Electrical Contractors Insurance: Cost and Coverage

What is Electrical Contractor Insurance?

The electrical contractor insurance is nothing but a financial safety net. Suppose any mishap or unforeseen incident occurs in the workplace of your business, such as an injury on the job or a lawsuit filed due to alleged negligence. In that case, this insurance covers all associated costs.

Without this insurance, the contractor may need to pay out of their own pocket, which can disrupt the financial flow of small or mid-sized businesses.

Electrical contractors face many difficulties while performing their duties. Small mistakes, such as incorrect wiring or faulty equipment approval, can result in severe consequences, including property damage, injuries, or even death (in some cases).

To reduce such incidents and deal with more confidence, businesses must obtain electrical contractor insurance before initiating any project.

7 Essential Insurance Coverages for Electrical Contractors

To ensure financial security, insurance coverage is a must for electrical contractors. Let’s explore the key insurance coverage packages to consider as an electrical business owner.

1. General Liability Insurance

General liability insurance is the first step in protecting your business. This insurance covers third-party claims, including property damage, bodily injury, and personal injury.

Let’s take an example.

Suppose faulty wiring damages a client’s appliance or a customer gets an electric shock due to mismanaged wiring on-site. This electrician liability insurance policy will help you cover medical expenses, repair costs, or even legal fees (if required).

This coverage is a must-have as electrical work involves high risks, and even a minor accident can result in expensive claims. Some clients ask for proof of general liability coverage before signing the deal, which makes this insurance even more essential.

What does it cover?

• Property Damage
• Bodily Injury
• Legal Defense Cost
• Personal or Advertising Injury (Claims of slander, libel)

2. Workers’ Compensation Insurance

This insurance ensures all of your employees in the business are in safe hands. Electrical work requires physical involvement, which is life-threatening for workers with risks like electric shocks, burns, falls, and equipment-related injuries.

With this insurance policy in place, if employees get injured or become ill while on the job, they will get medical care, rehabilitation, and wage replacement benefits without requiring any financial support from the business.

In the U.S. (almost all states), operating an electrical business without workers’ compensation insurance is a serious crime and is punishable by fines or even imprisonment. This is another reason why electrical contractors insurance is essential. It saves you from costly lawsuits.

Accidents can happen, and there is no certainty about when they will occur, so this becomes one of the most important types of insurance for electricians who run a business with employees.

What does it cover?

• Medical Expenses
• Lost Wages
• Disability Benefits (Compensation)
• Death Benefits (Financial support to families)
• Legal Protection

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3. Commercial Auto Insurance

Business vehicles play a major role in completing electrical business operations. It can be a van with all the essential tools, a truck carrying heavy equipment, or service vehicles for employees; accidents on the road could lead to costly damages. But if you have commercial auto insurance, you will save a lot of money.

This insurance policy gives financial protection if a business-owned vehicle is involved in an accident/collision, causes property damage, or results in employee injuries.

As vehicles are an unavoidable part of the business, having this type of electrical contractors’ insurance policy keeps the business financially secure.

What does it cover?

• Auto Liability
• Collision Coverage
• Comprehensive Coverage (Protection from theft, fire, or weather damage)
• Uninsured Motorist (Covers losses if hit by a driver without insurance)
• Medical Payments

4. Professional Liability/Errors and Omissions Insurance

Professional liability insurance, also known as Errors and Omissions (E&O) insurance, protects electricians against claims of negligence, mistakes, or failure to deliver services as promised. The general liability insurance covers physical damage or injuries, whereas this insurance policy entirely focuses on financial losses a client might suffer due to errors in design or faulty installation.

Suppose you installed an electrical system and it doesn’t meet safety standards; it will require costly rewiring. In such cases, the client may sue for damages, but this insurance policy helps cover the costs of legal defense, settlements, or judgments.

In electrical jobs, disputes can happen more often than not, and it is always good to have liability insurance that protects your reputation and finances.

What does it cover?

• Negligence Claims
• Legal Defense Costs
• Contract Disputes
• Faulty Advice or Design Errors

5. Business Owner’s Policy (BOP)

A Business Owner’s Policy is an insurance package specifically designed to protect small and mid-sized electrical businesses at an affordable rate. Suppose you are running a small business with a limited budget. In that case, you can consider BOP, which combines general liability insurance, commercial property insurance, and business interruption coverage (mostly included) in one plan.

Instead of purchasing separate policies, you can invest in BOP, which turns out to be one of the most effective forms of business insurance for contractors who don’t want to manage multiple policies.

BOP is an affordable electrician insurance that lays a strong foundation for your electrical business. It ensures both everyday risks and larger disruptions are covered.

What does it cover?

• General Liability
• Commercial Property
• Business Interruption
• Optional Add-ons (Cyber liability, equipment breakdown coverage)

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6. Tools and Equipment Insurance

Tools and equipment insurance is necessary for electricians who rely on handheld tools to larger machinery in their daily work. The electrical work mostly relies on these machines, and many tasks can’t be completed without them. Losing these machines to theft, damage, or breakdown could have a heavy impact on business operations. This is the primary reason why it is recommended to obtain this insurance.

Unlike general business property insurance that primarily covers fixed assets, this policy specifically protects mobile equipment that travels with electricians from one job site to another.

What does it cover?

• Theft Protection
• Accidental Damage
• Equipment Breakdown
• Rented/Borrowed Tools
• Replacement Costs

7. Umbrella Insurance

Umbrella insurance is an extra layer of protection for electrical contractors that extends the limits of existing insurance policies, such as general liability policies, commercial auto policies, or employer’s liability policies.

In the electrical business industry, minor accidents can lead to costly lawsuits or significant property damage, which standard policies may not cover. This is where umbrella coverage comes in. When your primary insurance limits are exhausted or exceeded, this coverage ensures your electrician business remains protected from financial losses.

What does it cover?

• Excess Liability
• Large Claims
• Broader Coverage
• Legal Expenses

The insurance coverage part is done; now we will look at the electrical contractor’s insurance cost.

How Much Does Insurance Cost For Electrical Contractors?

The yearly cost of an electrician insurance package ranges from $500 to $ 2000 on average. The electrical contractor insurance cost depends on various factors, not just one or two.

The cost varies based on the type of coverage plan you choose for your business, its location, size, and services offered.

Top Insurance Providers for Electrical Contractors

There are multiple insurance providers for electrical contractors. Among the top-rated providers, three big names are: Next Insurance, The Hartford, and Hiscox. They offer specialized business insurance plans for electrical businesses. Let’s find out what these top insurance providers are all about.

• Next Insurance: The company’s digital-first approach and quick online quotes make it unique among the top insurance providers. With Next Insurance, you can select customizable policies that can be adjusted as your business grows.
• The Hartford: It is well-known for its high-end coverage plans and excellent customer service. The Hartford provides insurance policies specifically made for electrical contractors. The company understands the risk of this industry and provides specialized coverage options.
• Hiscox: This company is primarily for small businesses. It offers policies best suited for electrical contractors. Hiscox offers flexible coverage plans with good customer support.
• Nationwide: It has built a reputation for maintaining financial stability. Electrical contractors can choose from a wide range of coverage options for their business.

To secure insurance at a lower cost, the Business Owner’s Policy (BOP) is often recommended as it covers both general liability and commercial property.

Examples of Electrical Contractor Claims

1. Property Damage Claim

If a wiring fault results in a fire catching the circuit, it can damage the client’s property. With an insurance policy in place, the repair cost and associated legal claims are covered.

2. Bodily Injury Claim

Suppose a customer falls over extension cords and suffers a serious injury. Insurance will cover all medical expenses and protect the contractor from a lawsuit.

3. Employee Injury Claim

On-site, if the employee gets injured or suffers an electric shock that requires hospitalization. In this case, workers’ compensation comes into effect, which covers medical bills and lost wages during recovery.

4. Equipment Theft Claim

In case of theft of tools or specialized equipment, insurance reimburses the cost and helps you move in the right direction.

5. Faulty Work Claim

When a client requests additional expenses for correcting wiring that doesn’t meet standards, professional liability insurance steps in to cover legal defense and compensation.

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Requirements to Get Insurance for Electricians

• State Licensing Requirements: Some states make it mandatory to have an insurance policy in order to operate an electrical business.
• Client and Contract Requirements: Some clients ask for proof of insurance before assigning tasks/jobs to protect assets in case of accidents.
• Workers’ Compensation Mandates: If you hire employees for your electrical work, some states make it mandatory to carry workers’ compensation coverage to protect employees from injuries.
• Surety Bond Requirements: A Surety bond is another form of insurance that ensures project completion and compliance. It is required in some states to operate legally.
• OSHA and Workplace Safety Compliance: Insurance must align with OSHA (Occupational Safety and Health Administration) standards to minimize workplace hazards and ensure proper safety coverage.

The Bottom Line

Insurance policies are a large asset for any business. It saves you from financial burden, protects your reputation, and eases the headache of property damage. With the right insurance policy in place, you can operate your business legally and look forward to growth. However, one challenge you might face when purchasing insurance policies is the cost of electrician insurance.

Small and mid-sized businesses can consider a Business Owner’s Policy (BOP), which combines major insurance policies in one plan and gives you the financial freedom.

While running an electrical contractor business, there may be times when managing your financial data can feel overwhelming. You may lose important invoices or forget to maintain records. So, how to overcome these mistakes? There is a solution.

You can consider using invoicing software in your workflow to save time, create error-free invoices, and manage financial data seamlessly.

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