Insurances Every Painting Contractor Needs
Do you have the right business insurance?
Do you have enough?
Do you even know what you need to have?
To be honest, It differs from person to person.
Are you just starting a business?
Many of us don’t know what insurance we need, let’s go over that now!
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I am Ron Ramsden, I am a DYB coach, also a painting contractor up here in Northern Massachusetts.
What kind of insurances are required as a painting contractor?
Insurance goes all over the place…
We have vehicle insurance, and of course, you want to take care of people’s health and things like that.
When starting a business, there are some insurances you should have in place.
One of my insurance bills just came in for a new policy renewal.
I am going to go over some of the different insurances and which ones you should have.
Of course, vehicle insurance, whether you drive a truck, a van, a car, whatever you may drive, of course, you need your vehicle insurance.
In fact, some of the jobs that we’ve been on, we’ve been asked to provide copies of insurance binders for our vehicles and it had to have certain limits.
In fact, one of the jobs asked for a million-dollar limit on all our vehicles, each individual vehicle, we decided to turn them down.
Anyways, we have vehicle insurance, depending on what your level of insurance is, it affects other insurances also.
You want to make sure you are covered enough, not just for the cheapest price but actually the value of the coverage you are going to need.
One of the biggest ones you are going to need when you are starting a business is Liability Insurance.
If you have no other insurance other than your vehicle insurance, you should have liability insurance.
Liability insurance will cover lawsuits against you and also claims against you.
Maybe you dropped a ladder on someone’s fence and maybe it’s a $3,000 fence.
They can’t just replace two sections, it all has to be re-stained or re-finished.
Maybe you broke something, maybe you dropped a ladder on someone’s car, maybe you were painting the inside of a house and you got some paint on a very expensive picture.
Maybe you broke something in someone’s house, those are all going to be a claim against you.
That’s where your insurance will come in, you’ll just write a check if it’s actually your fault, or you actually just use your insurance.
Personally, we are up to a million dollars for each occurrence in my company.
I’ve heard people picking up insurance policies for about $1,500 a year and then depending on your coverage, it goes up from there.
A must have, that’s a no-brainer you must have it if you are in business you’ve got to have certain kinds of expenses.
This is one of the expenses that you can have and once you have a history with the insurance company, a lot of times they will let you pay it monthly.
So the first may have to be paid all up and front, but after that usually it can be like a direct deduction out of your checking account.
Then we have Workman’s Compensation Insurance, Workman’s compensation is the replacement of wage and health because what if someone gets hurt on a job?
You may be saying, “no, I work for myself, I don’t need it.”
You have one helper who works for you part-time or maybe you have multiple people who are helping you, you need Workman’s compensation insurance.
I know in Massachusetts it is the law, there are two ways we pay a Workman’s compensation insurance in Massachusetts and many of the other states are the same way:
You can either pay upfront so they can determine what compensation you pay to your employees and yourself (if you are still in the field).
Depending on your risk factor, and if you’ve had claims, at the beginning of the year a check is due.
In January, they’ll audit you.
Basically, they look at your books, they want to see who you are paying checks to, your employees, they add it up and find out if you owe them more.
At the end of the year, you’ll get a refund.
There’s also another way to go about this, and it’s actually the option we use.
It’s called “Pay As You Go,” so our payroll is taken care of by an outside agency, the agency of our payroll is $5,000 this week.
Next week we will pay Workman’s compensation on that $5,000, so every week we are paying Workman’s compensation.
In the middle of the summer, it could be $500 a week, but for me, it’s a much easier and budget-friendly way of paying it.
It comes with some options, I love it, we don’t get audited, also all our payroll is certified by an outside agency and it’s a great way to budget your workman’s compensation.
Especially in January if you don’t have an extra $10,000 to send, Mr. workman’s comp.
Now, we are going to get to who needs workman’s compensation and who is going to need some of that if you are working on their jobs.
Short-term Disability Insurance; short-term disability is usually purchased by the individual, for someone like myself.
If I am not able to work and if I was still to be in the field, that would be a real burden on my family.
Short-term disability is great if you are still in the field, like myself.
I am not in the field, I am outside the bucket right now, I work on the business, not in the business, so short-term disability is not something I cover anymore.
Then we have Umbrella Insurance; umbrella insurance covers your excess liability of what other things would cover.
When you purchase umbrella insurance, it covers the amount of money.
For example, if someone sued you for a million dollars and your vehicle insurance only covered up to $300,000 insurance then you are losing a lawsuit, they are coming after you for the other $700,000.
Are they going to tax your house?
Are they going to make you sell off some vehicles?
Are they going to drain your 401K to make sure that gets taken care of?
Imagine working for 30 years and then one of your employees runs a red light and hits someone, they win that lawsuit and they come after your business and yourself.
They can drain your retirement, that’s terrible.
Anyways, umbrella insurance is very, very affordable, under $500 a year.
There are a couple catches, they make sure your vehicle has to be insured to a certain limit, you can’t go the cheap way.
You have to upgrade your vehicle insurance and to be able to get the umbrella insurance.
For us, it has worked great, it’s very small, it’s a business expense that covers us.
So, who is going to need Workman’s Compensation Insurance?
This is one of the big ones that a lot of people don’t pay because they think it’s so expensive and it’s really a lottery you do not want to win.
Workman’s Compensation Insurance, if you are working for a contractor, a general contractor, typically they want a binder, they want a liability and they want a Workman’s Compensation binder.
This is general, when you have this, you just call your insurance company and say, “hey, ABC construction who I work for needs an Insurance binder, my Workman’s Comp, and liability, could you please send it over for the past year,” they give them some contact information and it’s done.
That’s how it’s going to be, if you are working for homeowners and you are a one-man show, Workman’s Compensation isn’t usually mandatory.
The homeowner should understand that if anything happens to you on the job, and you have to put food on your table, they have insurance.
Unfortunately, they could be liable, a lot of homeowners don’t know this and this is why we also let homeowners know that we have this insurance.
You’ll drive down the street, you see on the back of someone’s truck or van; “fully insured,” what does fully insured mean?
Fully insured means that they have health insurance for themselves, fully insured means they have vehicle insurance.
I know that in our state, you can’t drive without insurance, so what does really fully insured mean?
Fully insured in my eyes means you have the liability of Workman’s Compensation, obviously your vehicle is insured, that’s fully insured.
For me, fully insured is Liability, Workman’s Comp., Umbrella, of course, vehicle insurance, and it is mandatory now that we have health insurance.
For homeowners, when we sign a contract, we say, “this company is going to be sending you an insurance binder via email, so please watch out for that in the next couple of days.”
We also let the homeowner know if the contractor is trying to give you a Xerox copy of an insurance binder, that can be a red flag.
This means they might have paid their insurance upfront and got canceled for non-payment, but they still have a copy of their binder.
I am not saying everybody does that but we have seen it.
You can offer to give them a copy, an insurance binder for every customer that you work for and it will set you apart a little bit.
Anyways, these are the insurances, it’s a lot to take in, I would really look for a good insurance agent in your neighborhood though.
I am Ron Ramsden, I am a DYB coach, also a painting contractor, just helping you through these insurance nightmares.
I help painting contractors work on their business, so they don’t have to work in the business, have a great day!