Contractor Insurance and Bonds - Definition, Types, Requirements, and Process

October 3, 2022 / By: Stampede Insurance Team
Contractor Insurance and Bonds - Definition, Types, Requirements, and Process

Every business needs adequate insurance to protect themselves, their workers, and guests in their location. Contractors insurance will keep your company running even when disaster strikes. 

Finding insurance policies can be tough, but the more you know about your needs and the local requirements, the faster you will be able to choose a provider. Moreover, American contractor insurance and bonds help make your business more professional and competitive. 

Types of Insurance

Insurance is designed to protect you against the various risks your business deals with on a daily basis. Most insurance policies have a limited scope of coverage, and they only protect against specific situations. Therefore, to have adequate coverage, you may need to mix and match a few policies. 

General liability keeps you covered in the event of unexpected accidents. That includes injury of a third party and property damage. 

Contracting jobs can involve lots of physical labor and worker's compensation insurance is there to cover any and all injuries employees experience on the job. When their job involves carrying large items or operating heavy equipment, the risk of injury can be higher than in the average office job. 

Commercial auto insurance is another common necessity because it specifically covers vehicles you own, like your work truck. This includes damage or injuries caused by an accident along with weather damage, theft, and vandalism. For rented vehicles, on the other hand, you can get hired & non-owned insurance. 

Your equipment is likely one of the biggest expenses you have. Equipment insurance protects your tools against theft and natural disasters. This policy will cover almost all of your tools, from hand tools to larger machinery. The best equipment insurance will also cover repairs to damaged tools.

What are Bonds?

In order to get a contractor license, business owners in California need to have a $15,000 surety bond or provide a cash deposit. This ensures that people who hire a contractor will receive compensation if the latter doesn't meet licensing standards or fails to complete the job. 

The company that owns the surety bond will be required to step in and pay the person who hired the contractor if the job wasn't completed—this concept is similar to insurance. Surety bonds allow small businesses to prove their reliability to clients, making it easier for them to get work.

Bonds guarantee your work will be completed, putting all parties at ease during a construction project. Payment bonds guarantee that subcontractors and suppliers will receive full payment. 

Contract bonds, on the other hand, give customers a guarantee that they will complete the job according to the terms of your contract.

Insurance Requirements

Aside from the $15,000 bond requirement, there are only a few other legal insurance requirements.

All California companies with employees must have worker's compensation insurance. Even if you hire workers who are not necessarily your employees, those people can occasionally be classified as your employees in a legal setting.

If you're a business owner and have lots of jobs, it's generally considered good business sense to have basic insurance. 

Many clients will ask about your insurance policies, especially for larger jobs. Insurance can put your mind at ease when you work with heavy machinery or are handling jobs that have the potential for costly errors.

Getting the Right Insurance

If you aren't sure what insurance you really need, it can be helpful to talk to an expert. The process of actually getting insurance can be long, but it's worth the effort. 

Without the right insurance, you could be held liable for property damage, lost equipment, and more. Running a business is already tough, so why not take help where you can get it? When you search for an insurance provider, you can learn about the policies they offer, and whether they specialize in insurance for clients like you. 

When you have the right insurance, you can feel confident about going forward with future construction projects. Clients will know they can trust you to be professional and hardworking. 

Finding a Reliable Provider

When you understand your insurance needs, it's important to find a provider who can offer all the coverage you require in one place. Some providers specialize in contractor insurance and they know exactly what plans are best for a company like yours.

We offer comprehensive protection plans for all kinds of situations. Our team will help you save time and money by comparing the best available plans. To speak with a California-licensed insurance agent, contact us at 888-306-7887 at Stampede Insurance Services today!

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