Learn 3 R’s that may help small, start-up trade contractors evaluate basic insurance needs.

Read 3 R’s that frame property and liability insurance basics for small, start-up trade contractors.

Resourceful. Resilient. Resolute. Three R’s that are hallmarks of the American spirit, particularly in response to difficult circumstances. Job loss or lessened work hours resulting from the economic impact of the coronavirus pandemic has many Americans reassessing their tool kit. Beyond focusing on individual skill sets, some may be looking in their garage or backyard shed for tools they could possibly use to earn income as a trade contractor.

RECOGNIZE:  Any work you do for hire, whether or not you have a written contract for work performed, is considered a business. Even the independent contractor just getting started on the first job is engaged in a business. There is no liability coverage under the homeowner’s/renter’s or condo insurance policy for any business activity. At a bare minimum, even small start-up trade contractors and independent contractors need general liability insurance coverage. Without it, you are putting your financial assets, as well as your financial future, completely at risk. Ballpark pricing for a small contractor’s general liability policy is in the range of $500. to $1,000., depending on the type of contracting work.

REVIEW:  If you find tools in the garage or backyard shed of your residence that could be used in trade contracting, would they be covered by your homeowner’s insurance policy? A quick review of the standard homeowner’s insurance policy indicates limited coverage applies to property used primarily for business purposes (if not covered under another policy). Carefully review your homeowner’s insurance policy, as actual policy terms and conditions always apply. That said, generally the limit is $2,500.00 on property on the residence premises; $1,500.00 on property away from the residence premises, except for certain types of media and electronic equipment. These low sub-limits are included in the standard homeowner’s insurance policy limit, SECTION II, COVERAGE C – Personal Property, i.e. they are not additional limits. To put this in perspective, if you are a carpentry buff and have expensive equipment in the garage of your residence that you plan to use in the business of carpentry contracting, the above sub-limits are probably totally inadequate.

Do you plan to use a personal auto for any business use? If so, will your personal auto insurance cover you for accidents during business use of your auto? This one can be tricky, depending on the usage and type of vehicle. This is an ideal time to contact your independent insurance agent at Richey-Barrett Insurance to review what your personal auto policy covers and determine if you need additional auto coverage.

Will you maintain any business data, whether on paper or electronically? Business data of any kind is not covered by the homeowner’s policy. Discuss your plan for customer billing and record-keeping with your independent insurance agent, who can suggest additional coverages you should consider.

REVISIT:  Go back and reassess your tool kit with pen and paper in hand. Doing so will help you see what you have and what you need. Does your skill set align with the skill set necessary to be a trade contractor? Inventory the physical tools/equipment in your garage or backyard shed that could be used to start a trade contracting business. What other tools/equipment might you have to purchase? As you budget, determine what money you have and are willing to invest in a trade contracting business. Do you qualify for affordable and reliable credit? Your budget should always include proper insurance; this is crucial for any size trade contracting business to be viable, as well as to provide personal financial protection.

Your Trusted Choice Independent Insurance Agent at Richey-Barrett Insurance understands the insurance market for trade contractors. We have years of experience placing insurance for many sizes and varieties of trade contractors.