How Much Business Insurance Do You
Need?

Business insurance is a necessary expense for all contractors, but how do you know how much you need? You don’t want to purchase too much due to the expense, but you also don’t want to buy too little, or you won’t have enough coverage. We’re going to look at the different types of business insurance policies contractors need, as well use provide guidance on how much coverage to purchase.

General business liability insurance covers all the transactions and activities that your business is involved in. It protects the company from damage caused by employees or damage or injury that occurs on your property. This type of insurance is required in order to be a licensed contractor. Residential contractors need to have $500,000 in general liability coverage in order to be licensed in Oregon. Commercial contractors need a minimum of $1 million in coverage. In Washington, all contractors need a minimum of $250,000 in business coverage: $200,000 in public liability and $50,000 in property damage coverage.

Workers compensation insurance protects workers if they are injured while working on the job. It also protects companies by helping to pay expenses related to the worker’s injury. State statutes set the limit of the coverage required. In Oregon contractors are required to have $500,000 in workers compensation coverage, no matter how many employees they have. In Washington, workers comp is provided by the state and costs are based on the number of employees and the industry.

If your business owns vehicles that are used in the course of your work, you’ll need automobile coverage to protect you from potential damages and cover injury expenses. The amount of insurance you’ll need depends on state requirements for automobile insurance and the size of your fleet.

Umbrella insurance is excess insurance coverage that you can purchase to raise the coverage limits of the other policies you own. This type of insurance isn’t required, but many companies purchase it for added protection.

Builder’s risk or installation insurance protects your work in progress while it is being constructed. Limits for this type of insurance are usually spelled out in the contract with the owner.