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Q: Do contractors need professional liability insurance?

As a contractor, you typically don’t need professional liability insurance unless you’re providing advice as part of your job. If you’re in construction management, for example, you should consider adding it to your policy. It can pay for legal expenses and compensatory damages if a client decides to take legal action against you due to complications your advice causes

Q: How do I get contractor insurance in Canada?

To get contractor insurance in Canada, take a few minutes to fill out a few details about your business with us. We’ll connect you with a licensed business insurance broker who will guide you through the process of selecting the best package for your needs.

Looking for insurance to protect your contracting business? Whether you’re in construction, roofing, or plumbing, we’ve got you covered.

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What is contractor insurance?

Matt Hands, VP, Insurance and MoneySense

June 19, 2023

Contractor insurance is a type of commercial insurance that protects you from the risks in general contracting industries, such as electrical, construction, framing, painting, roofing, plumbing, HVAC, and renovations. As a business owner, it’s important to prepare for any accidents or claims that could cost you a massive out-of-pocket payout, potentially shutting down your open jobs and job sites.

For example, if you’re renovating a client’s condo, but you accidentally damage the neighbouring unit, both the building and tenant next door could seek compensation. Having contractor insurance can protect you financially by paying for the damage and legal fees.

Each contracting industry is different - you won’t be facing the same potential risks as an electrician if you’re a window cleaner. Therefore, it’s important to customize the coverage in your contactor insurance policy to suit your business operations and maximize your protection.

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Who needs contractor insurance in Canada?

Any independent contractor should consider contractor's insurance as it helps to keep your hard earned money in your pocket if a sudden and unfortunate event occurs. Without a valid contractor's insurance policy, a single slip and fall accident or a property damage claim could force you to park your truck outside of a lawyer’s office, instead of the driveway of your next renovation - costing you time and money.

It’s important to protect not only yourself but also your workers, tradespeople, and clients, allowing you to maintain a good reputation and sustain your contracting business in the long run.

What type of business does a contractor's insurance policy cover:

HVAC maintenance
Window washing
Junk removal
Construction
Renovation
Demolition
Installation
Painting
Landscaping
Plumbing
Fencing
Roofing
Electrician
Cleaning services
Handyman services
Appliance repair

What type of coverage is included in a general contractor insurance policy?

General liability insurance

Equipment and tools insurance (contents insurance)

Builder’s risk insurance

Commercial auto insurance

Additional & optional contractor insurance coverages

Pollution liability insurance

Installation floater

Products-completed operations liability

Commercial property insurance

How much is contractor insurance in Canada?

For a standard CGL coverage on your contractor insurance policy, you can expect to pay annual premiums of $450 for $2 million in protection. The cost, however, will increase as you add more coverage options to customize your contractor insurance to suit the needs of your business.

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Factors that impact your contractor insurance quote

Service type
Each type of contracting service brings a different level of risk. If you’re a locksmith, there are still some risks associated, such as a break-in due to a faulty lock, but you won’t be facing the same type of claims that a demolition contractor would. Therefore, the more risk your service brings, the higher your insurance quote will be as you would be more likely to make a claim that requires a larger payout.
Number of employees
The more people you employ in your contracting business, the more expensive your insurance will be. Being responsible for more people means there is a higher chance someone will make a mistake that results in a claim. As an independent contractor, you have full control over all operations, but with team members, an employee could leave your swzall plugged in, causing a child to injure themselves.
Experience
In any profession, experience brings better results and fewer mistakes, and insurers appreciate any reduction in risk. Therefore, if you’re more experienced in your industry, whether it’s painting, plumbing, or construction, you’ll be able to get a cheaper contractor insurance premium than a beginner in the same field.
Revenue
The more revenue your business brings in, the more expensive your insurance will be because a claimant could seek more in damages knowing how profitable you are. As such, your insurer will also have more to protect.
Business insurance history
If you’ve made business insurance claims in the past, it could raise your insurance premium because it shows you are more likely to make another claim in the future. For instance, if you’re a painter that has damaged multiple carpets in the past, you likely won’t be claims-free later on. Insurers want to work with customers that present less risk, and your business insurance history is used as an indicator of that.

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Frequently asked contractor's insurance questions

Are subcontractors covered under contractor insurance?

If you require a subcontractor for a specific job, your insurance typically will only cover full-time employees under your business. You can, however, add the subcontractor to your insurance policy, but it may raise your premium. Be sure to clarify all details with your insurance company as you wouldn’t want your payout to be denied because of this.

If you choose not to insure them, and the subcontractor lacks insurance, liability will fall under the responsibility of the general contractor.

As a subcontractor, you can also purchase an individual contractor insurance policy to ensure your protection is adequate across all your projects. Then, your employers won’t need to worry about adding you to their insurance policy each time.

Do contractors need professional liability insurance?

How do I get contractor insurance in Canada?

Do I need contractor insurance if I have a construction bond?

A construction bond does not protect you from the same risks as contractor insurance would. A bid bond is used to confirm that you’ll finish a job before a client hires you, assuring them that you agree with the financial terms in the bid, and a performance bond can cover your client financially if you’re unable to complete a project. However, they do not protect you from other factors such as property damage, bodily injury, or equipment replacement. Contractor insurance and construction bonds are two separate tools to manage your business risks, and one cannot be used to replace the other.

Matt Hands, Business Director of Insurance

With 6+ years of experience at Ratehub.ca, Matt’s focus has been on growing its newest business unit, Insurance. He is a thought leader and a valuable resource to respected publications across Canada. read full bio

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