Electrician insurance is probably something that’s on your radar if you’re an electrical contractor. That’s a good thing because the risks and exposures are high for professionals working with electrical wiring and conduits, near overhead power lines or underground electric cables, and other potentially dangerous situations.
For instance, there are inherent risks to electricians that are life and death situations. According to Electrical Contractor magazine, 586 electrical workers died of electrocution over a 10-year span. That’s not considering the number of workers in the industry who survived an electrical injury or another type of trauma while on the job.
There’s also the risk of an electrical fire to your clients’ property. Unfortunately, in these situations, clients sometimes want to blame on the electrician who performed the work. Then there are threats to your business’s vehicles, reputation, equipment, and more.
The point is that these risks carry with them the potential to financially devastate the business you’ve worked hard to build into a successful, profitable enterprise, which is why most electricians invest in adding multiple layers of protection to protect their business.
The insurance you get for your electrical contracting company should be highly tailored and specialized from an insurance program like PowerPro which provides targeted protection for your electrical contractor business.
Is electrician insurance necessary for my business?
As an electrical contractor, your business is vital to maintaining the infrastructure of your community. However, it’s a hazardous trade. You and your employees work around dangerous scenarios that can cause harm to you or someone else.
There’s the risk of defective wiring or connections that can cause a fire or electrocution to anyone. Electrical components just aren’t made the way they used to be, and many of these parts are imported and have deficiencies.
The investments you made in your company vehicles, equipment, tools, and commercial property are also at stake. What happens if they’re destroyed, damaged, or stolen? Would you be able to replace it all out of your pocket, or would it be financially challenging to do so?
Insurance is vital for electricians to be able to run their business without worrying about these legitimate concerns. Many states also require that electrical contractors have some form of business insurance, especially workers’ compensation. So, insurance is vitally important from the viewpoints of compliance and financial protection of your electrical contracting business.
Is electrical contractor insurance for traditional electricians only?
The North American Industry Classification System (NAICS) classifies and codes businesses by industry. Insurance companies use these codes during underwriting to help determine the appropriate type of insurance for their clients.
According to the NAICS, many types of contractors fall under the scope of electrical work. The business description for electricians and electrical contractors extends well beyond traditional wiring and electrical work and includes:
- Airport runway lighting contractors
- Alarm system contractors
- Cable contractors
- Computer and network installation contractors
- Environmental control system installation contractors
- Highways and street lighting installation contractors
- Home automation installation contractors
- Solar panel installation contractors
- Sound equipment installation contractors
- Telecommunications installation contractors
- Traffic signal installation contractors and more
Is electrical contractor insurance expensive?
Considering the peace of mind electrical contracting insurance offers, the cost of the premiums is affordable and well worth it. Think about it this way. There are many expenses in running a small business. But how many of those expenses actually give something back in return?
Research from the Small Business Administration suggests that between 36% and 53% of small businesses will have at least one lawsuit filed against them, with many of those revolving around liability claims.
The legal expenses for litigation alone to defend your business can range from $3,000 to $150,000. There are also potential damages to your own business to consider. If you lost a significant percentage of your investment, could you quickly recoup those losses?
Finally, you have a legal and moral responsibility to protect your workers. The small price of workers’ comp insurance is worth knowing that your employees’ lost income and medical expenses are taken care of if something happens to them while they’re working for you.
Aside from the many benefits of having electrician insurance, various factors will affect how much premium you pay, including:
- Your business’s assets, including commercial property, vehicles, equipment, tools, etc.
- The type of work you do and the size of the projects you undertake
- How many employees you have
- The limits you choose for your policy(s)
- Previous claims’ history for your business
- How much coverage you choose
Many insurance companies will bundle coverage of different types to lower your overall premium. But, in most cases, electrical contractors can expect to pay anywhere from $500 to $1,500 annually for insurance.
What types of insurance coverage do electricians need?
Electricians need a combination of general basic insurance and specialized, tailored coverage to cater to their needs. Nearly every electrical contractor will need general liability coverage and workers’ comp if you have employees on the payroll.
To figure out which other types of insurance your company needs, you first need to understand the risks involved in your particular business.
For instance, do you own commercial vehicles or a commercial building? If so, in those cases, you’d need commercial auto insurance and commercial property insurance.
The bottom line is that it’s vital to have adequate coverage to protect your business, workers, and clients. That being said, let’s look at each type of coverage available to your business.
Workers’ Compensation Insurance
First, it’s important to point out that nearly every state in the U.S. requires businesses to cover their workers through workers’ comp insurance.
Since it’s essential to avoid the legal pitfalls of failing to do so, it’s best to consult an insurance company that understands the electrical contracting industry and your state’s legal requirements.
Talk to a professional about your business’s operations so they can help you make the best-informed decision about coverage.
Aside from that, there’s no doubt that you want to look out for your workers if something happens to them on the job.
Workers’ compensation insurance will pay for work-related injuries or illnesses that your workers receive while working for you.
Coverage will pay for medical care related to the injury or illness and any lost income while recovering. In the unfortunate event that one of your workers dies while from their injuries, workers’ comp will pay a death benefit to your employee’s beneficiaries.
Workers’ Comp example
One of your electricians rewired an older home that unfortunately had asbestos insulation, which causes lung problems and even a rare form of cancer called mesothelioma.
Over the following months, the electrician has bouts of respiratory issues, which he and his doctor claim are due to inhaling the asbestos. Your worker isn’t able to work while undergoing treatment and dies several months later.
Workers’ comp would pay for his wages while he was out of work, medical treatment related to the asbestos exposure, and ultimately, death benefits to his survivors.
General Liability Insurance
General liability insurance coverage is necessary to protect your business from third-party claims. Unfortunately, even under the best of circumstances, the unexpected happens.
Your business could implement the best safety training program to prevent accidents and incidences leading to property damage or injuries. And an unfortunate and unintended event could still occur.
For instance, one of your clients could claim that their property was damaged somehow during the work done by your electrical contracting company.
Or a non-employee might claim that your company’s actions cause an injury, leading them to need medical attention.
It’s also important to remember that electrical contractors often work as part of a larger construction project with many other contractors. There’s always the chance that a mishap could be blamed on your company when the responsibility actually falls on another contractor. But defending these types of claims is expensive.
General liability insurance will cover legitimate claims for repair or replacement costs associated with damage to someone else’s property due to work done by your company.
It will also pay for medical expenses related to a third-party injury and legal fees to defend your company if a lawsuit is filed. If a court sides with someone suing your company, general liability coverage will pay for any amounts within the limits specified in your policy.
General Liability example
One of your workers uses a faulty connection when installing an appliance for a client. Unfortunately, it results in a fire and destroys your client’s home. It’s not your company or your worker’s fault that the part was defective.
In fact, after researching, you realize the flawed part has been implicated in several fires across the U.S.
But, ultimately, your business is blamed, and the homeowner files a lawsuit against your electrical contracting company to recover their damages and help them rebuild.
A general liability policy would pay any settlement rendered by the courts as well as the legal expenses necessary to defend your case.
Umbrella Liability Insurance
Whenever you choose a general liability policy, you determine the type of limits on your policy. Most small businesses have limits ranging from 500,000 to $1,000,000.
So, if one or more people file a claim against your company and the settlement amounts are more than the limitations specified within your policy, that could be a real problem for you.
In that case, any amounts outside of your policy limits would have to be paid by you and your business. An umbrella liability policy was created to cover this gap if a settlement or verdict by the courts exceeds the limits of your general liability policy.
Umbrella Liability example
Your electrical contracting business is awarded a huge job installing the electrical system of a new hospital and physician complex.
The day before it’s set to open, it catches on fire, destroying two-thirds of the structure. Some of the wiring was faulty, leading to the blaze.
Your business tends to take on larger projects, so you have a $50,000,000 limit in your policy. But it’s a $60,000,000 project and you’re $10,000,000 short.
With an umbrella liability policy, the $10,000,000 would be covered, and your business wouldn’t have to figure out how to come up with the amount outside of your general liability policy limits.
Commercial Property Insurance
Many electricians operate from a physical location, where someone onsite receives incoming calls, puts customers on the schedule, and store the business’s inventory and equipment.
Commercial property insurance protects your business’s structure and contents if the building is vandalized or has a theft or is damaged or destroyed.
A commercial property policy will pay for repairs or rebuilding within the limits of your policy.
Commercial Property example
There’s been a string of arson going on in your city. One unfortunate night, the arsonist decides your business is fair game and sets it ablaze.
You’re called by fire officials informing you that there’s nothing left to your commercial building or your tools and equipment.
Two of your company’s vehicles were also destroyed in the blaze. Thankfully, your commercial property policy will make rebuilding less painful because it will cover your losses.
Commercial Auto Insurance
Commercial auto insurance provides liability coverage for vehicles used going to and from a job site.
Whether you have one vehicle or a fleet of vehicles, it’s imperative that they are all covered in case of an accident. This includes any employee vehicles that are used for your business.
Commercial vehicle insurance for electricians will pay for covered claims involving bodily injury and property damages.
Commercial auto example
One of your electricians was up all night and didn’t notify you. Unfortunately, he nearly falls asleep while driving to a job and crosses the center line, hitting an oncoming vehicle.
The other driver is injured and needs weeks of medical treatment and recovery. Her vehicle is also totaled. Your commercial auto policy will pay for the woman’s medical expenses and a replacement vehicle.
But, she’s decided to sue your company. Without adequate vehicle coverage, your company could have been held liable for exorbitant out-of-pocket legal expenses related to the claim and lawsuit. But your commercial auto coverage will handle it all and pay for covered amounts that are settled in the case or awarded by the courts.
Other Types of Electrical Contracting Insurance to Consider
Small business insurance should be highly specialized to address the risks and challenges your electrical contracting business faces.
In addition to the coverage basics outlined previously, there may be other types of insurance your business may benefit from, including but not limited to:
- Contractor’s pollution liability insurance: This type of coverage is especially important if you dispose of electrical equipment or older capacitors, which could contain PCBs and are known to cause cancer. If your business is accused of sending pollutants into the air, soil, or water, it could be costly to defend your case or pay for a settlement.
- Employment practices liability insurance: Discrimination accusations in the workplace are at a record high. Employment practices liability insurance provides coverage to defend your business if one of your workers takes you to court, citing unfair hiring practices or another type of discrimination or mistreatment.
- Inland marine insurance: At some point in your business’s operations, you face a gap in coverage on your tools and equipment. Commercial property insurance covers your equipment while stored at your commercial premises. But what happens when it leaves your commercial property? Electrician inland marine coverage will protect your investment in your tools and equipment while in transit.
- Cyber liability insurance: Cyber liability insurance is a prime consideration if you service or install security systems. It will also protect your business from data loss. It will cover costs associated with a cyberattack on your computer system that could compromise your customer’s financial or personal information. While it may seem unlikely, nearly half of all companies have experienced a data breach.
Whether or not your business needs these types of electrician insurance depend on your business’s risks. It’s a good idea to talk it over with a specialized insurer who is well-informed about your industry and its particular risks.
Lower Your Financial Risks With Comprehensive Electrician Insurance
Every type of business has liability risks. But electricians work around active wires and active circuits, as well as with specialized equipment and circumstances that increase the danger around them.
Statistically speaking, your electrical contracting business is likely to face at least one major claim during its operations. It’s wise to lower and manage the financial risks that could otherwise ruin your business.
As an electrical contractor, running a business is enough to worry about in and of itself. You don’t want to concern yourself with potential scenarios that could temporarily or permanently interrupt your business.
It’s essential to explore your insurance options with a knowledgeable and licensed electrical contractor insurance professional who understands the electrician industry and the challenges they face. There are appropriate insurance policies that can be tailored for the specific needs of your business.
Electrician insurance is a complex but vital component to helping your business stay on track and have long-term success. The right insurance professional can help break it all down for you so that you’re left with the best coverage for your electrical contracting business.