Contractors Liability Insurance In California: Professional Liability For Contractors

Contractors Liability Insurance In California: Professional Liability For Contractors

By In Uncategorized On April 22, 2020

Contractor liability insurance in California provides liability safeguards for contractors operating in the Golden State. Contractors and professionals in high-risk industries such as medicine, law, construction, consulting, and security, may require liability insurance with coverage similar to that of small businesses. 

This guide will help you understand your options, how much coverage you need and what it can do for you. Professional liability insurance California is mandatory for some contractors, but it’s recommended that all professionals have it due to high exposure to liability risks.

  • If your profession involves interacting with the public and you meet clients for a living, you may be sued even if you try your best to ensure client safety. To guarantee your safety, the only way is to purchase liability coverage insurance.

Californian professionals don’t need a Business Owner’s Policy, but they need general liability insurance. If you’re a professional or self-employed contractor, consider your options for liability insurance. Having high liability insurance is a priority for contractors who make more than 6 figures to avoid paying out of pocket expenses. 

Is It Illegal To Not Have Professional Insurance In CA?

If you operate as a professional contractor in CA, you are actually forced to have a license bond by law. Contractors have more obligations to fulfill to CA state than even small businesses. The state of California scrutinizes contractor licenses and only approves licenses for contractors who have insurance coverage.

  • Contractors may have to fulfill more obligations such as provide contract security bonds to the state for each job. Liability insurance protects you in the event you cause an accident while executing a job task.

As a baseline rule, CA contractors must purchase a baseline $15,000 bond. If you run your own LLC, the insurance coverage minimum is $100,000. You must also carry Worker’ Compensation coverage if you’re a self-employed contractor because this form of social security is mandatory for all workers in California. 

Contractors Liability Insurance California: Benefits

In California, the most common contractor liability policy provides coverage of $2M total and $1M per occurrence which means you’ll have a coverage limit of up to $1M per lawsuit. Contractors can increase their limits by consulting with their insurance company.

General liability for contractors and professionals will provide all-around protection for misfortunate events such as bodily injury/medical payments, property damage, intellectual property, advertising damage, and more. Here are the top benefits for contractors in the Golden State:

  • Medical Payments. If you injure a client by accident while you’re carrying out a job, this policy will cover their medical expenses.
  • Property Damage. If you cause physical damage to tangible private property such as cars, fences, equipment, decor, or anything related to your business, the client will be reimbursed for the repair costs necessary.
  • Advertising Injury. If you’re advertising your services on billboards or social media and you spread information causing a competitor to lose revenue, the competitor could press charges.

NOTE: Professional coverage is only valid during the policy period. Make sure to file your claims on time.

Contractors Liability Insurance California: How Much Will You Pay?

The premiums for the contractor’s liability insurance range between $1000-3000 on average, while they can be lower or higher depending on your income level. Important factors that can impact the premium price include your profession classification (i.e. consultants pay more than welders), sub-contractors/partners, and location.

Example: A contractor with a $30,000 income in California may only pay $1000 a year. A contractor making between $30,000-100,000 will pay in the range of $1000-3000 for liability. A contractor making over $100,000 will pay at least $2000 but this can reach as much as $5000 depending on their income level.

  • Risk factors can significantly increase or decrease the premiums. For contractors who have had 10+ years of experience without a single lawsuit, they may pay as little as $500 a year in liability insurance. 

Businesses with less experience that have a claims history may have to double or triple the amount due to increased risk for the insurance company. Factors that may have an impact include your personal credit score, age, and professional status. In the state of California, there are also small fees and taxes that go into processing liability insurance, adding to the total cost.

The total policy coverage does not impact the price you pay as much as the risk factor you pose to the company. For instance, the difference between $2M and $3M in total coverage is not going to be huge when it comes down to monthly payments. The difference could be as little as $20-30 more per month. 

For instance, if your current plan costs $1000 a year and you’re paying $80 for liability insurance with a total of $2M coverage, to upgrade to $3M you could only pay as little as $100/month. The insurer will allow you to adjust your total coverage including your maximum coverage for each claim.

Why Is Contractors Liability Insurance Necessary In California?

Contractor’s liability insurance, usually taken out under a General Liability Insurance policy, allows you to protect yourself from financial payments you’re obliged to pay due to malpractice, injury, damages, or any harm you cause to 3rd parties. This policy insures you while you’re working with clients or handling their equipment/property. 

Example: If you’re an auto mechanic, professional liability covers you for the damages caused to a client’s car. If you’re a doctor, you’ll be insured in case you accidentally injure a patient during a surgery. For consultants, you may need liability if you give wrong advice to a client which leads to revenue loss.

Certificate Of Liability Insurance 

California-based businesses who hire contractors tend to demand verification of liability insurance before they sign a contract. This is a new precaution that CA businesses take to protect their assets and business interests. If they entrust you with their equipment and pay you for your services, they expect a guarantee before they sign a contract.

To get hired, you may need to provide a certificate from an insurer called a “Certificate of General Liability Insurance”. This certificate will show the client you’ve purchased adequate coverage that can reimburse them for any potential losses or accidents caused while carrying out the job. 

While most businesses in the state of California have business insurance that can back them in the event of an accident, they expect partners to have this insurance if they entrust them with their assets. This allows all contractors to show they’re serious and care about the well-being of their clients.

California Garage Keeper Liability

California garage keeper liability is an optional upgrade for all liability insurance plans in the automotive industry. This policy is one of the most popular policies for contractors and business owners who store, operate or repair vehicles. 

Garage keeper liability is essential for buildings in the service sector such as hotels, motels, restaurants, service stations, repair shops, and more. It’s also essential for retail such as dealerships, parking lots, etc. The policy can be taken out by tow truck operators, car mechanics, truck drivers, and more. It insures the vehicles and protects them from damage and theft.

The CA economy largely relies on vehicle transport and this policy can be added as an optional upgrade to your existing “General Liability Insurance”. It covers all incidents that are related to garage operations and accidents. The policy also covers customer injuries and damage caused by employees.

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