Protect Your Business: Understanding Home Improvement Insurance 

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No matter what size operation you run, home improvement business insurance is essential for your profession.  

You put an incredible amount of work into developing and maintaining your business. You don’t want to lose it because of one unforeseen incident. Learn why you should carry insurance protections and how it contributes to long-term stability.  

There are also many types of business insurance options out there. Each covers different contingencies. It can be intimidating to sift through them to decide what you actually need to carry.  

We’re here to help. Get our suggestions for different kinds of insurance and their importance. With our tips, you can assemble a policy that fits your unique needs. 

The Importance of Home Improvement Business Insurance 

Home improvement contractors often work in one of the most dangerous environments there is.  

Consider these facts from the US Occupational Safety and Health Administration (OSHA): The construction industry was involved in 5 of the top 10 most common safety violations. These violations contributed to over 5,000 worker fatalities in 2022. 

There are potential risks to contractors’ clients, too. We’ll discuss those below. 

Due to its high-risk nature, it’s essential to have home improvement business insurance. This insurance protects you and your investment, as well as your clients’ interests in some scenarios. 

Without the proper insurance, you may not be able to get state licensing or funding from a lender. You could wind up paying out of your own pocket for losses. Or worse, you could be ordered to pay damages after a court case. 

These high-level expenses are not weatherable by most small contracting companies. Home improvement contractors would be put out of business without insurance to cover them. 

Home improvement business insurance can protect you in case of: 

  • Property damage, theft, or vandalism 
  • Bodily injury 
  • Vehicle accidents 
  • Liability 
  • Cybercrimes 
  • Loss of income 

In the next section, let’s look at the different types of insurance protection available for your profession. 

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Home Improvement Business Insurance Coverage Options 

If you’re looking at home improvement business insurance, the choices can be overwhelming.  

Here are the insurance options you should consider first. Insurance carriers typically put these types of coverage together to form comprehensive protection. 

General Liability Insurance 

No business should be without this type of coverage. It protects you in case of non-worker-related harm, such as accidents and injuries to clients or passersby. 

For example, say one of your employees leaves a large tool lying in your client’s yard. The client comes home late at night and trips over it, breaking an arm. 

Your liability insurance would pick up the cost of their medical care, such as a visit to the emergency room. It could even cover expenses like lost wages or lawyers’ fees if the client sues you for negligence. 

The downside to liability insurance is that it has a cap on it. So, you may want to purchase commercial umbrella insurance, which we’ll discuss in the next section. 

Property Insurance 

Home improvement business owners typically carry two types of property insurance.  

The first is property insurance for your office if you own one. 

You might operate out of your home. But if you have a separate address, you want it insured against things like fire, storm damage, or theft. You can add earthquake or flood insurance if necessary. 

The second type of property insurance is for your tools and equipment. This includes things like ladders, saws, and hand tools. Insurance coverage would allow you to replace them quickly if they were stolen. You would minimize lost work time and income. 

There aren’t a lot of cons to property insurance other than you may pay for it for years but never need it. That’s true of most kinds of insurance, though. It can add up over time, but when you do need it, it’s a lifesaver. 

Builder’s Risk Insurance 

Some policies let you combine your liability insurance with property insurance for the structure you’re working on. This is known as builder’s risk insurance. 

It protects your client’s property in case of unforeseen damage while under construction. Many larger projects and municipal jobs require it. 

The biggest con with this type of insurance is that every carrier handles it differently. You need to be very sure of what it covers in case you need to fill a gap with a different type of insurance. 

Also, multiple parties may have insurance for the same property, which can be confusing. You should find out if the client has also insured the property to avoid paying for coverage you don’t need. 

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Commercial Auto Insurance 

Did you know that driving your own vehicle for your home improvement business isn’t covered by your personal auto policy? 

Commercial auto coverage for cars, vans, and trucks is a must for contractors. There are 2 types of basic protection: 

  1. Liability 
  1. Full coverage 

Liability insurance pays for medical care and property damage to others if you or an employee is at fault in an accident.  

Full coverage auto insurance includes collision and comprehensive. Collision pays for repairs to your own vehicle when you are responsible for a crash. Comprehensive covers theft, vandalism, and storm damage. 

Your state dictates the minimum liability coverage you must carry. However, you can elect to pay for more coverage if you want. Lenders require full coverage if you finance your vehicle. 

What’s the negative side of this insurance? Commercial auto coverage is usually more expensive than personal auto insurance. This is because the coverage amounts tend to be higher. 

Even then, your policy may not cover everything after a serious accident. For instance, imagine you get minimum liability protection of $5,000 for property damage required in California. What happens if you total someone’s brand-new luxury car? You’ll wind up paying anything over $5,000 with your own money. 

Additional Insurance Considerations 

Once you have the basics covered, it’s time to look at additional forms of protection. Here are 6 other kinds of insurance you may find it smart to carry: 

  1. Cyber Insurance 

Do you take payments from clients online? If so, their credit card and personal information could be at risk. Cyber insurance covers you in case of a data breach, hack, or identity theft. 

Cyber insurance varies by company, though. You need to be sure that your online business needs are covered by your policy. Some policies only cover certain types of cybercrimes and not others. 

  1. Workers’ Compensation Insurance 

We mentioned above that home improvement work can be hazardous for workers. They use power tools and climb ladders to work at great heights. Many contractors work with electricity and chemicals, which also have the potential to be dangerous. 

Workers’ compensation insurance covers your employees if they are injured on the job. It pays for expenses like medical care, prescriptions, lost wages, and rehabilitation. Most states require this coverage if you have one or more employees. 

This insurance can be complicated, like some of the other types discussed here. You need to know precisely what’s covered and what’s not. And in some states, you can’t purchase it from an insurance agent. It must be bought from the state itself. 

  1. Commercial Umbrella Insurance 

What happens when you hit the cap on any kind of liability insurance? You have to pay anything above the cap out of your own pocket. 

That’s why commercial umbrella insurance was created. It kicks in when your other insurance reaches its maximum payout. You can use it for any kind of liability, from on-site accidents to car crashes. Coverage starts at about $1 or $2 million and goes up from there. 

There’s no downside to this extra coverage other than you may never need it. It’s a gamble, but it gives many business owners peace of mind. 

  1. Bonds 

There are many types of bonds for all kinds of businesses. But the one home improvement professionals use is for construction jobs. 

This bond covers you when your word is on the line about finishing a project on time. What if a subcontractor, like a plumber, fails to show up to complete a kitchen remodel? Your bond protects you should the client want compensation or take you to court. 

Construction bonds also protect you if something on the job is not completed according to certain standards. For instance, if the electrician you hire doesn’t put in an outlet correctly, the bond should cover fixing it. 

“Should” is the operative word, however. You need to find out exactly what your bond covers, as they can vary quite a bit. You don’t want to be caught unprotected. 

  1. Business Interruption Insurance 

This insurance protects your company if events beyond your control mean you can’t operate. For example, there could be a massive power outage in your area lasting for weeks, and you can’t run any power tools. Business interruption insurance covers loss of income in this situation. 

Like other types of insurance discussed above, protections from this kind of insurance can vary with the carrier. You want to know what events would allow you to use the insurance without being excluded because of technicalities. 

Of course, you could pay for this insurance for years and never make a claim. It’s intended for more extreme situations. Do a risk-benefit analysis to decide if the premium is worth the expense. 

  1. Specialized Liability Insurance 

Finally, there are unique types of liability insurance for special circumstances. The two you would likely want to explore are: 

  1. Errors and omissions insurance (E&O) 
  1. Business practices insurance 

The first protects you if a mistake or miscalculation causes damages for the client somehow. 

The second covers internal issues like discrimination, wrongful termination, and harassment of employees. 

Adding more liability insurance can get pricey quickly.  

Do you really need this extra coverage? If you only have a couple of employees, business practice insurance probably isn’t worth it. And if you only work on small home improvement projects, you don’t likely need E&O coverage. 

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Top Takeaway Tips for Selecting Home Improvement Business Insurance 

Now that you know more about home improvement business insurance, are you ready to start shopping for coverage? Here are some tips you can use right away as you evaluate your options: 

  • Shop around and compare prices as well as what you get for your money. Saving a few dollars here or there may not be worth it if you don’t get the protection you really need. 
  • Consider working with an independent insurance agent. They partner with all the major carriers, plus a bunch you probably don’t know about. And you’ll get more personalized service and someone who knows the local business community, too. 
  • Ask your colleagues who provides their insurance. They may have good recommendations for savings and customer service. Also, ask if they’ve ever filed a claim and how it was handled. 
  • Understand how deductibles work. Your deductible is the small amount you pay out of pocket when a claim is filed. Usually, the smaller the deductible, the larger the premium, and vice versa. You can sometimes cut overhead costs by choosing a larger deductible. 
  • Many policies for contractors are made up of multiple smaller policies. Think of it like a meal from a buffet. The more policies you can bundle under one agent or carrier, the more you can save. You can also often save money by bundling your home and business coverage under one roof. 
  • If you’re going to pick one type of insurance that feels less essential and more of an extra, go with commercial umbrella coverage. This offers broad protection that you can use in a number of scenarios. And you’ll be able to focus on your work better knowing you are covered at a much higher liability level. 

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