Contractor Insurance

Both independent contractors and contractors that own businesses with employees need to make sure they have the right coverage. Let’s explore coverage that’s available and appropriate for both types.

Coverage Essentials for Independent Contractors

  • Errors and Omissions (E&O): Contractors providing advice or consulting, such as accountants/financial planners, designers, architects, etc. These professionals are potentially liable due to client losses resulting from the contractor’s recommendations.
  • Bodily Injury and Property Damage: Contractors working with heavy machinery, power-tools, compressed gas, etc. should be covered from mishaps from defective or hazardous operations.
  • Product Liability Insurance: Independent contractors serving food/alcohol at functions or events should cover risks from potential injuries or illness due to the food/alcohol served.
  • Medical and Disability: Self-employed contractors are not typically on a group plan to cover their own injuries, risking a loss of income injury/illness.

Who Needs Contractors Insurance?

There are many independent contractors beyond the trades most people consider “contractors”. In addition to the usual suspects related to construction like carpenters, plumbers, electricians, and painters, we find a wide range of professionals needing coverage.

Repair and cleaning services are obvious choices, as well as freelance writers, editors, and graphic designers. Even hair stylists and horse or dog trainers should consider the levels of coverage appropriate to their risks.

What Does Contractor Insurance Typically Include?

Contractors insurance includes a variety of property and liability insurance components. For general contractors, there is typically tools and equipment coverage for things like installations, tools, and equipment you and your employees own or rent.

Additionally, it’s not uncommon to see coverages included for exterior signs, electronic data, monies on hand, income, and risk-management items like fire extinguisher recharge.

Property components for a general contractor commonly include items like debris removal, outdoor and off-premise personal property, transit coverage, valuable paperwork, and even accounts receivable.

Liability components include both a standard blanket contractual liability as well as a personal and advertising injury coverages.

Optional Property and Liability Coverages

Next, let’s look at other coverages that might not be included automatically. A thorough exploration with your Johnson and Associates independent agent will help you to identify risks, and craft the right policy – at the right price.

Property Coverage

    • Employee dishonesty
    • Agreed value or actual cash value
    • Cyber suite coverage
    • Water backup and sump overflow
    • Equipment breakdown


Liability Coverage

    • Employee benefits
    • Damage to property
    • Herbicide/pesticide applicator
    • Transfer of rights recovery
    • Additional or blanket endorsement
    • Employment-related practices

Business Owners Policy

Property and liability coverages are the two primary components of a Business Owner’s Policy (also known as a BOP.) Often bundled with a contractor’s general liability policy, it covers risks that small business owners (fewer than 100 employees and less than $5 million) are likely to face. Adding a BOP makes sense if you have employees, and may qualify you for a discount on your policy.

Additional BOP Coverages to Consider

Common optional riders bundled with a BOP include:

  • Property damage (other than commercial vehicles.)
  • Business income (typically covering income/operating expenses for up to 12 months.)
  • Commercial vehicle (when used for business purposes.)

Worker’s Compensation

This insurance policy protects workers from a work-related injury, illness, and death – as well as related lost wages. Nearly all employers in Michigan are covered by worker’s compensation. Employers benefit from prevented losses due to employee lawsuits.

If you run a sole proprietorship or are considered to be “self-employed” employees you hire are covered by the act, but you are not. For further reading consult Michigan’s LARA. If you’re unsure if you’re operating as an independent contractor, consult the amended IRS ruling. Rest assured, we can help you navigate this topic.

Michigan requires employers not classified as self-insured to purchase worker’s compensation insurance. If you are officially self-insured, or self-employed without employees, you are likely not required to purchase workers comp. Chat with us to be sure.

Professional Liability – Errors and Omissions (E & O)

E & O is a liability policy to protect you from mistakes that cause financial loss to a client. Like general liability, it typically provides for legal defense and claims settlements, if necessary.

Who should consider E&O?

  • If you provide professional advice regularly. Examples can vary from recommending a particular type of plumbing/wiring to providing financial or interior design services.
  • If you hire employees/subcontractors who provide advice or consulting services.
  • If your state requires you to have E&O for licensing.

If you hire subcontractors, we recommend making sure they also have professional liability, as your policy might not cover them.

Common Contractors Purchasing E&O coverage

  • Appliances
  • Cable/Satellite/Telephone Installs
  • Concrete Construction
  • Driveway Paving
  • Decorative Metal Erection
  • Excavation or Grading
  • Fence Installation
  • Floor Covering Installation
  • Glass Vendors
  • Heating, Ventilation, & A/C (HVAC)
  • Home Furnishings/Fixtures
  • Interior Decorators
  • Interior Stone Tiles
  • Landscaping, Gardening, Lawn Irrigation
  • Masonry
  • Office Equipment
  • Plumbing or Electrical Work
  • Septic Tanks
  • Water Softeners
  • Well (Water) Drilling

Your Specific Needs

Your business is as individual as you are – let’s discuss appropriate coverage together. Your Johnson & Associates Insurance agent is skilled at making sure you have the right coverage to mitigate risks, and the best prices only an independent agent can offer you. Call us today!