Insurance Needs for Electrical Contractors

Electrical contractors are responsible for installing, maintaining, repairing and replacing electrical systems and machinery in residential, commercial and industrial environments. Due to the complex nature of their work, electrical contractors are exposed to unique risks and should consider construction insurance coverage to mitigate those risks.

This article discusses the potential exposures electrical contractors face and common types of construction insurance.

Potential Exposures

It can be challenging to control risk in the construction industry. The following are some of the most common risks electrical contractors are exposed to:

• Injury—One of the most common risks an electrical contractor faces is injury. Employees can sustain injuries while performing their duties, and third parties may be injured at the project site.
• Property damage—Damage to a client’s property can occur both during a project and after its completion. For example, a fallen ladder may cause damage to items inside or around the property, while faulty wiring could cause fire damage later.
• Equipment breakdown and theft—Equipment can break down unexpectedly, resulting in work delays. In addition, tools and equipment may be stolen if left on the premises unsupervised.
• Auto accidents—Any business that utilizes vehicles is susceptible to auto accident risks. Accidents could lead to injury or death, and the vehicles involved could also be rendered useless.

Common Types of Construction Insurance

Electrical contractors should have adequate insurance to manage their risks. The following are coverages electrical contractors should consider:

• Workers’ compensation—Workers’ compensation covers work-related employee injuries or illnesses. Employees working with electrical systems may come into contact with live electrical parts, resulting in shock, electrocution or severe burns. While these injuries are infrequent, they can be severe and require extensive medical treatment, resulting in a loss of ability to work. Workers’ compensation is critical coverage, as it takes care of the injured employee in the event of an accident; it will pay medical bills associated with work-related injuries and compensate the employee for lost wages—which can occur if the injury is severe enough for a doctor to recommend taking time off. What’s more, workers’ compensation policies typically come with employer’s liability coverage, which covers employers if a lawsuit is brought against them for their negligence in a workplace injury.
• General liability—General liability insurance covers claims of injury or property damage caused by routine operations. Electrical contractors face exposure if customers come into their office or showroom or if they work in occupied buildings. General liability insurance can also cover damage to a customer’s building caused by an electrician. Additionally, general liability insurance can provide coverage for reputational harm or advertising injury.
• Completed operations—Completed operations claims occur when injury or property damage results from work that is finished. Electrical fires are one of the main concerns from completed operations for electricians. Completed operations coverage protects businesses that provide a service and does not apply until after the work is done.
• Commercial auto— Electrical contractors typically use trucks or vans to get employees, materials and equipment to a worksite. Commercial auto claims can cover damage to company vehicles, damage to others’ vehicles and medical payments. Physical damage covers the damage to company vehicles, and liability covers damage done to other vehicles. Hired and non-owned coverage takes care of rental vehicles and vehicles owned by employees used for business reasons.
• Property—Damage to a company’s physical assets, including owned buildings and the business property, may result in property claims. Even if electrical contractors do not own their own building or work out of their home, business assets such as equipment, tools and computers are still at risk of property damage. Property insurance protects only from the perils covered by the policy. For example, floods are generally not covered events. Additional coverage may be necessary.
• Inland marine/equipment floater—Since commercial property insurance only covers business property at the location listed on the policy, inland marine insurance may be necessary for contractors as it is for property that is stolen or damaged during transit. Since electricians typically go to job sites with tools and equipment, equipment floater policies can help protect them from risk.
• Commercial umbrella—Commercial umbrella insurance provides additional coverage if claims exceed their limits. For example, if the limits of the policy are $1 million while the loss is $2 million, an umbrella policy can make up the difference. Otherwise, costs may have to be paid out of pocket.

Cyber liability—Increasingly, electrical contractors depend on technology to carry out their operations. Complex projects often require information and financial exchanges between clients, contractors, suppliers and other third parties. While technology helps electrical contractors perform their work, they are at risk of suffering financial losses from cyber events. Cyber liability insurance can help electrical contractors by providing coverage for first- and third-party cyber claims.

To best mitigate risk, electrical contractors should explore all policy options to find coverage for their business. For more information, contact us today.

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