Most contractors don't find out they're underinsured until a claim hits. Here are the five gaps we see most often — and how to close them before they cost you.
Many contractors purchase a $1M/$2M general liability policy because it's the cheapest option that satisfies contract requirements. The problem? A single serious bodily injury claim can exceed $1M before legal fees are even factored in.
If you're working on commercial projects or in residential settings where property values are high, minimum limits leave you exposed. An umbrella policy adds an extra layer of protection for a fraction of the cost of increasing your primary limits.
This is the most dangerous assumption in contracting. Many GCs believe that if everyone on the job is a 1099 subcontractor, they don't need workers' comp. In most states, that's wrong. If a sub doesn't carry their own workers' comp and gets injured on your job, your policy — or your personal assets — may be on the hook.
Always verify that every subcontractor has active workers' comp coverage. Get certificates. Check expiration dates. If they lapse, you're exposed.
Your general liability policy doesn't cover your tools. Neither does your personal auto policy if they're stolen from your truck. Contractors routinely carry $20,000–$50,000 in tools and equipment that's completely uninsured.
An inland marine or tools & equipment policy covers your gear whether it's at the shop, on the job site, or in transit. The premiums are surprisingly low relative to the replacement cost.
If you drive your personal truck to job sites and it's only covered by a personal auto policy, you have a gap. Personal auto policies typically exclude coverage when the vehicle is being used for business purposes. If you're hauling materials or driving between job sites, you need commercial auto.
This is especially critical if employees or subcontractors ever drive your vehicles. A commercial auto policy covers the vehicle regardless of who's behind the wheel — a personal policy does not.
You started as a one-person operation and now you have a crew of eight. You added a second truck. You started taking on commercial projects. But your insurance still reflects the business you were two years ago.
Insurance isn't set-it-and-forget-it. Every time your revenue, headcount, equipment, or project scope changes, your coverage should be reviewed. An independent agency like risk|x does this proactively — we don't wait for renewal season to check for gaps.
Not sure if your coverage has gaps? Text risk|x and we'll review your current policies — no obligation.
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