Insurance for Electricians and Electrical Contractors
Taking out proper levels of insurance against risks is essential for electricians and electrical contractors because their services are often needed by people and businesses to do urgent and vital work.
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Unexpected and unforeseen events can quickly develop that can end up costing a lot of money if you haven’t already prepared for that possibility by arranging your insurance in advance.
Modern life is totally dependent on electricity! It is difficult to imagine any environment in today’s world where a person could say:
“I am totally independent when it comes to electricity”
“I don’t use it, I don’t want it, and I won’t have it near me!”
Even if a person chooses not to have any electrical services in his home, relying on the old ways of fire for heating, light, and cooking and rainwater for washing, drinking, and cooking, there will be some part of his life that relies directly or indirectly on electricity, and this is what makes the work that electricians and electrical contractors do so important in modern society.
What work does an Electrician do?
Electricity powers modern life, by replacing the primitive sources of power that used to be produced completely locally, into a worldwide network designed to manufacture the power in the most convenient way and place, transport the power to where it is needed and then use it for the hundreds of different needs in the modern high-tech world.
Electricians and electrical contractors are highly-trained specialist handymen that deal with the networking, connection, and use of electrical power from the source to the final point of use.
Must an electrician be licensed to work?
In most states, they have to be qualified, certified, or licensed by a central state board.
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Out of all 51 states, the only ones that do not require registration or certification, are Illinois, Indiana, Mississippi, Missouri, New York, and Pennsylvania, and even in these states, individual municipalities like cities and towns can have local regulations that require some proof of qualification in order to work in their jurisdictions.
Read more about handyman insurance in Texas to learn some of the specifics of that state.
Electricians usually go through at least four years of training as an apprentice, followed by the licensing their state requires.
There are many specializations, like high-power wiring, home, and office design, installation of cables, power points, connecting homes and offices to the national power grid, maintenance, and repair of motors, household appliances, and equipment.
Electricians and electrical contractors work in residences, public buildings, factories, and offices, and also in public access areas like parks, streets, highways, and more.
Wherever electrical power is being used, the device has to be installed, connected, repaired, and maintained by a qualified and trained electrician.
Electricians also work in heavy industry, such as steel mills, and in the power plants and solar farms that actually produce the power that gets distributed over millions of miles of cables into the consumer environment.
There is a growing demand for alternative “green-energy” in homes and businesses, such as for solar panels on rooftops.
The installation of the panel needs a specialized handyman, but it can only be connected after installation into the household or office power network by a qualified electrician.
Is there a shortage of trained electricians in the US?
In 2019, the Bureau of Labor Statistics projected 8.4% growth in the number of electricians for the following decade.
This would require an estimated 62,200 new electricians which is a growth much faster than the average for all occupations.
Homes and businesses continue to require wiring, and electricians are needed to install the necessary components.
There is some difference between an electrician and an electrical contractor.
Electricians accept short-term work orders from customers, usually on the basis of a simple quote for the cost of their services and any related materials.
Contractors sign a legal agreement either with the customer directly or as part of a group of other service providers.
For example, an office tower requires general building contractors, air conditioning contractors, roofing contractors, and electrical contractors.
Each one of these provides specific services on a contractual basis.
Usually, electrical contractors are companies with management structures, registered offices, and other standard business components.
Electricians can be self-employed, work as employees for companies, or work as subcontractors.
What insurance do I need as a self-employed handyman?
All electricians, whether they are contractors or companies, should insure against normal business risks as we describe in the next chapter.
A self-employed handyman like an electrician has a few other special risks that relate to the dependence that he or she has on producing some income each month.
If you can’t work, you can’t earn, but the bills will keep piling up.
In many states, electricians can join unions that provide protection for members who are sick, injured or unemployed, but this can be expensive, in some cases as much as $300 per month.
At the moment, there are no companies in the USA that will sell income protection insurance, which is very popular for tradesmen in the UK, Australia, and other countries.
What insurances do electricians need?
Electricians and electrical contractors have all the same risks as any small business and should make sure that insurance policies cover them in case something goes wrong.
As we said at the beginning of the article, electrical power has become one of the very few resources that modern society is totally dependant on and so when you are working to supply, maintain and repair peoples’ and businesses’ power grids, and the devices that feed off the grid, you have to perform according to high levels of expectation and demand.
Every professional businessman needs to add insurance against unforeseen and unplanned outcomes that are part of all business activities.
Working as an electrician is a highly active and skilled job that involves working with special equipment, often working at height, in tight spaces, and with raw power.
The work you do is also done outside of your own workshop, in other people’s homes, offices, and stores.
In such an environment, you are exposed to two specific risks:
There is a possibility that someone will be accidentally injured, injured, or even killed as a result of your work, and there is a possibility that the property or contents of the place where you work will be inadvertently damaged.
You need Public Liability insurance for these risks.
We explain more about this, the tiers, and the possible costs in the following sections.
You are not only responsible for accidents, but also for improper or substandard work from a professional point of view.
As we said in the introduction, the work that electricians do is extremely important to people in their environment so that clients can feel the results of whatever you are doing and react very quickly.
Sometimes a very nice client can turn into a very angry person in front of a judge and testify against you in court if there is any dispute about any aspect of the project.
It could be something as simple as a piece of visible wiring in a hidden corner of the room, or it could be a technical complaint that the holes you penetrated into surrounding walls to feed cables have destroyed part of the structure.
Today’s electrical wiring jobs require highly specialized equipment, meters, and monitors, as well as investments in inventory, such as materials like lighting, ladders, scaffolding, and much more.
This can require thousands of dollars in investment and must be insured against theft, loss, fire and water damage, vandalism, and all other hazards to natural things.
Equipment insurance protects your investment.
Electricians have to move their tools and stock from place to place and they are heavy and clumsy so you probably have a truck or small truck.
Commercial vehicle insurance not only protects the vehicle itself, but also its contents in the event of theft, fire, or storm, and the driver in the event of an accident.
If your business employs one or more full-time, casual, or part-time employees or contractors, Workers Compensation insurance is required in most states.
If you sell the wires, lighting, monitors, or any other material used in the job, you should consider taking out product liability insurance to cover yourself in the event that the material is unsuitable.
If you run your business from a central location that has office equipment, computers, customer records, paint shops, and any other part of your business, you need commercial property insurance to cover the risk of fire and storm damage, theft by vandalism. , etc.
In the following sections, we will explain each of these insurances in more detail.
Limited Liability insurance
General liability insurance is the primary type of insurance for any person who runs the risk of being sued by a third party for injury, death or property damages.
All small businesses such as:
- roofing contractors
- solar panel installers
- general contractors
- fencing contractors
should have general liability cover as the absolute minimum.
General liability insurance is the primary type of insurance for any kind of business.
It covers you for financial losses caused to third parties by bodily injury or property damage.
In addition, any related medical or legal expenses.
Some companies offer cover for ancillary covers such as slander and libel.
Accidents can occur at any time while conducting your electrical installation jobs.
There is a legal duty that you will conduct your installation in a manner that doesn’t endanger people in the immediate area of where you are working, in other rooms in the home or office, as well as to protect the property itself against damages resulting from your actions.
All around the work environment, there are many different sorts of risks that can lead to unfortunate accidents.
Whether you are working in an established home, in a building being constructed, or out in the open, the liability is the same and you can be held responsible for any injury to customers, visitors, viewers or anyone immediately in the vicinity or to damage in any way to any other area of the house or office, such as bathrooms, access areas and so on.
When you think about it, electricians are working in a risky place.
You are handling things that are potentially dangerous, such as high-speed drills, soldering irons, gas welding equipment.
Most importantly, electricity is inherently dangerous, and a simple slipup can hurt you, someone standing near you, or could start a fire and burn down a house or a whole town.
It’s possible and has happened, that improper wiring has fused electricity for a whole town, causing millions of dollars in damage in the blink of an eye…
Other possible scenarios are accidents that happen off the workspace in general access areas, like someone tripping on a ladder lying alongside a stairwell.
All of these could be deemed to be your fault.
Without any way to prove that you weren’t responsible, a settlement of many hundreds of dollars could end up as the only way to avoid adding thousands of dollars in legal fees to the whole incident.
So, if the person injured, or the owner of the damaged building, claims that you were at fault, they may sue you for the cost of replacement or repair, for any medical expenses, and for other things like “pain and distress”.
Is it a legal requirement to have public liability insurance?
Some states have made it a mandatory requirement for licensed electricians to carry a minimum amount of general liability insurance.
These include Delaware, Idaho, Iowa, Kentucky, Ohio, and Tennessee.
None of the states have set a minimum public liability insurance level.
General liability insurance for electricians and contractors provides a high level of protection against any such legal outcome.
The policy takes over all aspects of the case, provides the necessary legal defense, and up to the limits you have selected, will cover 100% of the final judgment or settlement.
We talk more about the usual levels of insurance you should be thinking of a bit later in this article.
You can read more about general liability insurance near you here.
Do electricians need professional indemnity insurance?
Also known as Professional Liability Insurance, it gives protection in case you are sued for failure and inaction
Also known as Errors and Omissions insurance, it covers the financial losses of electricians resulting from claims of abuse by their customers, mistakes and negligence in doing their jobs.
You should consider purchasing Error & Omission insurance if your business offers the following:
- A professional service
- Professional advice to clients
- Contractual services.
If you or your business provides these professional services, you need professional E&O coverage because these services come with risks.
You could be held liable for:
- breach of contract
- providing incomplete work
- providing substandard work
- work errors or oversights
- missing deadlines
If your customer claims that any of these resulted in financial losses or reputational damage for them, then they could sue to recover from you all damages.
In addition to claiming that the service you provided was not performed properly and professionally, you may be sued for additional charges.
For example, when you agree to fully wire a shopping mall by a certain date, but you have not fulfilled this commitment, if the owner now has to postpone store opening to after the expected end date, they can be sued for all relevant costs, business losses plus “reputation damage”, which can run into the tens of thousands of dollars.
In case of losing the case, in addition to the high court costs, you are liable for both your defense and for the other party.
Let’s look at some real-life examples:
Suppose you are the electrical contractor for a building project and accidentally forgot to get your client’s approval and signature on some required municipal documentation.
This may result in the project being temporarily paused, or even permanently shut down, costing thousands or even hundreds of thousands of dollars.
Or, on a more personal level, if you are installing some light switches for a temporarily disabled customer in a wheelchair.
Say by mistake you install fittings that they cannot access without standing – which they shouldn’t do.
Suppose your customer suffers some muscle damage reaching for a switch.
In that case, they can claim that your work was substandard.
You may be liable both for the cost of re-doing the whole installation, as well as for any medical treatments the customer has to undergo, plus damages for “pain and suffering” or even “emotional distress”.
There are many such situations in which professional liability insurance can help.
Professional Indemnity Insurance applies to many occupations engaged like you in the building sector, such as plumbers, solar panel installers, consultants, engineers, architects, real estate agents, and surveyors, to name a few.
In many of these, it is a legal requirement to hold a Professional Indemnity policy in order to render your services.
Because electricians need specialized and costly equipment, it is very expensive to replace if it is damaged, lost, or stolen.
In particular, devices need to be moved around a lot and sometimes stored in dangerous and unsafe environments.
You may suffer injuries, fires, thefts, and other similar intentional acts or natural phenomena such as lightning, storms, earthquakes, and other natural events that cause great damage.
If you can not immediately replace the expensive equipment out of pocket, consider full-level equipment insurance so that you can immediately buy all the equipment needed for the business to keep running.
Business Insurance for electricians
Running any business involves many different risks, some of which are unique to the kind of activity and others all businesses have to cope with.
There are comprehensive insurance packages for business owners, that in addition to public liability insurance give you coverage for the commercial activity side of your plumbing business.
Business interruption insurance
This is also sometimes called business income coverage, and it provides coverage for the outcomes of events beyond your control, such as fire, wind, hail, vandalism that cause direct physical loss or damage to your premises, inventory, or equipment.
The following are typically covered under a business interruption insurance policy:
- Profits that would have been earned, based on recent history
- Expenses and costs being incurred by the business
- Extra expenses for moving to and operating from a temporary location
- The cost of training operators on new machinery
- Expenses are needed to continue operation while the property is being repaired.
Management Liability Insurance
This protects you and the company’s owners and directors from consequences of some mismanagement, misconduct, or breach of legislative or regulatory decrees.
It also protects against dishonest acts such as fraud or theft by staff.
Commercial Vehicle Insurance
Apart from tools, you will also need a vehicle to get to and from job sites.
You can use your personal vehicle at the start but must beware of the possibility that your car insurance doesn’t cover the loss of contents and damage if the vehicle is used for business purposes.
The only way to ensure that your vehicle is insured for both its own value, and the valuable contents, is by a proper commercial vehicle insurance package.
Beware – most car insurance companies do not cover the theft and damage to private vehicles used for business purposes, so you definitely need to add on commercial coverage, or take out separate insurance.
Workers Compensation Insurance
In most states, this type of insurance is legally required for any business where the company employs one or more workers.
It’s important to know that the term “employee” is not restricted to full-time workers, but includes part-timers, temporary, casual workers, and subcontractors.
Workers compensation insurance protects such employees from any injuries or illnesses that are a result of work.
The insurance covers the employee’s wages for the time while he is off work sick or injured, as well as his medical expenses.
It can also protect the employer from lawsuits in connection with an unsafe work environment as long as he is following OSHA requirements.
To be eligible to get any payment from workers comp insurance, the injury or illness must be directly related to work.
In the electrical installation or contracting business, working with dangerous tools and live wiring is a necessary part of the job.
This is why, to protect yourself and your employees, you must have workers’ compensation insurance.
In some states, there are monopolies on workers comp insurance and not all companies are allowed to sell it.
Always talk to an insurance agent, broker, company representative or check on the internet to find out the regulations for the state where you are operating.
If you run a multi-state business, you must cover the workers in each state separately in accordance with that state’s rules.
The property insurance portion of an insurance package usually includes buildings owned or rented by the business, as well as additions and outdoor fixtures.
The policy will also cover any business-owned items and also any items owned by a third party but kept temporarily in the control of the business or business owner.
This coverage helps protect buildings; equipment; tools; inventory; furniture and personal property for damage caused by uncontrolled events, typically fire, explosion, wind damage, vandalism, smoke damage, etc.
How much is insurance for an electrician?
Insurance cost always depends on the level of cover that you require, but can also be influenced by factors such as your claims history, the level of danger in your business, number of employees and many others.
The two standard policies almost all businesses take out are General Liability and Professional Liability.
General Liability policies for most small businesses cover you for up to $1 million for a single incident, with the total limit for one year at $2 million.
For general liability cover of $1 million / $2 million, you should expect to pay around $70 – $90 per month.
In a few states, some companies offer rates as low as $60-$65 per month, so it’s worthwhile doing a thorough internet search.
E&O insurance of $25,000 / $50,000 should cost around $45-$50 per month.
Many insurance companies offer a package called the Business Owner’s Policy.
Most business owner policies combine the two liability covers, plus commercial property insurance, for around $100 per month, but that depends on the value of the property and the insurance levels chosen.
Vehicle, property, and product liability insurance costs will depend entirely on the value of whatever is being insured.
Workers compensation insurance is based primarily on your payroll, as it is calculated at a basic rate per $100 of monthly pay of each covered worker, adjusted for the level of risk in your industry and the different states each have different basic rates.
Electrical installation and contracting offers great rewards and is an opportunity for trained handymen to get going without the need for massive start-up costs, advertising or investment.
But, it carries some special risks, and any professional electrician’s business needs to properly insure all aspects of the business to keep ahead of the possible dangers.
It’s also a growing sector, and people will never stop needing these sorts of services, so it gives great long-term security.