Risky business: understanding your insurance options

by Dan Luigs

As a contractor, every day is filled with potential risks. From disgruntled ex-employees claiming wrongful termination to accidentally contaminating the environment with one bad bucket tip, there’s almost no end to the issues that can financially undo your business if you’re not properly insured.


Unfortunately, there’s no one-size-fits-all policy designed to protect contractors from every potential issue that could arise. That’s why it’s important to be aware of the different policy options and understand what they are designed to cover.

Typically, a contractor will want to carry the following:

  • Business Owner Policy
  • Commercial Auto Insurance
  • Inland Marine Insurance
  • License Bonds / Permit Bonds
  • Workers’ Compensation Insurance

Here’s a look at what each policy does and doesn’t cover:

Business Owner Policy includes both Business Personal Property and General Liability coverage.

While the Business Personal Property portion of this policy covers everything that is kept at your office including computers, supplies, machinery, etc., the General Liability portion protects you and your company from claims involving non-employee bodily injury and property damage resulting from your products, services or operations. It also helps with medical expenses and attorney fees and may cover you if you are held liable for damages to any building or property you rent for business purposes.

What it does not cover is employee injuries, auto accidents, workmanship, intentional acts (i.e., an assault), or professional mistakes.

Commercial Auto Insurance covers damage to company vehicles and provides protection for employee accidents when they are doing anything related to work, no matter what vehicle they’re driving. For example, if an employee runs out for lunch for the crew and is involved in an accident, your business could be sued. Commercial Auto Insurance covers that, but it is very important to also have Hired/Non-Owned Auto Coverage.

Inland Marine Insurance is a must-have as it safeguards your tools, equipment (including computers), and unfinished projects from loss or damage when it is at a jobsite or in your vehicle; whereas Business Personal Property only covers it in your office or company garage.

License and Permit Bonds, sometimes referred to as ‘commercial bonds’ or simply ‘license bonds,’ are required by government agencies and are intended to protect customers and/or the state from damages. For example, when the antique vase is missing and the client and company aren’t sure what happened, the bond company steps in and handles this as a third party.

Workers’ Compensation Insurance is critical. It doesn’t matter if it’s repetitive motion injuries, falls or ladder accidents, if an employee gets hurt, this is the coverage that protects you.


There’s an additional policy that businesses should consider. That is Employment Practices Liability Insurance. If an employee or past employee sues your company, this type of insurance would protect you. This covers the hiring process, HR procedures, and discrimination, just to name a few.


As many policies as there are to consider, there are even more people out there willing to sell them to you. But if you only take one bit of advice from this column, let it be this: Find someone who understands painting! If they don’t ask about your sprayer and equipment that you take to jobsites, they don’t understand your risks. Buy smart and be covered no matter what comes your way.


Dan Luigs has worked with the Insurance Store Inc. as an insurance agent for the past seven years in Chesterfield, MO. Working largely through referrals, he’s successfully grown his business into the top 3% of premiums written in the country out of all insurance agents in the U.S., and he is proud to call some of the top contractors in Missouri and Illinois clients.

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