Electrical Contractor Insurance: What You Should Know
As an electrical contractor, you deal with unique risks and insurance requirements while operating your business. You not only have to comply with customer and licensing requirements; you also need to protect yourself from lawsuits against your business and accidents involving your business-owned property.
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What insurance does an electrical contractor need?
Electrical contractors may be required to carry several policies. Most of the time, though, these five will cover your needs:
For a more detailed breakdown of what insurance contractors need, check out our article, "A Guide To Contractors Insurance."
General Liability (Electrician Liability Insurance)
Whether you’re a one-man shop or a large firm, every electrician needs general liability insurance for electrical contractors. This policy covers property damage or bodily injury they cause to others (whether it’s a business or an individual) as a result of their completed work or their operations on the job site.
The nature of electrical work means you should absolutely consider this coverage. As an electrician, you are responsible for harm arising from your work, whether that’s electric shock or a building fire.
Workers Compensation
Workers compensation insurance pays for medical bills and lost wages if employees are injured while working for your company.
Most states require any business that has employees to obtain a workers compensation policy. Even if your state does not have this requirement, it is still a good idea to purchase this insurance policy. Without it, you would be responsible for all of the medical bills and disability payments of your injured employee(s).
Contractors Tools & Equipment
You use a lot of equipment for your work, including hand tools and expensive wiring in your work truck. If that equipment is stolen or damaged, a contractor's tools & equipment policy can help pay for these items.
Commercial Auto
Work trucks or cargo vans are usually owned and operated by the business and need to be insured on a commercial auto insurance policy.
This policy covers your business liability arising out of your or your employees' use of the work vehicle. It addresses all the automotive risks in your business, such as at-fault accidents or being hit by an uninsured vehicle. It also addresses repairing your vehicle if it is damaged.
Electrical Contractor License Bond
Since electrical contracting is a highly skilled trade with a high degree of liability if work is performed improperly, many states require their electricians to carry a license bond. Although this bond is not insurance, it is usually purchased from your insurance provider. It is a financial guarantee that you will perform work in a way that is compliant with your licensing.
If you are looking for an electrical license bond, you can click here to visit our contractor bonding portal and purchase a bond anywhere in the U.S.
Common Insurance Requirements For Electricians
Additional Insured Endorsements
If you are an electrical contractor working on commercial projects or for a general contractor, you will most likely be required to add the project owner or your general contractor as an additional insured on your policy.
This means that if your actions lead to a lawsuit for either the general contractor or the property owner, your policy will cover them and yourself.
Waiver Of Subrogation Endorsements
Your insurance company will often handle a liability claim, even if other parties are at fault. If it is later determined that another party was responsible for causing the claim, then a process of subrogation occurs. This is when your insurance company will collect some of the money it spent resolving a claim against the responsible party or their insurance policy.
For example, if you installed a faulty electrical panel that started a fire, your insurance company will represent you in the claim and most likely pay for fire damage resulting from the installation. After the claim is resolved, your insurer will try to collect the money it spent resolving the claim from the manufacturer, which was ultimately at fault for the incident—for manufacturing a faulty electrical panel.
A waiver of subrogation prevents your insurance company from being able to collect money from a named party, even if that named party was negligent in causing the claim.
Additional Liability Limits
The larger the projects you work on, the higher the limits you will be required to carry. While all the policies above usually come with a $1 million limit, many projects require anywhere from $2 to $25 million.
You can fix this with an excess liability (or umbrella) insurance policy. It allows you to increase your limits to whatever amount you need to comply with your project requirements.
Electrical Contractor Claims Examples
General Liability: House Fire Caused By Construction Defect
Your electrical contracting business is hired by a homebuilder to install the electric in a newly constructed custom home. Your team completes and tests the installation, the homebuilder signs off on the work, and your crew moves on to another project.
A year down the road, you are notified that the house that you installed the electric for burned down and the cause was a fault in the home's electrical system. Not only was the home destroyed, but two members of the household sustained injuries from the fire and resulting smoke.
A general liability policy covers property damage and bodily injury, and would cover both the damaged property and medical bills arising from the fire you are responsible for causing.
Workers Compensation: Employee Fell From Ladder
While running the electric for a light fixture, an employee loses their balance while on a step ladder. The employee sticks out their arm to catch themselves, resulting in a broken arm and injured wrist.
It is later determined that the employee needs surgery on their arm and the recovery period will be roughly one month.
Workers compensation will cover both the medical bills for your injured employee and provide partial lost wages while the employee is recovering and unable to work.
What does electrical contractor insurance cost?
For a self-employed electrician with no employees and no subcontractors, general liability coverage can start as low as $300-$500 per year. For larger companies with workers compensation, auto policies, and other policies, this price can go up.
In most instances, electrician insurance pricing (both general liability and workers compensation) is based on payroll, which means insurance will get more expensive as you hire more people to work for you.
Depending on your specialty and type of work you are performing, most electrical contractors can check pricing with five or more insurance companies by getting an online quote here.
Why Electricians Choose LandesBlosch
100 Years of Contractor Experience
LandesBlosch has been insuring contractors since 1922. We understand the insurance market for electricians and can help secure you find a policy that meets your requirements and budget.
We specialize in electrical contractors.
Not only are we specialists in contractors, but electrical contractors are the largest part of our construction specialty. When you speak with one of our risk advisors, you’ll know they have experience handling the insurance of hundreds of other electrical contractors across the country.
You can get a quote in 5-10 minutes online.
Get started on a quote for your electrical businesses and have pricing on general liability, workers compensation, property insurance, and auto insurance within five to 10 minutes.
About The Author: Austin Landes, CIC
Austin is an experienced Commercial Risk Advisor specializing in property & casualty risk management for religious institutions, real estate, construction, and manufacturing.