Setting up the correct insurance for plumbers almost always requires a multifaceted approach. There are many moving parts in with plumbing business insurance, and making sure you have the right insurance coverage in place is important to protect both your business and your clients. The following are the most common plumbing contractor insurance requirements:
- Workers Compensation
- General Liability
- Commercial Auto
- Commercial Property
- Inland Marine / Equipment
Before we dive a bit deeper into the individual lines of insurance coverage, and when they are necessary, I want to touch on two less talked about things to consider: Endorsements and Admitted vs Non-admitted carriers. These two terms, which are likely unfamiliar for most plumbers (or really most people not in the insurance world) are big drivers of hidden costs in plumbers insurance policies.
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Endorsements
If you are working for a builder or another contractor, and not just direct retail customers, you will likely be asked for some additional endorsements to be listed on your certificate of insurance for the certificate holder.
The two most common endorsements on plumbers insurance coverages are Additional Insured and Waiver of Subrogation endorsements. The are also others like Per Project Aggregates, Primary and Non-contributory language, and Completed Operations, but these are less common and apply more for plumbing contractors working on large commercial or industrial projects.
If these endorsement are not included by your agent when they write your policy, you will be charged for each and every endorsement you add to the policy throughout the course of the year that the police is in force. Many carriers will charge between $150-250 for each individual endorsement, which can easily add up to thousands in additional hidden fees on plumbers insurance policies.
I prefer to write plumbing contractor insurance with carriers who include additional insured and waiver of subrogation endorsements with all policies on a blanket basis. When an endorsement is added on a blanket basis, it just means that it covers all work performed at all locations for all clients during the term of the policy. This allows us to issue as many certificates as are needed with the endorsements at no additional cost to the on the plumbing contractor insurance policies.
Admitted vs Non-Admitted Carriers
Another phrase that most people outside the insurance industry don’t hear about, or understand exactly what it means, is Admitted and Non-admitted carriers. The difference can cost you though, so it is important to know which your are dealing with and how it may be effecting your bottom line.
First and foremost, and admitted carrier is one who had been approved by the state you work in to provide insurance coverage and they are back by the states insolvency fund for all written policies. What this means in laymen’s terms is that if the company is to go bankrupt during the term of you policy, or for whatever reason can not afford to cover a claim, the claim will be paid by the state. While this is an uncommon situation it does happen, and Guarantee Insurance Company who was A rated when they folded is a recent example of this.
While the possibility of an insurance company going under may seem like something you don’t need to be too concerned about, there is another reason you should be looking to purchase your plumbing business insurance through admitted carriers. Quite simply, because it is often substantially cheaper.
Non-admitted carriers are also often referred to as “Excess and surplus” carriers, and almost always include additional taxes and fees. In fact, for many smaller sized plumbers the fees can be close to the same amount of the actual cost of the coverage. These policies are often written by insurance agents using brokers, who will also add their own additional frees.
For instance, insurance for plumbers liability with a non-admitted carrier may be $550 for the year, but the taxes and fees could easily run an additional $350-400, bring the annual total to over $900. With an admitted carrier that same policy would likely run about $650 for the same coverage and term.Now that we have covered some of the lesser known things to be on the lookout for, let’s get into the meat and potatoes of plumbing insurance coverages and what you may need as insurance for plumbing businesses.
Workers Compensation Insurance For Plumbers
Workers compensation insurance for plumbers is one of the areas that we get the most questions as agents. There are so many things to consider with workers comp. You really need someone who will take the time to explain the details. For instance:
- What does workers comp insurance for plumbers cost?
- What happens if you use 1099 subcontractors?
- Do you need comp if you are comp exempt?
- What is a ghost policy, and how does it work?
- What is actually covered by workers comp?
- What does it mean to be excluded as an officer?
If you don’t get your comp set up correctly in the beginning you could end up with a situation where a claim is not covered, or you are looking at a large audit bill at the end of the year. Do not be afraid to ask your agent any questions you can think of. They should be happy to answer any questions, make sure they full understand the structure of your operation, and be sure you are making an informed decision.
One thing I would like to touch on before we move forward is workers comp coverage limits. Workers compensation policies are generally written under one of three different limits. We get into the details of these different coverages /in this article/, but the important thing to know here is that the difference between $100,000 in coverage and $1,000,000 in coverage is usually only 1.1%. So, if a plumbers workers comp insurance costs $5,000 for $100,000 in coverage, that same policy with $1,000,000 in coverage would only cost $5,050. A $50 difference for 10 times more coverage, that’s a no brainer.
You would be shocked at how often we work on quotes for plumbing insurance where an agent has written the policy with a $100k coverage limit. It usually tells us that the customer is dealing with an agent who doesn’t really understand business insurance, and in turn is not properly protecting their clients.
Most of the questions above are answered in depth in other articles on our site, which I linked to in the bulleted list above. I’m going to cover them each briefly here, but if you want to drill deeper into any of these topics I suggest reading the article specifically on the topics you want to know more about.
What does plumbers workers comp insurance cost?
The calculation of workers compensation cost is a much more clear cut than other lines of plumbing insurance cost. Quite simply, workers comp is determined by the rate for the classification of work, multiplied by the amount of labor payroll to employees or uninsured subcontractors.
There are hundreds of class codes which correlate to the various types of work people perform. The classification code for plumbing workers comp is 5183. In terms of contractors class codes, the rate plumbing contractors pay for labor is definitely on the lower end of the scale.
Here are some workers compensation rates by state that we have been able to get for some recent clients:
Georgia: 4.15%
North Carolina: 3.09%
South Carolina: 3.52%
There are some taxes and fees that get added to the policy, but they are minimal and it is pretty safe to estimate your workers compensation cost by simply multiplying your labor payroll by the rate above for the state you operate in. So, a simple example would be a plumber in Georgia with $100K in labor payroll would pay roughly $3,350 plus taxes and fees for workers comp coverage.
Of course other factors can have an effect on your workers comp premium like years in business and claims. Which can either decrease or increase the price you pay for coverage respectively. Also, if your business is experience mod rated, the mod rate has a direct effect on your annual premium. /If you don’t know what a Ex mod is, you can read more about it in this article./
Plumbers Workers Comp and 1099 Subcontractors
The most common questions we receive when quoting workers comp insurance for plumbing contractors revolve around 1099 subcontractors, and how they are handled when it comes to workers comp. The bottom line here is, if you are paying someone for labor, and they are not providing you with a certificate showing they have their own workers comp coverage, you are going to pay to cover them on your policy.
This is why if you are working for a GC they require a certificate from you even if you are a sole proprietor and are technically comp exempt by state guidelines. If they don’t have your certificate showing you have coverage, they will pay additional premium on their policy at the end of their policy term for any labor they have paid you.
What if you are comp exempt?
There are some important things to keep in mind if you are comp exempt , and are not working for anyone who lists workers comp as a plumbing contractor insurance requirement. First and foremost, if you are working entirely by yourself, and never subcontracting any of your work, then you are likely ok to take advantage of the comp exempt status. On the other hand, if you have any direct or down stream labor, you should absolutely have workers comp in place. There are two reasons for this:
First, let’s say you have one employee, which puts you under the state guidelines for number of employees to be comp exempt. If that employee is injured while working for you, it doesn’t mean you are off the hook for covering their medical bills and lost income. It just means that you don’t have the right plumbers insurance to cover those expenses! It is an absolutely crazy position to put yourself in, particularly if you are working in a higher risk industry like construction trades where there is always a possibility of getting injured.
Second, let’s your plumbing business only uses insured subcontractors to perform labor on your jobs. You think you are good because they have provided you with a certificate showing they carry their own workers comp. If they let their policy lapse or get cancelled, and one of their employees is injured while working on your job, the claim travels up stream and becomes your problem. Another possibility is that you sub has a minimum statutory limit policy which only provides $100,000 in coverage for an injury. If they have someone who is severely injured while on your job, and they exceed the limits of their policy, it is absolutely possible that their lawyers will look upstream for additional coverage. If you don’t have a policy in place to pick up this exposure, your business could end up footing the bill.
What is ghost policy insurance for Plumbers?
In the second of the two scenarios above a ghost policy would protect you, and it would only cost you $1,620 for $1M in coverage. You know what medical expenses look like these days, what do you think that $1,620 would equate to if someone was injured? Maybe an aspirin in the emergency room…
A plumbers ghost policy would be for a plumbing contractor who either works by himself, or subcontracts all of his work to insured subcontractors. It will full the plumbing contractor insurance requirements for both regulatory bodies and upstream clients, while protecting the plumbing contractors business from work related injuries due to down stream labor. To understand more about ghost policies, / ./ check out this article
What Does Workers Comp Cover?
We’ve touched briefly on what is covered by workers comp insurance for plumbers above, but I feel like now is a good time to layout exactly what workers comp provides as far as protection for people working for your plumbing contracting business. Workers comp has two parts; medical and indemnity.
Medical is, as you would assume, everything that has to do with doctors, surgery, recovery, and rehabilitation in the event that someone is injured on the job. When an injury happens the insurance carrier will cover all medical expenses involved in treating the injured party. This could be as simple as some stitches at an urgent care, or as complex as multiple surgeries and follow up physical therapy. It is all going to be covered by your insurance carrier, up the the limits of the policy.
Indemnity, while sounding more complex, in this case is more or less lost wages. I say “more or less” because most people think of lost wages in terms of the money an individual would have earned had the not been out of work as a result of an injury. When it comes to workers compensation lost wages also include a death benefit paid to the beneficiaries in the event that an accident results in a loss of life.
What is an officer exclusion?
An officer exclusion is a form that is filed when a business sets up a workers compensation policy, which tells the insurance carrier that the owner(s) or officer(s) of the business do not want to be covered by the policy in the event they are injured on the job.
Easily 99% of the workers compensation policies we write have the officer excluded from coverage. In the end, it really all comes down to cost, but maybe for reasons you haven’t considered.
In many states the amount a small business owner would pay to include themselves on their workers comp policy is more than they would pay for disability insurance, which in essence is very similar to the indemnity portion of workers compensation coverage. So, the business owner who has health insurance, and purchases their own disability coverage, is often going to pay less for roughly the same level of coverage and not be forced to file a claim against their own workers comp policy in the event that they are injured while working.
Having workers compensation claims has a negative effect on your businesses experience modification rate, which directly controls the amount you are paying for workers compensation. Increased premiums can last for as long as 3 years after the claim is completed. Because this is the case, most business owners would not want to file a claim against their own company.
Additionally, states have minimum payroll remuneration requirements for officers to be included on their workers comp policies. In some sates this can be as high as $52K per year. Some business may not have that much profit going to the owner, but even though the owner is making less than the state minimum the insurance carrier must use the predetermined minimum set by the state they reside in. For new businesses in particular, where profits are often thin for the first year or two, including the officer in the workers comp coverage is cost prohibitive.
General Liability Insurance For Plumbers
Liability insurance for plumbers is an absolute minimum must have. This is the coverage that is going to protect you if something you do results in injury to a client or damage to their property. Proof of general liability insurance is also a plumbing contractor insurance requirement for many state licensing boards.
The first thing that comes to mind for most people when thinking about insurance for plumbing work is causing major water damage. There are a number of other scenarios where general liability coverage is going to protect your company and your assets though. For instance, if a messy job site results and your client being injured as a result of a slip and fall.
One thing to keep in mind is that general liability insurance does not usually cover faulty workmanship. If you, or an employee, plumb something incorrectly and it causes a major leak at some point in the future for example. That type of loss would be covered under professional liability coverage, rather than your general liability. Many carriers will package general liability and professional liability insurance for plumbers, so keep this in mind when you are getting quotes.
Anytime you can package coverages your are almost always going to save money. A Business Owners Policy (BOP) will package general liability insurance for plumbers with additional insurance coverages for your commercial buildings and personal property. So, if you currently have a general liability policy and also have an inland marine policy covering your tools and equipment, and/or have an office you are paying commercial property coverage for, it probably makes sense to look into a BOP.
What should General Liability insurance cost plumbers?
Plumbing liability insurance cost is generally determined by two variables: Total annual gross receipts for the business and gross annual labor cost.
Gross receipts is pretty self explanatory, it is simply the total amount your business bills out to clients over the course of the year. This number includes all labor, materials, and overhead expenses.
Gross labor can be a little trickier. Both W2 and 1099 labor pay need to be scheduled in order to properly calculate the cost of your general liability policy. W2 employees will be scheduled by the type of work they do, for example if you have a secretary and a journeyman we would schedule their payrolls under the clerical and plumbing classes respectively. If you are using 1099 sub contractors who are insured they are going to fall under their own classification for Insured subcontractors. It is very important to make this distinction because the price you will be charged for each of these different types of labor vary greatly.
We get the question all of the time “Can you give me a ball park price for plumbers insurance?” The answer is, in most cases, “No, we need to actually quote the account to give you an accurate price because there are so many variables to consider. That said, we can give a couple of examples of accounts we have written recently so you have an idea what others are paying in your industry.
An individual sole proprietor with $125K in gross revenue and no employees or subcontractors just secured coverage with one of our carriers for $650 in annual premium on a BOP which included coverage for his hand tools.
Another client, with $860K in gross revenue and $298k in plumbing employee payroll was written last month in a BOP, which covered all of his tools and equipment, for $1,810.64
Those two examples should give you an idea of what both ends of the spectrum look like for most plumbing contractors insurance. Unless you have some extenuating circumstance or prior claims, it is pretty safe to assume most plumbers liability insurance is going to fall somewhere between those two accounts. But, again, the only way to truly know what you should be paying is to get some quotes!
Contractors Commercial Auto Insurance for Plumbers
When plumbers are setting up their insurance coverages, contractors commercial auto insurance is definitely something they need to be thinking about.
It is very common for owner operated plumbing contractor businesses, and other small businesses in general, to use the same vehicle for personal and work purposes. It is important to know that many personal lines auto insurance policies may exclude coverage for accidents where the vehicle was being used for work purposes though. Commercial auto carriers are generally ok with the vehicle being used for personal purposes as long as we notify them that this is the case when we are writing the policy.
Because commercial auto coverage is more expensive than personal auto coverage in most cases, we generally recommend that someone who is currently covering their vehicle under a personal lines policy reach out to their carrier to see if they can endorse the policy to cover them while they are working. Some carriers will offer this option, and it is usually cheaper than having true commercial auto insurance.
It you have company owned vehicles, or have employees who are using their own vehicles for work, you should absolutely have a commercial auto policy in place. Employee used vehicles need to be covered under hired and non-owned coverage, depending on the arrangement.
What does commercial auto for plumbers cost?
Again, as with a number of the other coverages we talk about in this article, there are so many variables to consider when it comes to contractors commercial auto insurance cost. Obviously coverage for a 2020 Mercedes Sprinter is going to be more expensive than a 1995 F250 Econovan. The same goes for younger vs older drivers, radius of operations which fall in metro areas vs rural areas, etc.
As a general rule though, we see the majority of commercial auto insurance for plumbing business and other trades contractors coming in at around $2,200-$2,500 per truck in Georgia. If you live in North Carolina that price is going to be a bit cheaper, and if you live in Florida that price is going to get a little more expensive.
Like I said above you could definitely see swings in plumbing auto insurance cost, sometimes even up to $1,000 in either direction depending on a slew of variables. If your situation is around that of the average we quote though, that price range is about where you should expect to be.
Contractors Commercial Property Insurance For Plumbers
Like commercial auto insurance, commercial property liability insurance for plumbers is pretty cut and dry. If your plumbing contractor business has a physical location, whether it is owned or rented, you should have a commercial property insurance policy in place.
The commercial property insurance is going to provide protection for your building and your personal property within the building, which would include scheduled products and materials which are waiting to go out to job sites. Depending on the carrier and how the policy is set up, it can also cover plumbing records, documents, computers, furniture, etc.
The cost of commercial property policies is dependent on too many variables to be able to give you even a ball park idea of what this coverage should cost. Building age, building value, roof type, and distance to fire hydrant are just a few of the factors that drive the premium for plumbing contractor commercial property insurance.
Inland Marine / Equipment Insurance for Plumbers
The last coverage we are going to discuss here is what is called inland marine insurance for plumbing businesses. The name throws most people off, because really what could “inland marine” have to to with plumbing contractor insurance?!
An easier way to look at inland marine coverage is: Insurance for materials, tools, and equipment that is moveable. I’m sure you are thinking, but you lists equipment and tools under commercial property too, so how are these two coverages different? Lets look as some examples of what would be covered under commercial property vs inland marine:
Inland marine examples:
- A generator that you take out to job sites, would be covered under inland marine.
- Hand tools that move between your truck and you workshop, would be covered under inland marine.
- A skid steer bobcat, would be covered under inland marine.
Commercial property examples:
- A pipe threader fixed to the slab of your warehouse would be covered under commercial property
- Boxes of fittings and stock pipe stored in your warehouse would be covered under commercial property
- Plumbing fixtures or water heaters at your location waiting to be delivered to a customers job site, would be covered under commercial property
On things like owned equipment, it is usually safe to assume around 1% of insured value for the annual premium. Like commercial property coverage though, inland marine is depends on too many variables to give an accurate idea of what the cost will be without quoting specifically for your plumbing business insurance needs.
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Conclusion
We hope this has answered some of the most pressing questions you have about setting up plumbers insurance for your business. As I mentioned in the beginning of this article, it is important to get your coverage set up correctly in the beginning. Making sure you have the right agent workmen for you goes a long way to getting you the right coverage for the right price. While that may take leg work on our end, it will protect you and your business in the long run, and we are happy to provide that level of service for all of our clients.
If you have any additional questions we would love to answer them for you, so please don’t hesitate to give us a shout or drop us an email!
Also, for more state specific information about plumbing contractor insurance requirements, check out these additional resources:
Georgia Plumbing Insurance and Licensing information: https://sos.ga.gov/index.php/licensing/plb/40
North Carolina Plumbing Insurance and Licensing information: https://www.nclicensing.org/
South Carolina Plumbing Insurance and Licensing information: https://llr.sc.gov/clb/CLB%20How%20to%20apply.aspx
Tennessee Plumbing Insurance and Licensing information: https://www.tn.gov/commerce/regboards/llp.html
