Article Reviewed by a licensed insurance professional: Sam Meenasian (CA dept of insurance license #0F75955).
Estimated reading time: 9 minutes
Key Takeaways
- Business owners in various niches face confusion when selecting insurance coverage.
- One policy often doesn’t cover all needs, leading to potential custom packages for mixed-industry operations.
- Essential insurance types include general liability, tools and equipment, professional liability, and workers’ compensation.
- Consider bundling policies with a Business Owner’s Policy (BOP) for cost savings and comprehensive coverage.
- Consult with an insurance professional to ensure adequate protection against risks across multiple trades.
There is an increasing number of business owners who work in all kinds of niches. You might fix things, work on plumbing, or even paint houses. It’s expensive to keep up with inflation and the cost of living, and if you have a variety of skills, you might work in a variety of fields.
The problem with this kind of business arrangement is that it can be confusing to know what kind of insurance you may need to protect your business and yourself if something goes wrong.
The answer to this kind of insurance question could be complicated, but let’s see if we can break things down a bit and clarify what you need to be aware of.
Why One Policy Doesn’t Cover Everything
Insurance companies are not in the business of insuring companies for “everything”. This wouldn’t make sense financially for anyone involved in the business of taking out insurance policies, either. Most coverage and protection is set up to collect a fair amount of premium from everyone in a specific business or industry to cover the claims that come in each year.
If you work between industries and niche markets, your business might be harder to classify and therefore, harder to insure. Your expectations may be a little different since you might have to get a custom business package for your insurance needs, or in many cases, one GL policy that may include multiple class codes or operations. Higher-hazard operations such as roofing, height work, and certain remediation may require separate underwriting, endorsements, or even a separate carrier/policy.
The cost to protect construction workers and roofers is far higher than the cost to insure someone who sits at a desk all day. Each industry has a different risk level, so if you work across several fields, particularly higher-risk ones, then your insurance premiums may be higher. The more high-risk industries you work in, the higher the cost of your insurance should be.
General Liability: The Foundation
General liability insurance is commonly the first foundational policy for businesses to consider, and it may be required by clients, landlords, or contracts, but it isn’t legally required for every business in every state. General liability insurance typically covers injury and property damage claims. For instance, if you accidentally break a customer’s sliding glass door or a homeowner trips over the extension cord and breaks their ankle, they may be covered.
Tools & Equipment Insurance
In most industries, your tools are just as important as your skills. You cannot work without them. So what happens if your important tools and equipment are stolen? How can you get back to work or replace them?
Protecting your tools and equipment is essential to your business so that there is no downtime if your tools are stolen. Therefore, to have peace of mind, tools and equipment coverage is what helps out. If you have tools in a work van or leave them on a job site each day, this policy may cover them and help you to recover.
Professional Liability Insurance (Errors and Omissions Coverage)
Anyone could make a mistake; it’s part of being human. But on the job, even a small mistake could turn into a serious issue. The trouble with assuming you could “make it right” is that clients might not be willing to talk through a fix, especially when they paid you to deliver a professional service. If someone feels your judgment caused them harm, they may choose to pursue legal action against you or your business instead of working out a solution informally.
Even if the claim that the client is making is not accurate, you still could be on the hook for the cost of your legal defense to protect your business and its reputation. You should consider professional liability (Errors and Omissions) coverage to protect your business and to help guide the process of coming up with an equitable solution if you did make a mistake that caused a customer financial loss.
Commercial Auto Insurance
Many small business owners overlook insurance for their work vehicles. If the vehicle is titled to the business or used primarily for business, commercial auto is usually appropriate. Many small business owners will simply take out a personal auto policy on their work vehicle, not realizing that this is incorrect. Some personal auto policies allow limited business use, but if a vehicle is owned by the business or used primarily in business, a personal policy may be inadequate or may not protect the business entity.
You will not have the kind of protection that you need to cover you for a business-related loss if you don’t take out a commercial policy for your work vehicles. Commercial auto insurance often is more expensive than personal auto because it typically carries higher liability limits and business-use exposures, but varies widely by vehicle type, radius, and driving history. If you or employees use personal vehicles for deliveries, then you may consider Hired & Non‑Owned auto liability coverage. If you do not classify a vehicle as a commercial use and there is a significant loss that has to be claimed, your insurance company may deny or not renew your policy.
Make sure that you properly categorize work vehicles and get the right insurance coverage to protect them, your tools, and your staff.
Workers’ Compensation Coverage
In most states, workers’ comp coverage is mandatory when you hire your first employee, but thresholds and exemptions vary by state and industry, and some states treat owners/officers differently. Confirm with your state’s workers’ comp regulator or a licensed agent.
The cost of recovering from an accident on the job can be staggering. If someone hurts their back at work and needs back surgery, for example, you could be looking at a bill of hundreds of thousands of dollars just to cover medical bills. This doesn’t take into account lost wages that need to be paid and possible vocational training needed to help the person get a different job as a result of their accident.
Workers’ comp helps protect you from catastrophic medical/lost-wage exposures and regulatory penalties, but it is a premium expense, and claims can affect future pricing.
Business Owner’s Policy (BOP)
This is one of those bundle-and-save opportunities that could work perfectly for your jack-of-many-trades business. You could get liability protection, business interruption coverage, and property damage protection on this policy. Business interruption coverage could be vital when a covered physical loss (e.g., fire or certain water damage) forces a temporary closure. Coverage depends heavily on policy language, covered causes of loss, exclusions, and waiting periods.
You may save money by bundling policies in nearly every case, and a BOP can be the perfect solution for your needs.
Umbrella Insurance
Think of this policy like the backup for your backup plan. This kind of policy extends the coverage over certain underlying policies. Being able to get access to the rest of the coverage that you need to handle a really large claim can make all the difference in many different industries.
Let’s consider an example. If you work in the roofing industry, you could easily be hit with a claim that might total up to $1.5 million. Many small businesses carry $1M per occurrence / $2M aggregate GL limits. If a claim totals $1.5M, you could be short $500k without umbrella/excess—unless you carry higher underlying limits.
Cyber Liability
You might say to yourself, I don’t have much of an online presence, I don’t need cyber liability insurance. However, if you have any kind of online presence where you collect customer information or you take payments, you need cyber liability coverage. These kinds of threats are on the rise, and you might be surprised at just how complex resolving this kind of claim can be.
You may need to notify your impacted customers, you may need legal protection, and you may also need help getting back to doing business. These policies more than pay for themselves as soon as you suffer a cyberattack.
Things to Remember for Those Who Work in Many Different Industries
If you wear many hats, you should consider different insurance policies. Just make sure that you don’t forget the following:
1. You may need a general liability policy. GL is commonly the first foundational policy to consider and is often required by clients, landlords, or contract terms.
2. You need to have tools and equipment coverage if you have essential business equipment that you absolutely must have to do your job.
3. You may want to add a professional liability policy if you want to protect yourself from errors and issues with decisions that you made about a job that don’t work out as planned.
4. You may need workers’ comp if you have any employees.
5. You may want to consider bundling with a BOP, which would include lots of critical insurance protections.
Piecemeal Coverage is Never a Good Plan
Some people try to save money by not electing specific coverages, thinking that coverage might never be needed. It’s common for people to think, “I only work on roofing jobs once in a while, so I don’t need coverage for that.”
The trouble with this kind of thinking is that if your employee is injured doing roofing or other high‑hazard work, that is not what general is intended for. Injuries to workers are typically addressed by workers’ compensation (where required/when elected) and/or separate medical/disability arrangements for owners, depending on your state and business structure.
You should be appropriately insured that matches your contracts, job size, requirements, and assets. Over-insuring could hit your pockets, and under-insuring could hurt your business, but when you are covered by the right insurance policies, you will not have to suffer the consequences of these kinds of disasters, accidents, and problems.
How Much Should My Policy Cost?
These are just the standard numbers for these policies. Your location, the number of people working for you, and a variety of other factors may influence the cost of your premiums.
· General Liability: with annual costs ranging roughly $425 to $3,000+, depending on risk.
· Tools & equipment: About $45/month (~$540/year) median for many small businesses.
· Professional liability: About $61/month (~$732/year) median for many small businesses.
· Commercial auto: About $147/month (~$1,764/year) median for small businesses.
· Workers’ Comp: Ranging roughly $900-$3,000 (depending on class code, payroll).
Make Sure That You Get the Coverage That You Need
There are so many businesses out there that are operating without enough insurance protection these days. As people move into the reality of working in many different trades, they are increasingly likely to be poorly protected from risk. Make sure that you are not one of these people. Get the help of a skilled insurance professional to ensure that you have the insurance coverage that you need to operate safely and with peace of mind.
At USA Business Insurance, we understand your business insurance needs. Let us help you to maximize your insurance savings while also getting the right coverage to keep your business safe for years to come.
