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[av_toggle title=’Do I really need Workers’ Compensation insurance for my contracting business in California?’ tags=’Workers Compensation Insurance’]
In a nutshell, yes. You don’t just need it, you MUST have it to do business in California. It is required by California state law, even if you have only one employee. Some contractors need to carry Workers’ Compensation insurance even if they have no employees but themselves. Even temporary employees must be covered by your Workers’ Compensation policy.
The reason is simple. Workers’ Compensation protects workers who are injured on the job or develop a work-related illness. It makes payments directly to workers to make up for some of the wages lost due to work-related injury or illness. It also helps pay their medical expenses, including rehabilitation costs. Without Workers’ Compensation insurance, employers are responsible forpayingall costs stemming from a work-related accident or illness.
In fact, if you don’t have Workers’ Compensation insurance for your contracting business you are breaking the law. Under California law, it is a misdemeanor and you could be fined as much as $10,000 or sent to jail for up to a year. The state will also issue a stop order that prevents you from using any employee labor until you have a Workers’ Compensation policy.
[av_toggle title=’Doesn’t the state of California provide Workers’ Compensation insurance that I can buy?’ tags=’Workers Compensation Insurance’]
California requires you to have Workers’ Compensation coverage but it does not provide it. You must buy a Workers’ Compensation policy from an insurer licensed to do business in California or you must become a self-insured employer. Only companies with a net worth of 5 million and a net annual income of $500,000 may become self-insured. Even then, approval from the state and a security deposit are required. The vast majority of contractors purchase coverage through an insurance agency or broker licensed to sell Workers’ Compensation policies in California.
[av_toggle title=’Do my employees contribute to the cost of Workers’ Compensation insurance?’ tags=’Workers Compensation Insurance’]
Sorry, but no. California requires employers to pay for the Workers’ Compensation policy that covers their employees.
[av_toggle title=’Isn’t there a lot of administrative work involved with Workers’ Compensation?’ tags=’Workers Compensation Insurance’]
Small contractors often worry about having to do a lot of paperwork. Yes, there are a few things you will have to do, but your insurance carrierwill get you started and usually acts as administrator. The state of California providesinformation for employers and employees on the Division of Workers’ Compensation website.
There is a posting requirement, which is easy to meet. When you receive the “Notice to Employees” poster, simply hang it up in a place where employees will see it—maybe in a lunch or break area, or near the water cooler. There is also a pamphlet you must give to new employees, explaining their rights and responsibilities if they suffer a work-related injury or illness.Your insurance carrier should give you a supply of claim forms that employees must complete when a work-related injury or illness occurs. As the employer, you will also need to submit a report for each incident. There are tight deadlines for these items, so it’s important to act promptly.
[av_toggle title=’What happens when an employee wants to come back to work but has work restrictions?’ tags=’Workers Compensation Insurance’]
People are usually eager to get back to work after an injury or illness. And work is usually considered good therapy. But recovering employees may need to ease back into the work routine rather than jumping back in with both feet. The treating doctor may say that an employee can return to work, but with certain limits or work restrictions. The doctor’s report will say whether the employee can perform regular work, modified work, or alternative work. You might need to make some changes to the kind of work, or the amount of work, the employee does. Or maybe you would need to change the way the work is done, or give the employee a different job altogether. The goal is to work something out to make it possible for employees to get back to work and get on with their lives.
[av_toggle title=’Why do employees have to go to specific doctors when they make a Workers’ Compensation claim?’ tags=’Workers Compensation Insurance’]
California’s Division of Workers’ Compensation has approved certain groups of doctors, or Medical Provider Networks (MPN), to treat employees who have submitted Workers’ Compensation claims. Each insurance carrier has its own MPNs, but some allow employees to pre-designate their own personal doctor.
[av_toggle title=’As a contractor working in California, I use my personal vehicle for business. Do I really need commercial auto insurance?’ tags=’Commercial Auto Insurance’]
In a word—Yes.It’s all about protecting the business that you’re working so hard to build. Your personal auto policy may not cover you for an accident that happens while your vehicle is being used for work. Different risks are involved when a vehicle is used in contracting work than when it is driven for personal use only.
[av_toggle title=’One of my employees drives his own van to work and picks up some of my other employees on the way. Why do I need commercial auto insurance for his van even though it’s not owned by my company?’ tags=’Commercial Auto Insurance’]
The state of California requires commercial auto insurance on any vehicle used to transport your employees. If you fail to carry the required insurance, both your business and personal assets are at risk if there is an accident.
[av_toggle title=’In California, what kinds of vehicles can I get commercial auto insurance for? Can I get coverage for a cement mixer? How about a trailer?’ tags=’Commercial Auto Insurance’]
Pretty much any kind of vehicle used by contractors and their employees can be covered by commercial auto insurance in California: cars, vans, trucks (from small pickups to big rigs), trailers, and even cement mixers. It’s not the type of vehicle that matters, but rather its use. If a vehicle is used for commercial purposes you should be taking a look at commercial insurance for it.
[av_toggle title=’What specific commercial auto coverage should I carry for my contracting business?’ tags=’Commercial Auto Insurance’]
In California, as in any other state, the basics are liability, medical, and physical damage insurance:
- Liabilityinsurance provides coverage for bodily injuries or property damage resulting from anaccident.
- Medicalpaymentsinsurance makes sure your business is not saddled with medical bills for anyone injured in an accident involving a company-owned vehicle or personal vehicle covered by your commercial auto policy.
- Physical damage insurance includes both collision insurance, which pays the repair bills after an accident, and comprehensive insurance, which covers repairs for damage from storms, vandals, thieves, and other causes.
You may also want to consider uninsured motorist insurance, which makes sure your business won’t be held liable if one of your covered vehicles is involved in an accident with an uninsured or underinsured driver. Uninsured motorist coverage also protects you in a hit-and-run situation.
[av_toggle title=’Is there a minimum coverage requirement in California for commercial auto policies?’ tags=’Commercial Auto Insurance’]
To get and keep a California Motor Carrier Permit, which is required for many commercial vehicles, you must provide proof that you have met certain liability insurance requirements. The minimum coverage depends on the type of vehicle and what is being transported. To determine whether you need a Motor Carrier Permit and access related insurance requirements, visit the California Department of Motor
Vehicles website: http://www.dmv.ca.gov/vehindustry/mcp/mcpfaq.htm#minins.
[av_toggle title=’What will an insurance carrier consider when determining the rates I will pay in California for commercial auto insurance for my contracting business?’ tags=’Commercial Auto Insurance’]
A number of factors enter into the calculation, such as how many and what type of vehicles need to be insured, how much time each vehicle will be on the road, and how many drivers will be covered and their driving records. As with any insurance, the higher an insurer thinks the risk is, the more you will pay in premiums.
[av_toggle title=’Why do I need general liability insurance to run a contracting business in California?’ tags=’General Liability Insurance’]
The short answer: stuff happens. California is no different than any other state where that’s concerned. Stuff happens. Stuff you didn’t anticipate. Stuff that can end up costing someone a lot of money, and you don’t want that someone to be you. General liability insurance is a solution.
California contractors face the same risks as contractors everywhere else. An accident at your place of business or at a work site could result in injury or property damage and a law suit against your business. The work that contractors and subcontractors do can be dangerous. Excavators and electricians and roofers and people who work with power tools or heavy equipment face far more dangers on the job than the average office worker, for example. California general liability insurance can keep you from being bankrupted by a serious worksite accident.
You may be wondering, “Why do I need general liability insurance if worksite accidents are covered through Worker’s Compensation?” The simple answer is that Worker’s Compensation Insurance replaces some of the wages a worker may lose due to an accident and pays some of the injured worker’s medical bills. But it won’t help you if you lose a lawsuit related to a worker’s on-the-job injury.
Some risks contractors face are not as obvious as a worksite accident. Suppose you install a lighting fixture in a house you’re remodeling for a residential client. The fixture turns out to be faulty and causes a fire. The house will need extensive reconstruction, and the homeowner will need temporary housing
in the meantime. And there are big medical bills for treating injuries suffered during the fire. The company that manufactured the malfunctioning lighting fixture has gone out of business. So guess who gets sued? Or, suppose that a visitor to your place of business trips and falls and sues you for negligence.
Such exposure to risk can also be offset by California general liability insurance.
Clients and contractors you work with in California expect you to be covered by general liability insurance. They’re probably not worried about what would happen to your business if you lose a law suit. They simply want to make sure that if you get sued and lose, you will be able to pay up. They may even require you to carry a certain amount of general liability coverage as a condition for working with them.The type and amount of insurance your business carries may be the deciding factor in whether or not you win a contract.
[av_toggle title=’Deductibles: How much and for what?’ tags=’General Liability Insurance’]
The rule of thumb with most insurance is: the higher the deductible, the lower the premium. In other words, you take on the risk of paying more out of your own pocket later for lower premium payments now. Unfortunately, most people worry more about current expenses than about something that might happen sometime in the future, or not at all. The question for contractors is, how much could you afford to pay out of pocket if you had to pay it tomorrow? If the answer is $5,000, you don’t want your general liability insurance policy to have a $10,000 deductible.California contractors can choose to have the same deductible for bodily injury as for property damage, or have a higher deductible for one than for the other.
[av_toggle title=’Part of your insurance strategy’ tags=’General Liability Insurance’]
General liability insurance is a must for contractors working in the state of California, but by itself it is not enough. As a California contractor, you need to have an overall insurance strategy that protects your business in a number of ways. Your strategy will include Worker’s Compensation as well as general
liability insurance, and may also include more specialized insurance for situations not covered by either of those. You may also want to consider excess/umbrella coverage, insurance for materials and tools in transit from one location to another, and builder’s risk coverage.
[av_toggle title=’What is cargo insurance?’ tags=’Cargo Insurance’]
Cargo insurance is a very broad category. Some people may call it transportation insurance, because it is designed to cover goods that are being transported from one place to another. Cargo insurance can be used to cover goods being moved by truck, train, boat, plane, or just about any other form of transportation. (There may even be insurance carriers out there willing to write cargo insurance for shipments by dog sled or camel caravan!)
This discussion focuses on ground transportation by for-hire truckers. Insurance for cargo being moved by truck is actually a form of liability insurance. When other modes of transportation are used, the cargo insurance is typically a form of inland marine or maritime coverage.
[av_toggle title=’Do I really need cargo insurance for my California based trucking company?’ tags=’Cargo Insurance’]
If you are moving goods that belong to someone else, you probably need cargo insurance. Without cargo insurance, you are liable for any losses that occur to those goods while they are in your custody.
One of the most common types of cargo insurance policies is coverage for moving companies that transport the contents of a house, apartment, condo, office building, or other structure from Point A to Point B when the owner relocates, so let’s use that as an example. Think in terms of the possible extent of loss that can occur, as well as when and where it can occur. You could have a partial loss of some of the cargo or total loss of all of the cargo. And the damage could occur while the truck is being loaded at Point A, or when it is being unloaded at the destination, Point B, or at any point in between. If the cargo will spend any time in a warehouse, it could be damaged during loading or unloading or while in storage.
Most people can understand that unfortunate stuff sometimes happens, but they may not be as understanding if they have to fight to get paid when their property is damaged or destroyed as a result. Ultimately, cargo insurance not only protects you against having to compensate the cargo’s owner for losses incurred while the goods were in your custody. It also protects your trucking company’s good name and reputation.
[av_toggle title=’What cargo insurance coverage is available for shipments by truckin California?’ tags=’Cargo Insurance’]
One major distinction is between All Risks coverage, which covers partial loss of a cargo, and Total Loss coverage, which does not. All Risks coverage gets its name from the fact that it pays for damage from all causes not specifically excluded by the policy, including breakage from mishandling, storm damage, theft, or vandalism. An All Risks Policy, of course, provides the greatest peace of mind for the for-hire trucker.
[av_toggle title=’With either All Risks or Total Loss coverage, you may want to consider additional protection, such as:’ tags=’Cargo Insurance’]
- Removal Expenses coverage, which would pay for the removal and cleanup if, for example, a moving van overturns and spills its cargo onto the roadway.
- Sue and Labor coverage, which would pay the moving company’s costs to defend itself in court or to settle any claims
- Earned Freight Coverage, which would compensate the moving company for the revenues lost as a result of not delivering the cargo that was lost
(Costs arising from damage to the overturned truck itself, and from any bodily injuries, would fall under the company’s commercial auto policy.)
If you decide to opt for Total Loss coverage instead of All Risks, understand that only the loss of the entire shipment would be covered. A partial loss, or damage to only some of the cargo, would not be covered and the for-hire trucker would be held liable.
[av_toggle title=’How much cargo insurance do I need to operate as a for-hire trucker in California?’ tags=’Cargo Insurance’]
As with any liability insurance, you want to make sure that you will not end up being responsible for paying out more than you can afford in the event of cargo damage or loss. The state of California requires moving companies with a household goods carrier permit to maintain a minimum of $20,000 in cargo insurance per shipment. Different rules govern companies that only handle office moves. Visit the California Public Utilities Commission website for more information about cargo insurance requirements and guidelines: http://www.cpuc.ca.gov/PUC/Transportation/faqs/
[av_toggle title=’I’m a contractor working on dry land in California. Why would I need something called inland marine insurance?’ tags=’Inland Marine Insurance’]
There is a long story behind the name. It has to do with the history of the insurance industry and with who insured what, at sea and on land. The easiest way to think of it today, where California contractors are concerned, is as insurance for things that float around, or are moved from place to place—most notably your tools and equipment. It can also cover things like blueprints in the trunk of your car, or data on the laptop you take back and forth between your shop and your work locations. You may need broader protection for such items than your regular business policy may provide.
Inland marine insurance covers you when you losevaluable tools, equipment, materials, or other itemsto
a thief, fire, flood, or other unwelcome event. They are covered wherever they are—on a job site, in a truck or car, or at your place of business, for example. Your regular business insurance may protect you if a backhoe or power saw mysteriously disappears from your shop. But it may not pay off if the theft occurs at a construction site, or on the way to or from a job. Inland marine insurance may also cover the loss of property belonging to someone else, such as scaffolding or a piece of heavy equipment you may have rented for the duration of a job. Some policies may cover tools and equipment owned by your employees.A specific form of inland marine insurance, called builder’s risk insurance, also provides coverage for a contractor’s unfinished construction projects.
[av_toggle title=’Does the inland marine insurance sold in California cover old tools and equipment, or just new ones?’ tags=’Inland Marine Insurance’]
Carriers often place a limit on the age of items that can be covered under a contractor’s inland marine policy. For example, a policy might only cover items that are five years old or less.
[av_toggle title=’Is there a limit to how much a carrier will reimburse me for if I submit an inland marine insurance claim for something that was stolen or destroyed?’ tags=’Inland Marine Insurance’]
You will typically be reimbursed for the replacement cost of the item, taking into account its age and depreciation. When a contractor purchases inland marine coverage in California, the insurance carrier asks for an inventory of the items to be insured. You want to be sure to list the current age of each, because replacement cost is based on actual current value, not its original purchase price. The higher the current value, the more you will pay in premiums. You don’t want to pay to insure an older piece of equipment for more than it is worth now, because you will only be reimbursed for what it is worth now, not what a new one would cost today.
[av_toggle title=’I already have general liability insurance for my contracting business. Why would I need excess liability coverage as well? Is it required by the state of California?’ tags=’Excess Liability Coverage’]
Think of excess liability as an extra layer of protection for your business. California doesn’t require you to have excess liability coverage, but a client or contractor may.
Let’s say you have a general liability policy that covers your business for claims of up to $1 million, but you’re hoping to land a job with a firm that requires its California subcontractors to carry $1.5 million in liability insurance. You need excess liability coverage to take care of the extra $500,000. It’s an easy and affordable way to increase the limits on your existing general liability policy.
Excess liability coverage also kicks in when a claim against your contracting business exceeds the maximum amount that your underlying insurance, such as your general liability or workers’ compensation insurance, will pay. Many contractors add excess liability coverage to their commercial auto policies, because of the potential for very high jury awards if they are found at fault in a serious motor vehicle accident.
So, while excess liability coverage is not required under California law, there are good reasons to consider it.
[av_toggle title=’Is excess liability the same thing as an umbrella policy?’ tags=’Excess Liability Coverage’]
Although people sometimes talk about excess liability and umbrella insurance as if they were the same thing, they really are not the same. It’s called excess liability when it provides additional coverage for one type of insurance only, like your general liability policy ORa commercial auto policy. You pay a separate premium for each policy that you add excess liability to.
Umbrella insurance bundles different types of insurance, such as general liability AND commercial auto, and pays when a claim against either exceeds the limit.Many California contractors bundle their general liability, workers’ compensation, and commercial auto coverage under one umbrella policy. You pay a single premium to add umbrella coverage to all bundled policies.
[av_toggle title=’Do I have to buy an excess liability or umbrella policy from the same carrier that I get my general liability insurance from?’ tags=’Excess Liability Coverage’]
There is no such requirement in California. You do not have to buy your excess or umbrella coverage from the same carrier that issued the original underlying insurance. You might find that you can save some money using different carriers. But there may be advantages to using the same carrier. For example, it can be easier to avoid coverage gaps and problems in processing claims when a single carrier is involved. That’s a decision you will need to make after weighing costs and practical considerations.
[av_toggle title=’I’m opening a small consulting firm in California. Do I need errors and omissions insurance if I already have general liability insurance?’ tags=’E&O’]
General liability insurance provides protection in the event that you are held financially responsible for bodily injuries or physical property damage. But what about other kinds of damage, such as financial lossesresulting from inadequate work or negligence? Individuals and businesses that provide services for a fee need specialized insurance to cover them for professional liability—and that’s what errors and omissions (E&O) insurance does. In fact, it is often referred to as professional liability insurance.
Just about anyone who provides fee-based services should consider E&O insurance: printers, accountants, financial advisors, tax preparers, insurance agents, realtors, consultants, lawyers, software developers, architects, and building trades contractors, to name a few. The malpractice insurance carried by doctors is a specialized form of professional liability insurance.
Everyone working for me is experienced, careful and honest. They’re not likely to make any costly mistakes. Why should I pay for E&O insurance?
Everybody makes mistakes upon occasion. Consider this example:
A printing company in southern California is hired to produce 10,000 copies of a brochure for a large roofing company, along with dozens of large magnetic signs for the company’s vehicles. The layout and ad copy were created by a local advertising agency and sent to the printer electronically. Somewhere along the line, a typo was not caught by the advertising agency or by the printer. Nobody noticed the mistake until after the brochure was in widespread distribution and the roofing company vehicles were driving all over California, proudly proclaiming “We do doors and widows, too!” When a photo of one of his trucks bearing the unfortunate sign went viral on the internet, the roofing company owner decided to sue both the advertising agency and the printer, not only for the cost of correcting the error and printing new brochures and signs, but also for making his company an object of ridicule. Without errors and omissions insurance, the two defendants would have to foot the bill for any damages awarded by the court.
There are countless examples of similar small mistakes that can end up costing a business big bucks. And the financial repercussions of bigger mistakes can be crippling, especially for smaller firms. The relatively low cost of purchasing E&O coverage is a bargain in comparison.
[av_toggle title=’If I buy E&O insurance in California, does it cover my entire staff?’ tags=’E&O’]
E&O insurance typically covers you, the business owner, and all of your employees, whether they are salaried or hourly workers, permanent or temporary, as well as any subcontractors performing work for your business.
[av_toggle title=’What is not covered by an errors and omissions policy issued in California?’ tags=’E&O’]
E&O policies do not cover bodily injury or property damage or damages stemming from illegal, dishonest, or fraudulent acts, like deliberate copyright or patent infringement or false advertising. It also does not provide coverage for matters related to employment, which would fall under your Workers’ Compensation plan.
[av_toggle title=’When and how does an E&O policy pay off?’ tags=’E&O’]
Some California E&O policies are structured so that you get reimbursed after you have settled the claim and made payment to the disgruntled client. This can pose cash flow hardships for smaller companies. Some policies, on the other hand, pay the client directly, without you having to wait for reimbursement. This is an issue you should address when you inquire about buying E&O insurance.
[av_toggle title=’I have general liability insurance for my new California based contracting business. I’m about to sign a deal to build a house and now my client wants me to buy Builder’s Risk insurance, too. What’s up with that?’ tags=’Builder’s Risk’]
Your client is probably concerned that something could happen to damage or destroy his home before
he ever gets a chance to move into it. There could be vandalism, or a fire, or a lightning strike, or a storm with heavy winds.
Some kinds of damage are not automatically covered when you buy a builder’s risk policy. In California, earthquakes are always a concern. However, earthquake coverage, like water damage or wind damage to buildings in a beach area, usually requires special underwriting and is not automatically included in a builder’s risk policy.
Some builder’s risk policies may also provide coverage for expenses from completion delays, for
example from contract change orders.
Builder’s risk insurance is a form of inland marine insurance. (Don’t let the name fool you—no boats are involved!) LINK TO MARINE INLAND PAGE?? In California, builder’s risk insurance can be purchased as part of an umbrella policy that includes excess liability and Workman’s Compensation insurance.
[av_toggle title=’What if somebody gets hurt as a result of work being done on a site covered by builder’s risk insurance? ‘ tags=’Builder’s Risk’]
Builder’s risk insurance covers damage and losses during construction that are not covered under your general liability or California Workers’ Compensation policy. A work-related injury to an employee
would most likely result in a Worker’s Compensation claim. An injury to someone visiting the site, or the loss of property belonging to others, would come under your contractor’s generaal liability insurance.
[av_toggle title=’Will one builder’s risk policy cover all of my new construction projects?’ tags=’Builder’s Risk’]
No, you will need a separate policy for each new construction project. You should have a policy in place before materials are purchased and delivered to the construction site because materials are covered in transit to the site and while stored onsite, as well as the building itself.
A California builder’s risk policy ends when construction ends and the structure is ready for occupancy. At that point, the owner must have property insurance in place to cover the structure.
[av_toggle title=’Is builder’s risk insurance available only for new construction?’ tags=’Builder’s Risk’]
In California, builder’s risk coverage can be purchased for remodeling or renovation of an existing
building as well as for new construction. For example, you might take out a builder’s risk policy before you build an addition to a house or do a major kitchen update. However, builder’s risk insurance only covers vacant buildings, so it isn’t available if the owner plans to remain in the structure during construction.
[av_toggle title=’What is medical malpractice insurance?’ tags=’Medical Malpractice’]
Medical malpractice insurance is a specialized form of professional liability insurance. It protects health care professionals from having to pay potentially large damages out of pocket when they are sued by patients claiming to have been harmed by inadequate, negligent, or incorrect medical care.
[av_toggle title=’Who needs medical malpractice insurance in California?’ tags=’Medical Malpractice’]
It’s not only doctors, surgeons, and institutions that need to worry about being sued for medical malpractice. In California, any individually licensed professional in the health care industry can be sued for harm caused to customers by failing to maintain the normal standards of practice. That includes nurses, therapists, pharmacists, and other licensed professionals who provide patient services and care.
[av_toggle title=’In California, do I need my own medical malpractice policy if I’m covered by my employer?’ tags=’Medical Malpractice’]
Hospitals, clinics, and group practices typically have umbrella policies covering their employees, but those employees need to have their own individual policies as well. The umbrella policy may not provide enough coverage for a very large award for damages, or it may require employees to reimburse the employer for damages paid due to the employee’s negligence. And, the umbrella policy won’t cover you for any malpractice suit brought by or for patients you treat or advise outside of your regular work hours.
[av_toggle title=’I am starting up a janitorial business in California, cleaning homes and office buildings. What insurance am I going to need?’ tags=’Janitorial Insurance’]
Janitorial businesses and cleaning services in California, like any other business in any other state, need to protect their assets –their property, equipment, vehicles, and their ability to conduct business and earn money. The basic issue is liability, being held financially responsible when things go wrong. And there are plenty of things that can go wrong: a company vehicle gets T-boned in an intersection, an expensive piece of equipment bites the dust, an employee falls off a step ladder, someone steals a month’s worth of supplies from your shop…and the list goes on and on. Janitorial and cleaning services often end up with a number of different policies, each of which plays a specific role in the company’s overall insurance strategy.
There are many kinds of businesses involved in providing janitorial, maintenance, and cleaning services. There are carpet cleaners, and window washers, and landscapers, and floor specialists, and so on. And let’s not forget all the folks that provide disaster cleanup services after water, fire, or smoke damage—like mold remediation companies. Each of these involves a different set of risks, so you will need to discuss with potential insurance providers the particular nature of your janitorial business and the risks it entails.
[av_toggle title=’What specific coverages does California require me to carry for my janitorial service?’ tags=’Janitorial Insurance’]
Some insurance, like Workers’ Compensation and commercial auto insurance, is required by the state of California.
You must have Workers’ Compensation, no matter how few employees you may have. Even temporary employees must be included. If an employee is injured on the job or becomes ill as a result of the job, your Workers’ Compensation policy will pay some of the lost wages and help pay the employee’s medical bills. Failing to have a Workers’ Compensation policy is a misdemeanor that can get you fined as much as $1,000 or put you behind bars for up to a year—not to mention the fact that your business would be responsible for paying the employee’s medical bills.
Commercial auto insurance is required by the state of California for any vehicle used to transport your employees. If you are required to carry commercial auto insurance, but fail to do so, your business could be held liable for bills resulting from an accident, and you can be held personally liable as well. A commercial auto policy includes:
- Liability insurance for bodily injuries and property damage
- Medical payments insurance for the medical bills
- Physical damage insurance includes both collision insurance and comprehensive insurance
You may also want to include uninsured motorist coverage with your commercial auto policy.
[av_toggle title=’What other insurance do I need to buy for my janitorial service?’ tags=’Janitorial Insurance’]
Some kinds of insurance, like general liability insurance, may not be required under California law, but clients will expect or even require you to have them. It’s to your advantage to have general liability insurance to cover any costs that Workers’ Compensation does not pay if there is a work-related injury. General liability insurance also provides coverage for property damage resulting from accidents at a client’s location.
Property insurance provides coverage for damages to or loss of the space your business occupies or the equipment and supplies you use in your business. If you are leasing space, your landlord may require you to maintain property insurance. You will need to decide whether to insure your property for its full replacement value or the current value. There is a special property insurance endorsement for cleaning and maintenance companies, the SPICE endorsement, which extends coverage to company property when it is not on the premises—for example, in transit to a client’s location.
Some insurance companies will bundle general liability and property insurance together as a business owner’s policy, which could save your contracting business some money in premiums.
Excess liability insurance provides an extra layer of protection for janitorial, cleaning, or maintenance businesses. It is not required under California law, but some clients may require you to carry it, to increase the amount of your existing general liability and/or Workers’ Compensation coverage. Excess liability insurance can also be added to a commercial auto policy to cover any gap between a successful claim against your business and the maximum the underlying policy would pay. You pay a separate premium for each policy you add excess liability coverage to.
Umbrella insurance bundles different types of insurance, such as general liability AND Workers’ Compensation, or general liability and commercial auto, or perhaps all three together, and provides excess coverage for a single premium. The umbrella policy pays when a claim against any of the bundled policies exceeds its limit.
[av_toggle title=’I’m about to sign my first contract with a corporate client. Why do they want me to pay for a surety bond? Is this something the state requires?’ tags=’Janitorial Insurance’]
No, this is not a requirement of the state of California, but rather a requirement of the corporate client. A surety bond ensures that your client will get paid a certain amount if you are unable to fulfill the terms of your contract with the client. It’s not uncommon for even companies with years of experience to be required to be bonded.
When you buy a surety bond from an insurance company, the insurance company is agreeing to pay back the client if you are unable to finish a job you have already been paid for and cannot repay the client directly. But you then have to pay back the insurance company. That’s why insurance companies are careful about which businesses they will bond. They need some assurance that they will get paid back according to the surety bond agreement. It will usually be easier and cheaper for an established company with a proven track history to purchase a surety bond than it will be for a startup company to get bonded.