Flooring contractors face numerous financial risks. For example, employees and customers can be exposed to hazardous substances such as silica, asbestos, lead, adhesives, finishing vapors and airborne wood dust. And flooring installers can suffer from back and knee strains, hearing loss and injuries from carpet knives, tile cutters or table saw.
The Bureau of Labor Statistics notes carpet installers and tile and stone setters “have some of the highest rates of injuries and illnesses of all occupations.” Add the possibility of being sued by a customer for property damage or having valuable equipment stolen from a work site, and you’re in a risky business.
That’s why talking to an insurance professional about business insurance and workers’ compensation is so important, especially if you’re just getting started.
You can’t eliminate every risk, but getting the right insurance can substantially reduce your financial exposure. It can also allow you to stay in business in the event of an accident, lawsuit or business interruption. Here, we’ll look at some of the most important coverages available.
Commercial general liability insurance
Commercial general liability (CGL) insurance for flooring contractors is essential. In fact, project owners and general contractors often require proof of CGL coverage. Banks also require proof of insurance for loans and lines of credit. Your licensing board may require it as well.
CGL covers your business and employees from liability claims if damages or accidents occur at a customer’s home or business, on a construction site or on your business premises. CGL helps pay your monetary liability for bodily injury, property damage, medical expenses, and advertising and personal injury. It also covers claims of slander and libel, copyright infringement and misleading advertising.
CGL policies help pay your legal expenses and damages up to certain limits. Coverage is based on the size and risk of your business and typically provides at least $1 million in protection for a one-year period.
CGL policies don’t cover bodily injury to your employees. That’s where workers’ compensation insurance comes in. CGL doesn’t cover professional liability or employment practices liability claims, either. You must purchase these types of liability coverage separately.
Commercial property and auto coverage
Commercial property insurance covers your buildings and their contents, your equipment and tools, and any flooring supplies you store on your premises. Property insurance covers items located at your business address, although some policies may provide limited coverage for property transported to another location.
If you have a retail location or showroom, you need property insurance to cover the structure and its contents. Your landlord or mortgagor may even require it.
If you are a flooring contractor, you should consider a separate inland marine policy to cover equipment, tools and material in transit or stored at remote sites. Many standard commercial property policies won’t insure material or equipment that’s mobile or stored off-site. However, you can get installation floater policies for specific projects. This will ensure all materials for the project are protected during transit and storage.
You’ll also need to insure any commercial vehicles you have. Commercial auto insurance covers any other drivers you name on the policy. This is important coverage if your employees drive company-owned vehicles for work.
Keep in mind that if you or someone else is driving a personal vehicle for your business, they may not be covered if they get in an accident. Your company may be held liable if there are damages or injuries to another party. A “nonowned auto” policy is essential if your employees drive their personal vehicles for business.
Workers’ compensation insurance
Floor installers may be exposed to hazardous substances, and their work involves repetitive motions that can cause strain and other health issues. They’re also at risk of accidents at job sites. For these reasons, you should have workers’ compensation insurance for all of your employees. Most states even require it.
Workers’ comp covers work-related injuries and illnesses. It pays lost wages and medical and rehabilitation expenses while the employee recovers. Check what your state requires. In many instances, sole proprietors aren’t required to carry workers’ comp, but you may want to have the protection anyway.
Premiums are based on the type of industry you’re in, the number of employees you have and your “experience rating.” Your experience rating is a calculation based on your claims history. High-risk occupations and companies with previous claims pay higher premiums. You can keep your costs down by creating a safe work environment through health and safety programs.
BOPs and other bundled policies
If you have a small flooring company, you may benefit from purchasing your basic coverage in a bundled insurance program known as a business owners policy (BOP). BOPs are a good way to get much of the coverage you need in a single policy at a reasonable price.
BOPs come with at least three standard coverages: CGL, commercial property and business income. Business income, or business interruption insurance, replaces your income if your business can’t operate due to some kinds of natural disasters, fires, explosions, vandalism or other covered perils.
With a BOP, you usually purchase workers’ comp and commercial auto insurance separately.
If you’re looking for more flexibility and the ability to add other types of coverage, you may be better off with a commercial package policy. Your insurance professional can help guide you through the various options you have.
Finally, if you’re a subcontractor on a large construction project, the owner or general contractor may provide insurance through a wrap-up policy. A wrap-up policy is a controlled insurance programs that covers all of the subcontractors on the job. Wrap-ups usually include at least CGL and workers’ comp. Talk to your agent or broker about your coverage under such an agreement to make sure you don’t have insurance gaps.
Manage your hazards
As a flooring contractor, you can do a lot to reduce your risk of having a claim in the first place. While insurance is crucial, you can lower your losses and often your insurance costs by having a good risk management program that puts safety first.
You can get help building a loss-prevention plan from industry groups such as the Flooring Contractors Association. The Flooring Contractors Association provides business resources, training and safety programs. Many insurance brokers, agencies and companies also provide resources when you buy insurance from them.
Remember to check what legal requirements you must meet for your business. In most states, you’ll need to be licensed and bonded on top of carrying certain insurance policies.
Transferring some of your risk to an insurer can save your flooring business from financial ruin. Remember, attorney fees run high. Even one claim can put you out of business. An insurance professional who’s familiar with your business can help you find the protection you need.
