Plumbing Insurance: What Every Plumbing Business Owner Needs To Know

Joanne BrattonJuly 1st, 2020
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It takes a lot of work and oversight to run a plumbing 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 plumbing insurance to mitigate risk and provide financial protection.

Plumber insurance is beneficial in other ways, too, as it gives customers assurance your company is financially backed in potential unforeseen events, such as an accident, property damage, or injuries related to the job.

Although your plumbing insurance will be specialized for your company’s needs, an overview of what plumbing 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 plumbing business 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 plumbing company’s growth. We’ll define the most common insurance for plumbers to help you figure out what types of insurance to consider to protect your investment.

What types of plumbing insurance do you need?

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

Some of the most popular plumbing business 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

Plumbers liability insurance covers accidental injuries and property damage related to your work as a plumbing contractor.

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

Plumbing liability insurance is imperative because it protects your business if your company’s work causes property damage or bodily injury to customers.

Some examples of what general liability insurance covers include:

  • Repair costs for property damage to a customer’s home 

  • Physical injury to a customer leading to a lawsuit

  • Plumbing installation problems

Workers’ Compensation Insurance

A workers’ compensation insurance policy pays the medical bills and payroll costs of employees injured while working for your plumbing company. Many states require workers’ compensation insurance for plumbing 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 private industry, nonfatal work injuries and illnesses for plumbing and HVAC contractors totaled 13,060 in 2018, according to the most recent numbers from the U.S. Bureau of Labor Statistics. Overall, the construction industry has a higher rate of fatal work injuries than any other industry sector, according to recent data from the agency. 

Each state differs on worker’s 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

As a plumbing service company, your technicians are often on the road 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 plumbing companies protects your commercial property investment, including office space and any tools or equipment stored in the company’s owned or leased property. 

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

Other Plumbing Business Insurance Policies for Companies to Consider

In addition to the main insurance policies described above, plumbing business owners should also consider these additional types of commercial plumbing 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 plumbing business.

To be eligible for most business owner’s policies, your plumbing 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 plumbing companies to grow their businesses.

Some BOPs also include business interruption coverage to provide plumbing 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 plumbing 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 Plumbing 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 plumbers 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 have happen is for one mistake to damage your company beyond repair. Professional plumbers liability insurance covers legal fees and judgments awarded against your company in the event your company faces a lawsuit claiming the work performed was unsatisfactory. 

Policy coverage is limited to the company’s owners and employees, so work performed by subcontractors is usually not covered. Professional plumbers liability insurance coverage also does not cover 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 is completed, an errors and 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 plumbing contractors.

Umbrella Liability Insurance

If a civil suit judgment or other incidents exceed your plumbers liability insurance or business owner policies’ limits, an umbrella liability insurance policy gives you assurance your plumbing 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

Plumbing tools and equipment are a necessity in the plumbing industry. It’s important to have protection from stolen tools or equipment damaged in an accident.

Equipment insurance can be added to your plumbers 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 might 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 it is installed or put to use.

>>Related: Plumbing Van Organization: Maintenance Tips & Best Practices

Surety Bonds

Not technically insurance for your plumbing 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 plumbing 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 plumbing contractor. It’s different from insurance for plumbers 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.

Plumbing Insurance Requirements for Licensed Contractors

Plumbing licensing requirements vary by state and local municipality. In many places, to obtain a plumbing contractor license requires proof of general liability insurance or bodily injury insurance, and some require additional insurance policies.

In Florida, for example, $100,000 liability insurance and $25,000 property damage insurance are required to obtain a certified plumbing contractor license. In Illinois, plumbing contractors must prove they have $100,000 general liability, $300,000 bodily injury and $50,000 property damage.

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

Cost of Plumbing Insurance Policies

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

Your plumbing insurance cost depends on: 

  • Location and size of service area

  • Company revenue 

  • Number of employees

  • Technical and business experience 

  • Types of plumbing insurance policies you invest in

Because you work on customer’s property in a high-risk profession, your plumbing liability insurance needs and average cost of small business insurance will be higher than other industries. 

A standard plumbing liability insurance policy for small businesses provides up to $1 million to cover a claim and up to $2 million total during the policy lifetime and costs between $27 and $49 per month, according to one insurance agency and brokerage firm. A typical premium range for a business owner’s policy with the same amount of claim coverage is $750 to $2,400 per year, with a maximum deductible of $1,000.

Commercial auto insurance premiums cost $1,795 annually on average, while contractor tools and equipment coverage costs about $170 annually, according to one insurance holding agency.

Your plumbing company may be able to save by bundling some of your plumbing contractors insurance into one plan. When general liability is combined with commercial property insurance, plumber insurance can cost between $700 and $2,400 per year.  

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 your company’s claims history, according to insurance companies.

How Plumbing Software Gives You Added Layer of Protection

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

ServiceTitan Plumbing 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 with plumbing software to streamline your company’s efficiency and give you the data you need to know and grow.

Finding the Right Plumbers 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 important to do your 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 familiar with plumbing contractors insurance 

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

  • Shop and compare prices and benefits

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

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

ServiceTitan is a comprehensive plumbing 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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