employees. Any small business which has an employee or employees must obtain Worker’s Compensation insurance. It is required by law.
How Much Electrician Liability Insurance Do You Need?
Most policies cover from $500,000 to $1 million and up. An electrician should consider the value of the properties where the work will take place.
For example, is the electrician doing work for a shopping complex, large factory, or palatial home? Consider the amount of property damage that may be claimed by the client – who may represent a multi-million dollar project.
An electrician can start with a certain amount of liability coverage, and increase that as needed. Although the electrician may be working on a $100,000 home, the cost to replace that home – given the up-to-date cost of materials and labor – could be much higher than the home’s current value or assessment.
The policy cost may vary depending on the deductible amount chosen. You can play with the deductible amount and see how much raising that changes the monthly cost. However, often the degree of change in the monthly premium cost isn’t worth it – it’s best to stick with the lowest deductible amount.
Does Business Insurance Differ by State?
Yes, for a couple of reasons. Costs vary in some states, which have a cap on the maximum level of liability that a customer can claim.
The cost of Worker’s Compensation may also vary, depending on whether or not it is established by the dollar amount of claims paid. If a state has had a high number of Worker’s Compensation claims, the rate for that insurance will be higher.
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Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.