Umbrella Insurance For Contractors, Do You REALLY Need It

“Is commercial umbrella insurance for contractors a good idea for my business?” If you own a construction business, insurance can be one of your largest expenses.  Do you really NEED one more insurance policy to pay for?

Whether you are an Electrical Contractor, Plumbing Contractor, HVAC Contractor, Sand & Gravel Trucking Company, or any other construction business…insurance is often one of those expenses you HATE paying for.  In order to lower insurance premiums, contractors will look to lower liability limits or choose NOT to purchase certain insurance policies.

In this article we will show you what an Umbrella Policy is and a few reasons why you SHOULD and SHOULD NOT have a Commercial Umbrella Insurance Policy.


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Do Contractors NEED Commercial Umbrella Insurance

Does Umbrella Insurance Cover Contractors?

Umbrella Insurance DOES Cover Contractors!

In fact, more Business Umbrella Policies for Contractors are sold than most any other type of business.  While every business should look into the benefits of an Umbrella Policy, the nature of the contracting business exposes these businesses to more claims than their counterparts in other industries.

What Is Commercial Umbrella Insurance For Contractors?

Commercial Umbrella Insurance for contractors is an Insurance Policy that adds an additional limit of liability protection to MOST insurance policies that contractors carry.  The umbrella insurance is designed to sit on top of a contractor’s main insurance policies including:

  • Contractor’s General Liability
  • Contractor’s Business Auto Liability
  • Contractor’s Workers Compensation Insurance

Why Do Contractors NEED Commercial Umbrella Insurance?

There are a number of reasons why a commercial umbrella insurance for contractors is needed. Some business owners may choose to purchase a policy because someone else is requiring them to, while other business owners want to protect themselves and their business from LARGE Losses.  The reasons TO purchase an Umbrella Policy are numerous…let’s take a look at a few:

Contractors Purchase Umbrella Policies Because They Are Required By Contract

The main reason MOST business umbrella insurance for contractors are purchased is because someone else is requiring it.

When a contractor does work for other people and organizations, often there are contractual obligations in the contract that discuss the Insurance Requirements that the contractor must meet in order to perform the work.

When doing work for larger organizations and clients, the Construction Contract often stipulates more stringent Insurance Requirements.  The contracts typically require Additional Insured Endorsements, Waivers Of Subrogation, and Umbrella Liability Limits of at least $1 Million.

If the contractor wants the job and wants to get PAID…they will purchase Umbrella Insurance!

Business Umbrella Policies Protect Contractors From LARGE Losses

The MAIN reason a commercial umbrella insurance for contractors should be purchased is to protect the business from large lawsuits.

Unfortunately, contractors face more claims (claims frequency) than most other Small Businesses.  In addition, when claims are filed…they are typically LARGER (claims severity).  The best way to illustrate this is by giving some examples of claims contractors may face!

Contractor’s General Liability Claim Example

A Heating & Air Contractor (HVAC Contractor) was changing out heating units on a large office building. 

An employee for the HVAC Contractor was doing a minor welding work to sauder to lines together.  The employee completed the sauder and left for lunch.  The sauder dropped some hot by products around the lines that were being worked on. The heat eventually ignited the insulation in the attic where the work was being performed.

The fire quickly caught hold and created a massive fire that destroyed the office building.

  • $1,750,000 = Total Cost To Repair/Rebuild The Office Building
  • $1,000,000 = General Liability (Property Damage) Limit
  • $750,000 = Remaining Claim Balance

$750,000, representing the remainder of the claim, was paid by the Contractor’s Commercial Umbrella Insurance Policy.

Contractor’s Business Auto Liability Example

A Dump Truck was parked on a street toward the end of the day.  The driver had taken all of the normal precautions to insure the safe parking of the vehicle, to include engaging the E-Brake.

At some point, the parked truck began rolling.  Being parked on a hill, the truck gained speed and momentum as it careened down the road.

The dump truck hit and damaged 6 different vehicles before slamming into another moving vehicle injuring multiple people.

  • $1,500,000 = Total Cost Of Property Damage & Bodily Injury Claims
  • $1,000,000 = Business Auto Combined Single Limit
  • $500,000 = Remaining Claim Balance
  • $500,000, representing the remainder of the claim, was paid by the Contractors’ Business Umbrella Insurance Policy.


When Would A Contractor NOT Need Business Umbrella Insurance?

Business umbrella insurance for contractors is no longer needed as soon as the business closes!

While not every business owner wants to pay for an additional insurance policy, the need for a Business Umbrella Insurance Policy still exists!

Regardless of whether you run a large contracting business, or you are a single person handy-man doing odd jobs…the possibility that you could be sued for more than $1,000,000 exists.

The fact is that for a small single person contractor, the cost of a Business Umbrella will likely be anywhere from $450-$750 a year…so the coverage is very inexpensive.



North Carolina Commercial Umbrella Insurance For Contractors Agency

If you are a Construction Contractor in North Carolina, feel free to reach out to ALLCHOICE if you have any questions about commercial umbrella insurance for your construction business.  We are a local, independent insurance agency that gives you the best value to take care of all your insurance needs.  Contact Us today or request a Free Commercial Umbrella Insurance Quote.

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