Summary of Electrician Insurance: Anything Can Happen
Insurance for electrical contractors is a complex topic that can leave even the best of us scratching our heads in confusion. Liability, health, auto, worker's comp – what kind of insurance do you need to keep your business operating smoothly and in the black? We've taken a good look at some of the most common types of electrical contractors insurance and written this summary to help you through the process to make sure your business is protected.
What kind of insurance do you need?
Though insurance is optional in many areas, there are a few types you're required to carry. This may vary from state to state, so be sure to check with your local contractor's association to verify whether you need any other type in your area.
- Professional electrician liability insurance: This type of insurance covers liability based on your professional services. If you wire a home that later has an electrical fire due to an issue in your wiring, this policy would protect you against a lawsuit, unless it can be proved that you were negligent in your work.
- General liability insurance: This protects against more general liability issues, such as if a customer comes to your office and suffers a slip and fall accident while on your property. This type of insurance may also be required when working on some larger projects that require the owner to be included as an additional insured in case of a problem with the job site.
- Property insurance: As an electrician, you've invested a lot of money into your tools, your signs and your building. Property insurance covers those items in case of a loss, whether due to theft, fire, vandalism or other covered incident.
- Worker's compensation insurance: This type of insurance protects your workers if they are injured on the job and is a requirement in many states. Essentially, it will take care of the medical bills and the employee's lost wages while they are recovering or disabled due to the injury.
- Unemployment insurance: Though it's often referred to as unemployment insurance, most locations actually provide unemployment funds through a tax the employer pays based on the employee's wages.
- Health insurance: With the new requirements that have come into effect with the Affordable Care Act, you may be facing a variety of different options depending on your situation. You may be purchasing individual marketplace insurance if you're self-employed or a business policy that covers yourself and all your employees. Steep fines have come into effect if you don't have coverage throughout the year.
- Vehicle insurance: Whether you're using a personal vehicle for work or have a dedicated vehicle for your business, most states will require insurance to register a vehicle. But because the vehicle is used in business, you'll want to make sure you have sufficient coverage if your vehicle unintentionally causes property damage while on the job.
Are there other types of insurance you should consider?
But what about other types of insurance? Depending on your situation, it may be beneficial to add other insurance types to your portfolio.
- Life insurance: Is your business a partnership or do you have specific employees whose loss would cause serious problems for your business continuity? If so, you may want to have live insurance coverage to take up some of the slack in case of an unforeseen death.
- Business interruption insurance: Whether it's a serious illness that incapacitates you for a certain period of time or a natural disaster that wipes out your physical business location, having insurance in place in case of a business interruption helps ensure you'll have the income you need when you need it most.
- Umbrella policies: These policies typically fill in the gaps that traditional insurance lines don't cover. If you want the assurance of knowing that every possible contingency is covered, this is a good option to consider.
Are your premiums tax deductible?
Unfortunately, this question is one of many in electrical contractors insurance that is answered with it depends. In general, the answer is yes, but the type of tax, insurance and business may determine where the deduction can be taken. For example, a self-employed electrician may need to claim health insurance premiums on their standard 1040 form, but a corporation would have to record this information on a different form that covers the business' operating expenses. But for the most part, these costs are considered a normal part of doing business and are covered under most tax codes, even though the location they're recorded in may be different based on the business structure.
The IRS allows most normal business insurance premiums to be deducted from your taxes, but whether you can deduct such premiums or premiums for less common types of taxes at the state level may vary. The types of insurance that are considered normal include all of the above-mentioned policy types in addition to credit insurance to cover bad debts and overhead insurance to cover business overhead costs if you are ill or disabled for a long period of time.
But what policies aren't covered? Life insurance policies that include an annuity are typically considered to be more of an investment than a business expense, and so are often excluded from deductions. Premiums paid on a policy that guarantees a loan and disability policies paid by an individual are typically exempted.
By keeping these different types of insurance in mind, you can develop a portfolio of insurance types that best protects your business and your investment. This in turn allows you to lower your overhead and improve productivity and profitability. Another way to improve your overhead is by spending less time in the office and more time on the job site by using quality electrical estimating software.
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