Anyone in business knows insurance isn’t cheap. Toronto HVAC Contractor often look at how much they’re paying for general liability insurance, property insurance, workman’s compensation, surety bonds and the insurance on their commercial vehicle and wonder if they’re working for themselves or the insurance companies. While that’s a perfectly understandable sentiment the fact is unless and until the business landscape undergoes some fundamental change, it is what it is and trying to work around the insurance system is usually a recipe for disaster. Below we’ll get into why.
Why HVAC Contractor Need Valid Insurance
When HVAC Contractor make the foolhardy decision to forego insurance in order to pocket more of their earnings they are typically gambling on 2 things. First, that customers won’t ask for proof of insurance (and quite often they don’t) and second, that they or the people working for them, won’t be involved in any accidents or cause damage to anyone’s property. Given the number of work related accidents that occur every year that second gamble is really playing with fire. But there are other, not so obvious risks involved in not having insurance.
I Didn’t Do Anything. Why Are You Suing Me?
Hubris is a powerful thing. It can make people believe that just because they’re riding a winning streak today that it will always be that way. As such they abandon common sense and plow forward. And then life happens. The fact is lawsuits are a part of business life today and it’s often the case that even if you or your workers were not directly involved in an alleged incident you could get sued anyway by an overzealous lawyer. If that happens who is going to pay for your legal defense? Well, if you don’t have general liability coverage you are. And if you think insurance is expensive wait until the lawyer starts piling up billable hours. Is it fair? Probably not. But it’s the way things are and not having insurance to protect yourself against such possibilities is a little like closing your eyes and crossing the street. Sure, you might make it to the other side. On the other hand…
Some More Examples of Life Happening
Did we mention that you stand zero chance of becoming a licensed air conditioning and heating contractor if you can’t prove you have the requisite insurance? It’s true. So chew on that while we go over several more examples of how life can derail your plans to live large without insurance.
Your client refuses to pay
Any Toronto based HVAC Contractor who have been in business a while have faced this prospect. A client takes exception to something that was done or not done and refuses to pay the bill. What do you do? You’re going to get hit 2 ways by this. First you’ll have to pursue the matter in court which could get expensive and could take years and second you’ll have to find a way to keep your business open without this income. And if it was a big job it could be a serious blow to your cash flow. There are business owner insurance policies that will help you bridge the gap in cases like this. If you have one.
You lose a really lucrative job
Let’s say you bid on a really primo project that would set you up nice for the next year or so. You’re pretty sure you got away with skirting the issue when the client asked about insurance and everything else went great. You had a good rapport with the client, they seemed impressed by you as a person and businessman, they liked your bid and left you with the impression the contract signing was just around the corner. Then you get the call they decided to go with someone else. Why? Because you skirted the issue when it came time to talk about your insurance coverage.
One of your workers trips and hurts himself
He wasn’t watching where he was going and tripped over a coil of wire. He wasn’t wearing a hard hat and hit his head pretty hard on the wall. He hires a lawyer who comes after you with both barrels. That lawyer learns you don’t have insurance and goes after your client as well. Your client learns you didn’t tell the truth about your insurance coverage and voids the contract. You then are effectively up the creek without a paddle and you can be reasonably sure things will get a lot worse before they get better.
After the fact lawsuits
Let’s say you recently wrapped up a big job on a new supermarket that you somehow procured even though you don’t have insurance (it happens). During the grand opening there’s an incident and the whole place goes dark. You’re sure you did everything right but the supermarket owner isn’t buying it. She’s holding you accountable for lost inventory, lost income and damage to the brand. If you had commercial liability coverage you’d be all set. But you don’t. So you’re not all set.
You have a business-related accident in a personal vehicle
Auto accidents happen every second of every day. If you’re using your personal pickup as a company vehicle and driving it around without commercial insurance coverage any accidents, you have will be on you. Once the insurance company learns you’ve been using what should be a personal vehicle as a work vehicle all bets are off and you are on the hook for any damages, hospital bills and more. Commercial insurance will cover you for any injuries and damage you cause while driving your company vehicle.
Those are just some of the many ways not having valid insurance can derail a heating air conditioning career. With those in mind then we’re going to take a look at a half dozen as following
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Types of insurance coverage for HVAC Contractor
1. General Liability Coverage
General liability coverage will help protect the HVAC contractor should someone get injured or killed on the job or if there is property damage caused by the heating & air conditioning contractor or someone in their employ. General liability insurance will also cover settlements related to injuries, fatalities or property damage and also help cover legal fees. This is one of the most basic forms of insurance for HVAC Contractor and you won’t get a license without it.
2. Commercial property insurance
If you’re like most HVAC Contractor you run your business out of a fixed location. It might be a building you own, a space you rent or even your garage. This type of business insurance will help cover any costs should your home base be damaged in some way. What way? Well, let’s see there’s fire, flooding, blizzards, high wind events, lighting strikes or any other gifts Mother Nature feels like handing out. Let’s throw in vandalism for good measure and you begin to get the picture. Without coverage on your base of operations any damages are going to come out of your pocket. There are different types of business property insurance, so you have to be sure to get the right one for you.
3. Commercial auto insurance
As we mentioned above if you’ve listed your pick up as a personal vehicle on your insurance coverage and then you have an accident with it while on the job don’t hold your breath that the insurance company is going to cover any injuries or damage. They won’t. They’ll say you misrepresented your vehicle, cancel your policy and everything will come out of your pocket. Make sure you list your company vehicle as such and have the proper commercial insurance policy on it.
4. Equipment insurance
What is a HVAC contractor without their tools and equipment? Not much. Anyone who has worked on large, busy job sites knows that tools left lying around tend to grow legs and walk away. Also, if expensive tools are dropped they can be damaged and cost an arm and a leg to fix. Never mind the fact that you’ll likely have to rent replacements while your tool is being repaired. Equipment insurance can keep you up and running during all manner of equipment emergency.
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5. Errors and Omissions Coverage
Errors and omissions happen. Especially on large, complex jobs. Without E&O coverage you could be held personally liable if an error or omission of yours winds up making a negative impact on the client. Even if there is no obvious harm clients will often sue if they learn something has been left out. In those cases E&O coverage can help defray the cost of any lawsuits.
More About General Liability Coverage
As general liability coverage is the most basic and most important form of insurance for HVAC Contractor we would be remiss if we didn’t examine it a bit closer to help you understand how it works and just why it’s so important.
What is it?
Commercial general business liability coverage protects you and your company assets in the event someone is hurt while working for you, while coming in contact with one of your workers, while on your jobsite or as a result of something you or one of your workers has done. It will typically cover medical costs as well as any legal fees incurred should you be dragged into court by an aggrieved party. In addition comprehensive liability insurance should also cover any compensatory or punitive damages awarded by the court. But that’s not all. General liability coverage can also protect you from claims of false advertising, libel or even copyright infringement.
Do you actually need it?
The $64,000 question and one with a simple answer: “Yes”. Lawsuits are part of the business landscape today. All those people graduating with law degrees need something to do after all. Virtually all HVAC Contractor who have been in business for a long time have found themselves in court for one reason or another. As we stated above, even if you are sure you did not cause anyone any harm you may still find yourself in court simply because an overzealous lawyer is casting a wide net in search of the biggest possible settlement. And as unfair as it is you’ll still need to defend yourself in such circumstances. In the long run the $1,000 or $2,000 you wind up paying per year for general liability coverage could wind up saving you from financial ruin by covering any large settlement against you.
How much do you need?
The amount of coverage a typical HVAC contractor needs is determined by the perceived risk of the work they do. Certainly, because a HVAC contractor does work that can have catastrophic consequences if done improperly the cost of your general liability coverage is going to be more than if you were, let’s say, a graphic designer. Other factors weighing on the cost of your premiums will be the number of people you have working for you and your general safety record.
How does it work?
Your general liability insurance plan will place a cap on how much they will cover. Let’s say you have $250,000 in coverage and your business loses a court battle and is ordered to pay $200,000 in damages. You also incurred $100,000 in legal fees fighting the lawsuit. After your liability coverage pays out the $250,000 you will be left having to pay the remaining $50,000. Obviously the more you’re willing to pay for your liability insurance the more they will cover. You may want to ramp up the amount of coverage you have if you are facing a particularly large project.
Regardless of the risks there will always be those who will try to get away without enough insurance, or without insurance altogether. These are usually folks who don’t last long in the industry or never really see their business take off. Don’t let that be you. All legit HVAC Contractor are dealing with more or less the same insurance costs so it has a tendency to level the playing field. Which means that in the end whether you succeed or not will come down to your ability, not your insurance premiums.