Plumbing Business Insurance: Everything You Need To Know
Plumbing contractors are highly skilled licensed tradesmen who install and repair pipes that carry water, gas, and other substances. For the last 100 years, almost all buildings—from single-family houses to high-rise buildings—have had some form of plumbing.
Like many construction trades, getting plumbing company insurance isn't always as easy as non-construction industries. Here are some tips to help you understand what you need and how you can get the best deal on plumbing insurance.
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Why do plumbers purchase insurance?
With construction being one of the primary industries LandesBlosch insures, we have noticed a few primary reasons (or combination of reasons) that plumbing contractors purchase insurance:
Most states require that plumbers have liability insurance.
When obtaining or renewing a license to perform plumbing work, many states require that you provide proof of liability insurance for your plumbing business.
The state requirements usually stipulate that plumbers obtain a general liability insurance policy, and sometimes a license bond.
Plumbers want to protect their business.
You have spent thousands of hours investing in and building your business, so it makes sense to to insure it. That business supports your family, your lifestyle, and your retirement plans. Many of your employees also rely on the success of the business to support their families, too.
When a business matures, many construction companies will either purchase comprehensive insurance or increase their insurance limits to protect their investment, so that an accident can't materially affect the company.
Customers require it.
Although some residential plumbers don't have to worry about this as much, plumbers who do commercial work are almost always required to have liability insurance. Generally, commercial customers will require a general liability policy, a commercial auto liability policy, and workers compensation before work can begin on a project.
What types of insurance do plumbing contractors need?
Although plumbing insurance can look different depending on the size of your business and type of work you are performing, here are five coverages almost every plumbing business needs:
General Liability (With Completed Operations Coverage)
Commercial general liability (or plumber liability) is the policy that every plumbing company should buy, no matter their size or type of customer. For plumbing contractors, this covers two important parts of your business liability:
- Liability from "ongoing operations": This is the liability that arises from your presence on a job site. It includes things that your workers damage or accidents that injure non-employees while on the job site.
- Liability from "completed operations": Completed operations liability is liability that your work could cause after the project has been completed and is in use.
For example, if a water leak is found after a project completed that arose from your work and caused significant water damage to the structure, completed operations liability would cover the damage your work caused to the customer's building.
Workers Compensation
Businesses that have employees are usually required to purchase workers compensation insurance. This policy pays for the medical bills of any employee who is injured on the job, as well as costs such as lost wages while the employee cannot work.
In most states, workers compensation coverage is required by law and most commercial customers.
Commercial Auto
Most plumbing businesses have some type of work truck or work van they use for transportation to each job site. Additionally, this vehicle is used to transport tools, equipment, and materials for different projects.
A commercial auto policy protects your business from liabilities arising from your work vehicles (usually at-fault accidents). It can also cover the vehicle if it were damaged, whether it be a collision or some other cause.
Contractors Equipment
From small hand tools to trenching equipment, plumbers frequently have a significant amount of equipment they need to run their business. A contractors equipment policy covers the loss of or damage to the tools or equipment, whether the cause is an auto accident or theft from a jobsite.
This coverage can help you purchase replacement tools and equipment to make you whole in the event of a loss.
License Bond
Most states require that you purchase a plumbers license bond before you can obtain a plumbing license. These bonds are usually only a couple hundred dollars and can be purchased online with minimal information. We suggest purchasing a multi-year bond if possible. For the low cost of these bonds and the large consequences of letting it lapse, it is always best to purchase in three-year increments, if available in your state.
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LandesBlosch Plumbing Contractor Insurance Tips
Purchase Blanket Endorsements
If you issue more than a couple of certificates of insurance per year, it might save you money to purchase a blanket of additional insured endorsements.
Blanket endorsements automatically add common endorsements, like additional insureds and waiver of subrogation, from what previously had to be requested and individually itemized on the policy. This saves you time and money when your customers request a certificate of insurance.
In addition to the cost effectiveness, blanket endorsements allow you to issue quick certificates without getting underwriter approval and having to pay an invoice before the certificate is issued. This is great if you ever need a certificate in a pinch.
Purchase Other Policies With A Carrier That Offers Commercial Auto
In our experience, purchasing commercial auto insurance is much easier and cheaper when purchased from the same insurance carrier as your general liability or workers compensation policy.
Due to insurance companies having profitability issues with commercial auto policies, most carriers are not willing to write commercial auto by itself. They want you to write it in conjunction with another policy that they handle to help offset the losses.
If you have commercial auto insurance or think you will need it soon, it might be worth spending a little extra on another policy to build a relationship with an insurance carrier and ultimately save a lot later in the year.
Of course, there are exceptions to this “bundling” rule, and we have seen customers get very low-cost, stand-alone commercial auto insurance. This is just a general recommendation for most plumbing businesses.
Avoid Subcontractor Exclusions
We recommend that all construction companies (not just plumbers) avoid subcontractor exclusions on their general liability insurance policy.
Even if you do not commonly use subcontractors, insurance companies will often add an exclusion on cheap plumbing insurance policies that limits the coverage you have arising from subcontractors. Having this exclusion on your policy limits your ability to take on larger projects or fill skill gaps on your team.
How much does plumbing insurance cost?
Insurance costs for plumbers varies, depending on the type of work, the number of jobs, and company size.
On the lower end, general liability and workers compensation policies start at $500 per year per policy, and go up from there. For both of these policies, the pricing is usually determined based on your business's payroll amount, the state you are in, and if you are doing any utility work.
Real Life Examples of Plumbing Insurance
| Location | Payroll Amount | Quoted Insurance Company | BOP Annual Premium | Workers Comp Annual Premium |
|---|---|---|---|---|
| Kansas | $40,000 | Main Street America | $1,726 | $1,924 |
| Tennessee | $145,572 | Travelers | $3,829 | $3,216 |
| New Mexico | $166,300 | Liberty Mutual | $2,784 | $5,120 |
| Texas | $491,920 | CNA | $13,780 | $9,574 |
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If you prefer to walk through your coverage and insurance requirements with an experienced insurance expert, you can also call us for help.
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.