Why is business insurance a must for electricians?
Electricians face many risks while on the job—from live-wire injuries and damage to a client's home and personal property, to fires and more. You can avoid costly downtime and losses with electrician insurance from top providers. Insurance is often required to win clients and secure contracts.
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6 insurance policies every electrician should consider
General liability insurance
A general liability insurance policy protects electricians against legal expenses related to client property damage and injuries. It's often required by commercial leases and contracts.
- Client bodily injuries
- Damaged customer property
- Advertising injury and copyright lawsuits
Contractor's tools and equipment
Also known as inland marine insurance, contractor's tools and equipment insurance protects your equipment wherever you bring it. That includes in transit, stored off-site, or from one jobsite to the next.
- Saws, drills, and other tools
- Hard hats and other safety equipment
- Excavators and forklifts
Workers' comp insurance
Most states require electrical companies with employees to carry workers' comp to help cover workplace injuries. In some states, even sole proprietors who work in construction must have this policy.
- Medical bills from work injuries
- Disability benefits
- Lawsuits from workplace accidents
Commercial auto insurance
Electricians with business-owned vehicles must carry commercial auto coverage to comply with state laws. It helps cover financial losses in an accident, including legal costs and property repairs.
- Auto accident injuries
- Auto accident property damage
- Vandalism of an electrician's vehicle
Business owner's policy
A BOP bundles commercial property insurance and general liability coverage at a discount. It's often the most cost-effective type of business insurance for electrical work businesses.
- Accidental client injuries
- Accidental damage to client property
- Damage to your office or electrical tools
Professional liability insurance
Professional liability insurance covers legal fees related to a mistake, missed deadline, or other accusation of professional negligence. It's also called errors and omissions insurance (E&O).
- Project delays and budget overruns
- Wrong materials and other mistakes
- Breach of contract
Electrician insurance costs
Here's a quick look at the average costs of common electrical contractor insurance policies purchased by TechInsurance customers:
General liability: $61 per month
Tools and equipment: $42 per month
Workers' comp: $140 per month
The cost of electrical contractor insurance depends on several factors, including the types of services you provide, your business size, claims history, and location.
Start a free application to see how much insurance will cost for your business.
What factors affect electrician business insurance rates?
Insurance companies evaluate several factors when calculating the cost of electrician liability insurance during underwriting, including:
- Types of electrician services offered: The type of electrical services your business provides can impact your level of risk. For example, companies that offer alarm and solar panel installation services may pay higher premiums than those that only do standard electrical work, like changing light fixtures or replacing wall switches.
- Value of business property and equipment: The value of your electrical equipment, tools, supplies, and other business property can influence the cost of coverage, especially if you purchase commercial property insurance.
- Annual income: Higher revenue often means larger projects, more clients, and greater potential financial losses, which can increase insurance costs.
- Number of employees: Businesses with more employees typically pay higher insurance premiums because they face greater liability exposure and may have higher workers' compensation costs. A solo electrician will generally pay less for insurance than an electrical business with a full crew.
- Coverage limits and deductibles: Policies with higher coverage limits generally cost more, while choosing a higher deductible can help lower your premium.
- Location: Where your business operates can affect rates due to local insurance requirements, claim trends, and the cost of lawsuits in your area.
- Claims history: Businesses with previous insurance claims are often viewed as higher risk and may pay more for coverage.
- Subcontractors and additional insureds: Working with subcontractors or adding clients, landlords, or general contractors as additional insureds can increase insurance costs because of the additional liability exposure involved.
- Type of clients and contracts: Insurance premiums may also vary based on whether you work on residential or commercial properties, or rough-in electrical work.
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Electricians often assume general liability covers stolen or damaged tools on a jobsite, but inland marine insurance is often needed for that type of protection. Understanding these gaps can help avoid costly surprises.
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Common questions about business insurance for electrical contractors
Are electricians required to have a license, permit, or bond?
Similar to masons and HVAC contractors, electrical businesses are required to be licensed and carry certain types of insurance and bonds in most states. Even in states that don't require licensure, you might still need a local license to work as an electrician.
Your license, permit, and policy requirements vary by location and the services you provide, including fiber optic installation, electrical controls, lighting systems, or traffic signal work.
Typically, you'll work for about four years as an apprentice in the electrical trade under the supervision of a master electrician, before being able to take the licensing exam within your state.
Proper licensing, insurance, and permits can help new businesses build credibility and attract clients. Commercial clients, general contractors, and project owners also require proof of insurance and licensing before work can begin.
Some state and local governments require specific insurance and bonds, like workers' compensation, commercial auto, or various types of surety bonds.
Which insurance policies are required for electrical contractors?
Electrical businesses often must carry certain types of insurance and bonds depending on the state where they operate, their contracts, license classification, and number of employees. Insurance needs can also vary based on whether the business provides residential, commercial, industrial, or specialty electrical work.
General liability insurance is often necessary for electrical contractor licensing and project contracts. It helps cover third-party injuries, property damage, and legal expenses. Certain states and municipalities also require bonds as part of the licensing process.
Businesses that hire employees are almost always required by state law to carry workers' compensation insurance, especially in construction, where workplace injuries are more common.
Companies with work vehicles, including vans, trucks, or other business-owned automobiles, typically must carry commercial auto insurance to meet state minimum liability requirements.
Many general contractors, project owners, and commercial clients also require coverage before work can begin. Knowing your state and local requirements is crucial to ensuring your electrical business carries the proper coverage and limits.
What types of coverage do independent electrical contractors need?
There are several important reasons for independent contractors, subcontractors, and self-employed electricians to carry insurance: signing a contract or lease, complying with the law, gaining client trust, and protecting your business from devastating losses.
Workers' comp coverage for construction contractors is usually required by state laws, even if they work alone, because of the high risk of injury. Most states also require electricians with work vehicles to carry a commercial auto policy. You may also be required to carry surety bonds and a general liability policy.
Even if not required at the state or local level, there are several policies sole proprietors and independent electrical contractors should carry for peace of mind.
These self-employed electrician insurance options include:
- General liability coverage insures you against common third-party business risks like customer injuries, customer property damage, and advertising injuries. It helps cover medical costs, property replacement costs, and other associated expenses.
- Commercial auto insurance covers legal fees, medical expenses, and property damage to others if your work vehicle is involved in an accident.
- Workers' compensation insurance, which protects self-employed individuals if they are unable to work after suffering an on-the-job injury, such as burns, falls, electrical shocks, and other worksite hazards. Private health policies usually won't cover medical payments for work-related injuries or illnesses.
- Business personal property (BPP) insurance can be added as an endorsement to your general liability coverage to protect business property kept at a designated location.
- Tools and equipment insurance protects your tools and equipment while they're in transit or at a jobsite.
Check with your state, county, and local governments to ensure you meet all requirements and coverage limits for your business.
Can subcontractors be covered under an electrician insurance policy?
Whether a subcontractor can be covered under an electrician's insurance policy depends on the policy, subcontractor relationship, and terms of the contract.
In some cases, 1099 contractors and subcontractors can be added as an additional insured to an electrician’s insurance policy. Despite this, many project owners, general contractors, and insurance providers may require subcontractors to carry their own insurance coverage.
Depending on the work they perform and local regulations, self-employed electricians and subcontractors typically need their own general liability insurance and workers' compensation coverage.
Subcontractors who maintain their own policies can help reduce coverage disputes and protect your business from liability claims.
Electricians should review contract agreements carefully and confirm insurance requirements, coverage limits, and certificate of insurance (COI) obligations before hiring subcontractors.
Does electricians insurance cover equipment damage and theft?
General liability coverage typically doesn't protect stolen tools, damaged equipment, or losses involving your own business property. Also, while commercial property insurance can cover equipment stored at your fixed business location, it usually doesn't protect tools while they're in transit or at a job site.
Because of this, electricians often carry inland marine insurance, also called contractor's tools and equipment insurance, which helps protect tools, testing devices, materials, and other equipment against theft, damage, or loss while traveling between job sites or being used off-site.
Electricians frequently transport expensive tools and equipment, so this policy is often one of the most important for day-to-day operations.
Tools and equipment with higher values often need to be specifically scheduled. Individual items worth more than $2,500 may require separate listing and valuation, though limits and requirements can vary by coverage provider.
Do electricians need professional liability insurance?
Professional liability insurance, which is sometimes called professional indemnity insurance or errors and omissions insurance, protects you from customer lawsuits over a claimed error, mistake, or negligence that negatively impacted them.
State laws often don't require businesses to carry professional liability insurance, but it is especially useful for businesses that primarily sell industry expertise and knowledge rather than physical products.
Electricians, for example, should maintain this coverage if a client accuses them of poor workmanship that results in replacement costs from having to pay to have the work redone. The client could sue them, resulting in legal defense costs and a possible judgment or settlement.
Professional liability coverage is perfect for businesses that market and sell their industry expertise and knowledge, and protects against:
- Professional negligence
- Breach of contract
- Oversights and errors
- Breach of confidentiality
- Poor professional advice
- Missed deadlines and undelivered services
Human error is inevitable, and the out-of-pocket costs of legal action can be high. The right professional indemnity insurance policy can protect your business if a customer sues over an unsatisfactory service.
What other insurance coverages should electricians consider?
Depending on the type of electrical work you do, you may have additional insurance requirements and will need more types of coverage.
Helpful insurance policies for electricians include:
- Business interruption insurance covers day-to-day operating costs and lost wages and income resulting from a fire or other covered property claim. You can usually add it to your property policy or BOP.
- Hired and non-owned auto (HNOA) insurance protects your leased, rented, and personal vehicles that you and your employees use for business purposes.
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Employment practices liability insurance (EPLI) covers against many employment-based risks faced by your business, including lawsuits and claims of discrimination, mismanagement, and harassment.
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Surety bonds act as a contract between you and a client, ensuring you have the funds to cover if a job isn't completed as agreed. Some clients, particularly government contracts, require a surety bond.
How can you save money on electrician business insurance?
With TechInsurance, you can get free insurance quotes from top-rated insurance carriers by filling out one easy application.
There are a few other ways to get cheap electrician insurance, such as:
- Bundle your policies. The most popular option is a business owner's policy (BOP), which pairs your general liability policy with commercial property insurance to save money.
- Customize your policy. Choose lower limits, a higher deductible, or certain exclusions to save on your premium. Additionally, picking only the policies that benefit your specific business will help you save money.
- Focus on workplace safety. A safe work environment means fewer liability claims, which helps lower your insurance costs. Keeping your job site safe, your equipment well maintained, and your employees well trained is crucial to avoiding claims.
Speak to a licensed insurance agent if you have questions about your insurance coverage, including the ideal policy limits for your particular risks and needs.
