Carpenter insurance simplified: a blueprint of what you need to know
If you’re a carpenter, or it’s an endeavor you wish to take on, this guide is for you. There are over 950,000 carpenters in the United States according to the U.S. Bureau of Labor Statistics, and by the year 2031 this number is expected to grow to just shy of one million.
As you begin your carpentry business, the one aspect you don’t want to overlook is proper insurance coverage. Even with the best laid plans, things can happen and you don’t want to leave your business vulnerable to claims and other expenses if issues arise. Sure, you can always knock on wood and hope for the best, but there are better ways to safeguard your business.
What are common insurance claims for carpenters?
Carpenters may be exposed to a variety of potential claims, so having proper coverage may help alleviate some of the costs from such claims.
Not surprisingly, property damage is a common risk in this industry. It’s par for the course that, at any time, accidental damage to a client's property during construction or renovation projects could happen and turn into a potential claim. Some examples of property damage could include situations where furniture, walls, floors, or other belongings are damaged due to the carpenter's actions.
Aside from property damage, if a client or another third party sustains an injury while on your worksite, you could be held liable. This could occur due to slips, falls, falling objects, or other accidents that result in bodily harm.
Seems like an unlikely scenario, but sometimes carpenters may make a mistake on a project. This could include issues like improperly installed cabinets, faulty stairs, or the use of substandard products that result in damage or injury, prompting clients to file a claim for damages.
Overbooked and understaffed? It happens and is a risk carpenters face. Failure to complete a project within the agreed-upon timeframe or leaving it unfinished could give clients cause to seek compensation for any financial losses incurred because of the delay or incomplete work. Additionally, for carpenters who run a small business with employees, injuries sustained by employees while performing their job duties can result in workers' compensation claims.
And last, we’ll touch on theft or vandalism. Carpenters often have valuable tools and equipment that can be targets for criminals. When tools are stolen or workspaces are vandalized, business owners typically look to their insurance to replace or repair the stolen or damaged items.
These are just a few examples of potential claims carpenters may face. Specific risks and types of claims can vary depending on the nature of your carpentry business, the projects you undertake, and the environment in which you work. That’s why it’s important to have adequate insurance coverage to protect yourself against potential liabilities.
What kind of insurance coverage should carpenters have?
There are several types of insurance you should consider for your carpentry business to protect yourself, your employees, and your assets. Below we’ve outlined some of the most common types of insurance that carpenters typically need:
- General Liability Insurance: This type of insurance protects you in case you are held responsible for a third party’s bodily injury or property damage that occurs while working on the job. For example, if a client accidentally trips over a wire or tools while walking down the stairs of their home , this policy may cover their medical bills. This policy may also cover legal fees if the injured person files a lawsuit against you.
- Business Owner's Policy (BOP): A BOP is an enhanced insurance policy that combines general liability insurance with coverage for your business property, like tools and supplies.
- Professional Liability Insurance: Also known as Errors and Omissions (E&O) insurance, this type of insurance protects you in case a client accuses you of making a mistake or error in the performance of your carpentry services. This policy may cover the cost of legal fees and settlements or judgments against you.
- Cyber Insurance: This type of insurance protects from the costs associated with a data breach, targeted attack such as malware or phishing, or other cybersecurity incidents. This policy can cover the cost of legal fees and damages in case your clients or their customers suffer financial losses due to a breach. A cyber policy with Hiscox also includes access to a powerful cybersecurity platform providing software protections, live consultative services, and security training content.
- Workers Compensation Insurance: If you have employees, workers compensation insurance is typically required by law in most jurisdictions. It provides coverage for medical expenses, disability benefits, and lost wages if an employee is injured or becomes ill while working.
Do I need carpentry insurance?
If you choose not to insure your carpentry business, you may be exposing yourself to various risks and potential consequences.
For example, without insurance, you could be personally responsible for any damages, injuries, or losses that occur as a result of your carpentry work. This can significantly impact your personal finances and assets.
Additionally, if you face a lawsuit or legal claim, not having insurance means you'll have to bear the full cost of hiring an attorney and other legal expenses. These costs can be substantial, even if the claim against you is unfounded or minor.
If your carpentry business suffers property damage, theft, or other losses, you will have to cover the expenses of repairs, replacements, or rebuilding on your own. This can be a significant financial burden and could potentially lead to the closure of your business.
Also, keep in mind that clients may prefer to work with carpenters who are properly insured. Lack of insurance coverage can signal a lack of professionalism and reliability, making it more challenging to attract and keep clients. Similarly, some clients or projects may require you to have specific insurance as a condition of the contract. Depending on where you operate your business, carpenters may be required to have certain types of insurance. If you don’t comply, it could result in fines, penalties, and possible legal action.
How do I choose an insurance policy for my carpentry business?
It's important to assess the risks associated with your carpentry business and make an informed decision about what insurance coverage makes sense for you and your business. While insurance premiums may involve upfront costs, having proper coverage can provide financial protection, peace of mind, and help safeguard the long-term viability of your business.
When selecting an insurance policy for your carpentry business, there are several key factors to consider.
- You’ll want to be sure that the insurance policy covers the specific risks and liabilities relevant to your carpentry business. You will likely need general liability insurance, property insurance, professional liability insurance, workers' compensation insurance (if you have employees), and any other coverage types that align with your specific needs.
- Review the coverage limits to ensure they are sufficient to protect your business. You may want to consider factors such as the value of your assets, project sizes, potential liability risks, and industry standards. Higher coverage limits provide greater protection but may also result in higher premiums.
- Keep an eye on the deductibles associated with the policy you’re considering. A deductible is the amount you must pay out of pocket before the insurance coverage kicks in. Determine if the deductibles are affordable for your business and evaluate how they affect the overall cost of the policy.
- Pay attention to exclusions and limitations of the insurance policy. These are situations, circumstances, or types of claims that are not covered by the policy. Make sure that there are no significant exclusions that may leave you exposed to substantial risks.
- Consider the cost of the premiums and how they fit into your budget. Obtain quotes from different insurers and compare the premiums against the coverage and benefits offered. Remember that the cheapest option may not always provide the most comprehensive coverage.
- Take some time to research the reputation and financial stability of the insurance company providing the policy. Look for established insurers with a long track record of good customer service, prompt claims processing, and financial strength.
- Lastly, pay attention to the policy terms, including the coverage period, cancellation policy, and the renewal process. Assess whether the policy aligns with the needs of your carpentry business and evaluate the ease of renewing or adjusting coverage as your business evolves.
At Hiscox, we can work with you to help you assess your risks and recommend the appropriate types and amounts of coverage for your carpentry business. Ready to get started? We’d love to help protect the future you’re building. Learn more and get a quote today.