Electrician Insurance: What Every Electrical Business Owner Needs To Know

Joanne BrattonJune 30th, 2020
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As an electrical contractor, you know it takes a lot of work and oversight to run a service business.

Whether you’re starting a company from the ground up or expanding your services and looking for additional coverage, it’s key to find the right electrical contractors insurance to mitigate risk and provide financial protection.

Electrician insurance is beneficial in other ways because it gives customers peace of mind knowing your company is financially backed in potential unforeseen events, such as an accident, property damage, or injuries related to the job.

Although your electrical contractors insurance needs will be specialized for your company, an overview of what electrician insurance policies cover includes:

  • Accidental injuries

  • Property damage

  • Employee wages after a work-related injury

  • Vehicles and equipment

  • Unintentional faulty workmanship

  • Legal fees

Find the right electrical contractor insurance for your company to make sure you’re adequately covered for losses and to ensure your investment is protected. Whether you’re just starting your business or shopping for a new policy for additional coverage, it’s an important step as you plan for your electrical company’s growth. We’ll define the most common electrical contractors insurance plans to help you figure out what types of insurance to consider to protect your business.

What Type of Insurance Does an Electrician Need?

It’s important to understand the different types of electrician insurance, so you can determine which policies suit your needs.

Some of the most popular electrical contractors insurance policies include:

  • Commercial general liability

  • Workers’ compensation

  • Commercial auto

  • Business owner’s policy

  • Surety bonds

  • Umbrella insurance policy

  • Equipment, inland marine coverage

Commercial General Liability Insurance

Electrical contractor general liability insurance covers accidental injuries and property damage related to your work as an electrical contractor.

In many places, proof of general liability insurance is required to obtain a electrical contractor license, or when signing a commercial lease or a client contract.

Electrical contractor liability insurance is essential because it protects your business if your company’s electrical work causes damage on a customer’s property or injures customers.

Some examples of what general liability insurance covers include:

  • Repair costs for property damage

  • Physical injury to a customer leading to a lawsuit

  • Electrical installation problems

Workers’ Compensation Insurance

A workers’ compensation insurance policy pays the medical bills and payroll costs of employees injured while working for your electrical contracting company. Many states require workers’ compensation insurance for electrical businesses with employees. 

Workers’ compensation insurance makes sure your injured employees get medical care and compensation for lost wages if they are injured on the job, and usually protects employers from lawsuits. 

In 2018, nonfatal work injuries and illnesses for electrical and wiring contractors in the private industry numbered 7,520, according to the most recent numbers from the U.S. Bureau of Labor Statistics. Overall, the construction industry has the highest rate of fatal work injuries of any industry sector, according to recent data from the agency. 

In electrical work, ergonomic injuries caused by repetitive motions or poor lifting practices rank as the No. 1 cause of worker injury, responsible for more workers’ compensation claims than other hazards, which include falls, motor vehicle accidents and electrocution, according to data provided by the Independent Electrical Contractors to the Occupational Safety and Health Administration.

Each state differs on workers’ compensation requirements for employees or for those who hire subcontractors. To find out your state’s requirements, visit your state’s workers’ compensation commission website

Commercial Auto Insurance

Electrical service company technicians often travel in company vehicles, driving from one job to the next. If your employee is at fault in a collision, it could be costly for your company, especially if it involves injury to another motorist.

Most states require registered vehicles to carry liability insurance. Just as you protect your personal vehicles with insurance, it’s necessary to have commercial auto insurance to protect your company’s vehicles and provide protection if you or your employees are in an accident.

Commercial auto insurance can protect your company-owned vehicles from:

  • Collision damage to another driver’s vehicle

  • Property damage in an accident

  • Medical bills arising from a third-party injury

  • Theft or vandalism

Commercial Property Insurance

Property insurance for electrical contracting companies protects your commercial property investment, including office space and any tools or equipment stored on the company’s property. 

A commercial property insurance policy typically covers the cost of the building, if owned by the business, and its contents in the event of disasters, such as fire or vandalism.

Other Electrical Contractors Insurance Policies for Companies to Consider

In addition to the main insurance policies described above, electrical service companies should also consider these additional types of commercial electrical contractors insurance:

Business Owner’s Policy (BOP)

One option for small- to medium-sized companies is a Business Owner’s Policy, or BOP. This policy typically bundles commercial general liability insurance to cover personal injury or damage caused while on the job, and commercial property insurance, which covers repairs and equipment losses at the company’s office and other property used for the business.

To be eligible for most business owner’s policies, your electrical company must:

  • Employ fewer than 100 people

  • Make less than $1 million in annual revenue

Since a BOP is generally a cheaper option than individual policies, it provides an affordable and flexible option for electrical companies as they look to grow their businesses.

Some BOPs also include business interruption coverage to provide electrical contractor business owners with financial assistance if forced to close or relocate for repairs after a covered disaster.

>>Related: COVID-19 Insurance Coverage Resource

BOPs do not cover professional liability, auto insurance, workers’ compensation or other employee insurance. You will need to purchase separate insurance policies to cover your electrical contractor company’s professional services, employees and company vehicles.

A business owner’s insurance policy can be tailored to meet your company’s needs, and depending on your insurance provider, you can add coverage to a BOP for:

  • Data breaches

  • Equipment breakdown 

  • Employment practices liability

  • Loss of income 

Cover Additional Liability Risks with these Electrical Contractors Insurance Policies 

Just as it’s crucial to protect your company’s physical investment, it’s critical to protect the quality of your company’s work.

While your company’s commercial general liability insurance protects against damages involving other people’s property, business owners should consider adding professional liability insurance or an errors & omissions policy to cover any unintentional mistakes or mishaps related to a job.

Professional electrical contractor liability insurance can cover legal fees and judgments related to:

  • Work errors or mistakes

  • Negligence, whether actual or alleged

  • Incomplete work

  • Inaccurate advice

  • Misrepresentation of services or skills

Mistakes occur, even by experienced professionals. The last thing you want to happen is for one mistake to damage your company beyond repair. Professional electrical contractor liability insurance covers legal fees and judgments awarded against your company in the event your company faces a lawsuit claiming unsatisfactory work. 

Policy coverage is limited to the company’s owners and employees, so work performed by subcontractors is usually not covered. Professional electrical contractor liability insurance coverage also does not reimburse non-financial losses or losses caused by intentional or dishonest acts, such as purposely using sub-par materials.

If found liable for mistakes that cause damage after a job finishes, an errors & omissions insurance policy covers the cost to repair or redo the faulty work, as well as any legal defense against those claims.

E&O policies primarily used to be for larger general contractors or big businesses, but with consumers demanding more from home service companies and a rise in civil lawsuits, insurance providers started introducing more affordable E&O policies to protect electrical contractors.

Umbrella Liability Insurance

If a civil suit judgment or other incidents exceed your electrical contractor liability insurance or business owner policies’ limits, an umbrella liability insurance policy gives you assurance your electrical contracting company can cover the additional costs.

In essence, umbrella liability is a backup policy to provide extra coverage and protection for your company. An umbrella liability policy typically provides extra coverage for general liability insurance, commercial auto liability insurance and employers’ liability insurance, a component that’s often included in workers’ compensation.

Umbrella liability policies do not cover claims related to commercial property insurance or professional liability insurance.

Equipment, Inland Marine Insurance

Tools and equipment are necessities in the electrical contracting industry. It’s important to have protection from stolen tools or equipment damaged in an accident.

Equipment insurance can be added to your electrical contractor liability insurance or business owner’s policy. It generally offers coverage for small tools, mobile equipment and equipment less than five years old, but does not cover damage from general use and wear.

More expensive equipment may require inland marine insurance, especially if your company ships high-value products or equipment. An installation floater is a type of inland marine insurance that covers materials in transit until installed or put to use.

>>Related: 25 Essential Electrician Tools

Surety Bonds

Not technically insurance for your electrical company, a surety bond provides a level of insurance for your customers because it ensures the work is done to professional standards. Many municipalities and states require a minimal surety bond for electrical contractors seeking a contractor license or permit.

A surety bond involves three parties: the obligee, which is the entity requiring the bond; the surety, which is the bonding company that issues the bond and guarantees the work; and the principal, or the electrical contractor. It’s different from electrician insurance because you repay the surety company for successful customer claims.

Bonds guarantee your work, so homeowners and business owners have the confidence you’ll do the job right. If not, they know they could get reimbursed if they prove they paid for illegal or incomplete work.

What are Electrical Contractor Insurance Requirements?

Electrical contractor licensing requirements vary by state and local municipality. In many places, obtaining an electrical contractor license requires proof of general liability insurance or bodily injury insurance, and some require a bond or additional insurance policies.

In Texas, for example, to obtain an electrical contractor license requires $300,000 general liability insurance per occurrence and $600,000 aggregate, or the maximum amount the policy covers in its lifetime, and $300,000 aggregate for products and completed operations. 

It’s important to check in the areas where you perform services to make sure you have all of the necessary licenses, permits and insurance requirements in place, so you won’t face any legal problems along the way.

How Much Does Electrical Insurance Cost?

The average cost of electrical contractor business insurance varies because business risk factors and specific coverage limits determine business policy rates.

Your electrician insurance cost depends on: 

  • Location and size of service area

  • Company revenue 

  • Number of employees

  • Technical and business experience 

  • Types of electrical insurance policies you invest in

Because you work on customer’s property in a high-risk profession, your electrical contractor liability insurance and electrical business insurance will be higher than other industries. 

A typical electrical contractor liability insurance policy provides up to $1 million to cover a claim and up to $2 million total during the policy lifetime, and costs between $47 and $69 per month, according to one insurance agency and brokerage firm.

Average commercial auto insurance premiums cost between $1,672 to $4,377 with a $500 deductible, while contractor tools and equipment coverage costs about $490 annually, according to an insurance holding agency.

Your electrical contractor company might be able to save by bundling some of your electrical contractors insurance into one plan. When electrical contractors use a business owner’s policy, they pay an average of $500 to $1,006 per year, with a $500 deductible.

Workers’ compensation rates are based on every $100 of your business payroll but vary depending on the state your business is in, risk factors of the industry and claims history, according to insurance companies.

How Electrical Software Gives You Added Protection

In addition to having electrical contractors insurance, it’s essential to keep track of every aspect of your company, from call tracking to inventory of materials and tools.

ServiceTitan Electrical Contractor Software connects your office with the field and allows for real-time updates, wherever your team is located.

Track jobs and revenue, sort transactions and compile stats to streamline your company’s efficiency and give you the data you need to know and grow. That data could also prove important if your company ever needs to file an insurance claim.

Finding the Right Electrician Insurance Policy and Insurance Provider

Whether you’re just starting out and need basic, minimum coverage, or you’re following your company’s growth plan and need additional levels of protection, it’s important to find the right policy and insurance provider.

As with any financial commitment, it’s imperative you do research. Before you choose an insurance provider, get referrals and check reviews or complaints.

To determine if an insurance provider is right for you:

  • Find out if they are experienced with electrical contractors insurance 

  • Check the financial strength of the provider’s insurance companies

  • Shop around to compare prices and benefits

A qualified insurance professional will conduct an analysis to help you determine what electrical contractors insurance policies you need and the amount of coverage to adequately protect your company.

Once you know your insurance needs and invest in financial protection, you’ll be ready to take the next step in your company’s growth.

ServiceTitan is a comprehensive electrical business software solution built specifically to help service companies streamline their operations, boost revenue, and achieve growth. Our award-winning, cloud-based platform is trusted by more than 100,000+ contractors across the country.

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