What is Contractor Insurance?
Contractor insurance refers to a wide range of liability insurance coverages used by contractors, subcontractors and other tradespeople involved in renovation, maintenance or construction projects. The general purpose of contractor insurance is to protect policyholders against certain risks and losses associated with their work, including those involving liability under common law (such as negligence) and statutory liability (such as vicarious liability). A variety of contractor policies, or "specialty" policies, are available to Florida licensed contractors, both individuals and business entities , to cover their specific needs.
Florida licensed contractors typically use the following types of broad contractor policies to protect against their particular risks and work: Contractor General Liability (CGL); Commercial Automobile; Errors and Omissions (E&O) or Professional Liability; Umbrella for additional overlying coverage; and Workers’ Compensation.
Each contractor needs to consider their own unique requirements to determine the appropriate insurance needs for their particular business. For example, the insurance risk factors for a residential contractor (that conducts remodels and repairs primarily) will be different than the risk factors of a commercial contractor (that conducts vertical construction activities primarily). Larger contractors may be able to cost-effectively bundle several types of coverage under "package policies", which may also provide the ability for broader coverage options from one insurer. Smaller contractors may find it more cost-effective to "package" their insurance needs through independent brokers seeking coverage from different insurers.
Types of Contractor Insurance Offered in Florida
Types of contractor insurance policies available in Florida include general liability, workers compensation, commercial automobile insurance, and also bonds such as Performance Bonds and Payment Bonds. In addition, if the business has significant employees other than Florida licensed contractors, an Employment Practices (EPLI) policy may make sense.
General Liability — This is a very important policy for Florida Contractors and offers liability coverage for property damage or on-site bodily injury that is not covered by Worker’s Compensation. It also provides coverage for various claims of negligence and inadvertent harm against your company including: libel, slander and false advertising. Coverage is generally found for claims of negligence against a subcontractor, if available in your plan. It is important to have this insurance, but the various exclusions and restrictive definitions make it extremely important to read the policy form and our lawyers are always happy to assist you with this type of risk management document.
Workers Compensation — This is a mandatory form of insurance for all Florida Contractors. It is important for coverage of job-related injuries or illnesses suffered by your employees. If your business does not carry Workers Compensation, you will be personally exposed for a job-related injury if the employee does not carry some other type of injury insurance.
Commercial Auto Insurance — If you own vehicles that are used for business purposes, you must have Commercial Automobile Insurance. Private auto policies do not cover liability for auto-related accidents that happen in the course of your employment in managing your business. For example, if you are driving to meet a client and you cause an accident, your personal auto policy will not pick up the accident unless you specifically added business use to your policy.
Requirements of Contractor Insurance for Florida
Contractor insurance in Florida is not just highly recommended — it’s the law. According to the Florida Department of Business and Professional Regulation (DBPR), contractors are required to obtain and maintain liability insurance coverage for the protection of their clients. However, the specific coverage required may vary depending on which part of the state you operate in.
For example, licensed general and residential contractors in Miami-Dade county are required to have minimum general liability insurance of $500,000 for residential contracting work. Florida law also requires proof of insurance before a contractor can pull a permit, and permits are mandatory for any nontrivial job.
Under various Florida statutes, others affected by the law include:
In addition to general liability insurance or workers’ compensation, as needed, there are other requirements for Florida contractors. Residential contractors in the state must also keep on file a certificate that proves completion of the 14-hour Advanced Module Course for Building Contractors. This basic course covers risk management and risk control principles, and is also known as the Wind Mitigation Training and Certification Program. It’s offered by the DBPR.
When it comes to getting bonded in Florida, most contractors who need a bond have to be insured and comply with additional requirements. Most Florida cities, towns, and counties require contractors to carry surety bonds, and the amount of the bond varies according to their licensure category. If a contractor fails to comply with these requirements and the city or county that licenses or registers the contractor has to take action because of this, the contractor will be responsible for the cost of this action. As with the bond, the limits for surety bond amounts vary according to the category of licensure and registration.
Any contractors insured under the Residential Contractors Program are also subject to licensing and insurance coverage under the Florida Construction Lien Act and are liable for any construction liens imposed for such contracting. They are also required to execute, maintain and provide a copy to the department of a sworn affidavit from a bonding company that states that upon the applicant’s failure to satisfy any final judgment rendered due on a construction lien filed against property in the state, the bonding company has agreed to provide funds up to the limit of the bond, up to a period of 5 years. Businesses that do not obtain the required insurance can face certain legal actions. This includes the department issuing an administrative fine or notifying the Florida Department of Revenue of a person’s failure to maintain to required insurance, and the department setting a date for an informal meeting to obtain evidence as to grounds, if any exist, for revoking or suspending the business’s registration. Direct procurement of insurance policies is not permitted, and the courts reserve the right to place a contractor on probation or revoke, suspend, or reinstate licensure. Because these laws do not apply to contractors employed by homeowners or other parties, contractors are expected to carry their own insurance. The Department of Financial Services does not offer or recommend specific types of insurance companies. Regardless of the type of insurance, however, it should always be appropriate for your situation, and all contractors who work in Florida are required to work within the law when it comes to their insurance needs.
Selecting the Right Company for Contractor Insurance in Florida
When it comes to selecting an insurance provider for your contracting business, there are many factors to consider. Along with an analysis of the financial health of the insurer, contractors should also consider (i) the customer service support available for the policyholder, (ii) the ability of the insurer to fully cover the types of liability for which the contractor may be exposed, and (iii) the insurer’s claims handling practices and procedures.
Simply put, the purchase of a policy is just the first step in protecting your company from economic loss arising from covered liability. Policyholders should give careful consideration to how well their insurers respond when claims are made against them.
Contractor Insurance Premiums Costs
There are several variables that can impact the cost of contractor insurance premiums that are well worth knowing as you plan your insurance strategy in Florida. For instance, the size of your business can have an effect on what you pay for insurance. Most insurance providers calculate general liability premiums based on gross receipts. So, if your gross receipts are high, your premiums are likely to be as well. By contrast, your premiums will be lower if your gross receipts are low—although there are minimum premiums which are the floor regardless of income.
Privacy and data security compliance issues are also becoming a second set of factors that can influence premiums for what for many is one of their most critical policies. This generally only applies to companies that collect, process, store and/or otherwise handle corporate, governmental or any third-party confidential information. However, increasingly contractors across all industries are required by their customers , especially in the tech and defense industries to have cyber coverage and meet certain minimum security standards. When it comes to premiums, there are many variables. For example, because not everyone has been hit by a data breach, those that have yet to be breached are generally charged less.
The type of work your business is involved in also impacts the cost of your premiums. For example, a contractor who specializes in high dollar construction projects will generally pay much higher premiums than a contractor focused on smaller residential repair jobs.
Beyond the size, scope of work and privacy-related issues, a contractor’s claims history will also influence the cost of its insurance premiums—and for an obvious reason. Those who have more claims will pay more because they represent a greater risk to the insurance carrier. A contractor’s location also plays a role in their premiums. Those who risk exposure to hurricanes, for example, will pay more for premiums than those who live in a place that is not prone to severe weather.
Filing a Claim in Florida with Contractor Insurance
Filing an insurance claim can be a complicated process, and it’s critical to understand the proper procedure to ensure a smooth experience. To file a contractor insurance claim in Florida, follow these steps:
Step 1: Call Your Insurance Provider Immediately After the Damage
It’s essential to notify your insurance provider of the damage as soon as possible. You may have only 48 hours to do so, and if you miss this window, you risk losing the ability to file a claim or face other negative consequences.
Step 2: Document the Damage
Document all aspects of the damage with photographs and notes. Create a visual record of all visible defects, including the interiors and exteriors of all buildings. If possible, make short videos of the damage to further document what has happened.
Step 3: Secure the Property
If possible, secure the damaged property to prevent further damage. For example, cover broken windows and any holes in the roof to protect the interior from rain and other elements.
Step 4: Mitigate Damage
Document any actions you take to prevent additional damage, such as placing a tarp on the roof to protect the interior framing of your home. The more you can do to mitigate damage after the initial loss, the better your claim will look to your insurance company.
Step 5: Review Your Insurance Policy
Review your insurance policy thoroughly to understand your coverage and the claim process. Check to see if you are protected in the event of a lawsuit or unexpected expenses and if you’re protected in the event of an ongoing construction project. Research your policy’s provisions for business income, business liability, and legal expenses related to your claim.
Step 6: Contact Your Attorney
Before filing your claim, consider contacting an attorney to ensure you aren’t violating the terms and conditions of your insurance policy. An attorney can make sure you are filing your claim properly and aren’t doing anything detrimental to yourself or your business.
Step 7: Hire an Adjuster
Hire a public adjuster to evaluate the damage and act as the middleman between yourself and your insurance provider to expedite the claim process. A public adjuster will help you review your policy and make sure you have all the required documentation to support your claim.
Step 8: Review the Claim With the Adjuster
As the adjuster reviews your claim, they may ask you to provide additional documentation. Collaboration and clear communication are essential as they need to make an accurate evaluation of the damage and the cost of repairs. Having all the necessary documentation and evidence is critical.
Step 9: Follow Up
Constantly follow up with your insurance provider throughout the claim process. Be persistent but polite. Keep meticulous records of when you filed your claim, added or changed coverages, and the date of every phone call and received correspondence. Document any promises your insurer makes and follow up to ensure these promises are met.
Step 10: Read the Insurance Company’s Report
Read your insurance provider’s report carefully before determining how to respond. Each report should give a brief overview of the loss, detailed descriptions of the buildings and contents damaged, and how much the insurance company plans to pay out. If the report is unclear in any way, ask your provider for clarification and detailed explanations. You can also request an appraisal if you feel the insurance company’s offered value is unjust.
Step 11: File Your Claim
After you review the insurer’s report, submit the claim with signature and date. Do not forget to send a copy of your appeal to your insurance provider with a return-receipt requested, so you have proof that it was sent. Keep copies of every communication related to the claim.
Step 12: Wait for a Written Response
Be patient as you wait for a written response from the insurer. If you don’t receive one, ask your insurance company for a detailed explanation of how they reached the conclusion they did.
Advantages of Contractor Insurance in Florida
For construction contractors in the Sunshine State, the advantages of carrying insurance go far beyond the legal requirement of having a certificate. The first benefit is that it helps manage financial losses you might incur if you cause physical damage to a job site, or to someone else’s property. Here are some specific advantages of having contractor insurance with solid protection:
The second major benefit is that insurance offers legal coverage if someone ever tries to bring a lawsuit against you or your business. This doesn’t happen frequently , though it is becoming more common in certain fields of contracting.
Thirdly, if you present your clients with proof of insurance, it can help put their mind at ease when deciding between you and your competitors. If all else is equal, they may be more likely to choose you if they know you have such a policy.