Six Factors That Will Impact Your Contractor Liability Insurance

As a contractor, choosing a contractor liability insurance policy is one of the most important decisions you need to make.

Hopefully, you won't need to file a claim on your policy down the road. However, it's important to choose your contractor liability insurance policy wisely in case you may have to use it.

The following are six important factors to review that will impact your contractor liability insurance needs, costs, and coverage.

Legal requirements you need to meet

Probably the most important factor to look into before you purchase contractor liability insurance is what legal requirements you need to meet.

If you just have a small operation as a sole proprietor, you may not be legally required to purchase contractor liability insurance. However, in certain industries and municipalities contractor operations of all sizes may require insurance coverage.

Research the laws in your state and county to find out what legal requirements you need to meet to do business as a contractor in your industry. 

The size of your operation

The larger your operation is and the more projects you're involved in, the more liability risks you are likely to face. This means that you'll probably need higher policy maximums and more coverage if you're running a large company than you would while running a small-scale contractor operation. 

The deductible amount you choose

Your deductible amount is an important consideration. The lower your deductible, the higher your premiums are likely to be. However, you need to make sure that the deductible you choose isn't so high that it's not unaffordable for your company to pay in the event of an accident resulting in a claim. 

The insurance coverage of subcontractors working with you

If you work with subcontractors, you should be aware of the liability insurance coverage that they carry. If your subcontractors are insured, this could give your company added financial security without requiring you to invest more in liability insurance. That's why it's always a good idea to hire insured subcontractors when possible. 

The types of equipment you use or sites you work on

Industry factors, like what types of equipment you use and what areas you work in, could increase your liability coverage needs and costs. If you work on hazardous sites and accidents are common in your industry, you may have to pay more in liability insurance coverage. 

The requirements and preferences of your clients

Legal requirements might not be the only requirements you need to meet with your liability insurance coverage. You might also have to meet certain liability coverage requirements set forth by your clients. 

Clients who hire you will want to know if you're carrying liability coverage. They may even have certain insurance requirements regarding how much coverage you're carrying and what types of damages you're carrying coverage for.