Insurance for Plumbers 101

If you’re a plumber, you know there are tons of different projects and things to manage in your field. You could be called to fix a leaky faucet or take on the installation of an office building’s entire water system. You may find yourself working with residential customers, corporate clients, or as subcontractors for builders. 

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And when there’s so much hands-on work to do, for a whole bunch of different people, there’s a lot of room for things to go wrong. That’s why there’s plumbing insurance. 

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Insurance takes on many of the big risks plumbers face—from being sued by clients for property damage to employees getting injured on the job. But how do you decide which insurance policy (or policies) is right for your plumbing business? And how much do they cost? We’ll break all that down and more. So keep reading!

What Insurance Do Plumbers Need?

There’s no one single policy that speaks to all the needs of plumbers. In fact, there are multiple types of insurance that give you a smorgasbord of choices. Working with your insurer, you can pick and choose what you need and get an insurance quote for coverage. Let’s take a look at some of the options available to you, along with one required insurance type—workers’ comp—if you have employees.

General Liability Insurance

One of the most common types of insurance is liability coverage. “Liability” in this case refers to your responsibility to pay for damages, medical costs, or legal costs if a client or non-employee gets injured. A general liability policy may be the most important one you can buy.

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Imagine your client trips over a wrench that you left on the floor while working at a job site and breaks their leg. Your general liability coverage should pay for their medical costs and any legal fees from the accident.

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This policy will also cover damages. Let’s say you’re maneuvering a new bathtub through your client’s front door, and you accidentally take off part of the doorframe. That physical damage should be covered by your general liability insurance policy.

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General liability also covers advertising injuries. These include anything that might be considered slander or libel, as well as copyright infringement. So, for example, if you make a claim that denigrates your biggest competitor in an advertisement and they sue you for slander, this coverage would help pay for your legal costs.

Professional Liability Insurance

There’s also a type of insurance called professional liability insurance (also called errors and omissions insurance). This is similar to general liability but is for any financial damage you cause your clients. 

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Professional liability coverage protects you from third-party lawsuits that come about because you failed to complete work, were negligent, or made other mistakes or omissions that impacted the final product you delivered to a client.

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So, to simplify the differences between these insurance products, general liability covers physical damage or injury, while professional liability covers mistakes you make on your actual work.

Workers’ Comp Insurance

In almost every state in the U.S., you are required to carry workers’ compensation insurance if you have employees. Although liability insurance protects you if a client or other person is injured, workers’ comp covers you when your employees are injured on the job. It can cover medical expenses as well as lost wages and may protect you from lawsuits as well.

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Workers’ comp is based on your payroll and is usually estimated on a yearly basis, which can cause overpayments. Although the idea of workers’ comp dates back to ancient times, modern and innovative methodologies make the system easy, smart, and affordable. 

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Hourly, for example, syncs your workers’ comp with your real-time payroll, so your payments are exact rather than estimates. You’ll be at a lower risk for audits and have faster, more streamlined payroll runs.

Property Insurance

Commercial property insurance, or hazard insurance, protects your place of business. If your plumbing company has an office, a warehouse, or even a store that sells plumbing equipment—or any kind of real estate, for that matter—then this type of coverage is essential. It protects your small business and its assets from named perils, which may include fire and smoke damage, wind or hail, and more. Your coverage can pay for lost or damaged equipment and inventory, repairs to the building, and operating expenses.

Business Interruption Insurance

This type of insurance can be added on to an existing policy in many cases. It helps repay your business for the lost income and extra expenses that you may incur while your business is closed because of a named peril. 

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For example, if a fire damages the warehouse where you keep all piping and other plumbing supplies and because of this, your employees can’t work, business interruption insurance would cover the revenue you’d normally make during the period it takes you to replace your supplies. If you need to temporarily relocate because of the fire, this type of coverage will help you pay rent and moving costs. 

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Note that your property insurance would be the coverage that would pay for actual repairs to the building. If you have tools and equipment coverage, which we’ll talk about below, that may also help pay for the cost of repairing the items lost.

Business Owners Policy

Your head may be starting to spin as you consider the many types of insurance we’ve already covered, but one that may leave you feeling grateful is a business owners policy or BOP insurance. This is a single policy that bundles several kinds of insurance commonly used by businesses.

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Most BOP policies start with plumbers liability coverage (i.e., general liability) and add property insurance to that. They may also include business interruption insurance. When purchasing BOP insurance, it’s a good idea to work closely with your insurance rep. There are other optional coverages they can add to customize the policy for you.

Commercial Auto Insurance

You undoubtedly have one or more work vehicles to get you to and from your jobs. Perhaps you have trucks to carry the many pieces of equipment and piping that plumbers commonly use. And just like you need auto insurance for your personal vehicles, you need commercial auto insurance for your work vehicles.

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This type of business insurance covers roughly the same things as your personal auto policy: medical expenses for any bodily injury that occurs during an accident, repairs to the vehicle, rental vehicles if necessary, and legal fees. It may also include towing and labor costs and uninsured motorist coverage.

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It’s important to note that your personal auto policy does not extend to work vehicles unless you have worked with insurance agents to create a policy that covers both. In general, however, you will have separate policies for your personal and professional vehicles.

Tools & Equipment Insurance

Another type of plumbing insurance policy often purchased by small business owners is coverage specifically for your tools and equipment, sometimes called contractor’s equipment insurance. 

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It’s likely that you have invested a considerable amount of money in your tools—most plumbing contractors do. Insurance providers can create a policy for you that covers equipment that you own, as well as employee tools, clothing and even equipment that you borrow for a job.

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Generally, tools and equipment insurance covers your gear no matter where it is: at a job site, in your vehicle, or at your home, up to your policy limits. Coverage should include theft protection, as well as the costs of vandalism.

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This type of insurance, which is a form of inland marine coverage, can be a stand-alone policy, or you may be able to add it to your general liability or BOP coverage. Although this particular small business insurance is optional, it can save you from a minor disaster if your equipment is lost or damaged.

Surety Bonds

Surety bonds are not a form of insurance, exactly, but they are issued by insurance companies. A surety bond may be required as part of your licensing process, depending on what state you are working in, though commercial interests may require them as well. A surety bond ensures that you will follow all applicable rules and laws and uphold common standards of the plumbing trade. States that require surety bonds include California, Illinois and New Jersey.

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What you will need to do is pay a bond premium, which is a small percentage of the actual bond. In California, for example, plumbers are required to post a $15,000 bond. This would mean an annual premium of roughly $125-750, depending on circumstances, including your credit score, assets, and more.

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They come into play if you are unable to complete the work contracted for or if the work is not done to the client’s satisfaction, in which case the client would receive a settlement based on the bond. You would then have to pay it back.

What is the Average Cost of Insurance for Plumbers Insurance?

As you can imagine, the cost of plumber’s insurance varies greatly, depending on what you choose. As far as insurance requirements go, usually the only type of coverage that is state-mandated is workers’ comp. 

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The average for this varies from state to state. In California, for example, the average annual cost of workers’ comprehensive coverage is $1.61 for every $100 of covered wages, according to the National Academy of Social Insurance. So, for example, a plumber with an annual payroll of $200,000 would pay roughly $3,220 into workers’ comp each year.

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Liability insurance, meanwhile, is a median premium of roughly $125 a month, while commercial auto averages out to about $150 per month. Tools and equipment insurance is less expensive, usually around $15 a month.

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In general, for a comprehensive policy or policies with a limit of $1 million, a plumber can expect to pay between $1,600 to $3,500 a year. Variables include the coverage options chosen, as well as any deductibles that apply to the coverage. The best way to find out what your plumbing insurance costs will be is to contact your insurance agency and ask for a comprehensive quote for all the coverage types you think you need. 

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Business insurance coverage can change easily by tweaking your deductible, raising or lowering your coverage limits, and allowing exclusions. During the underwriting phase, your insurer will consider all that in crafting coverage specific to your own needs—at an insurance cost that works for you.

The Bottom Line: You'll Need Different Types of Insurance

Only you—the business owner—and your insurance agent can determine the amount and type of policy—or policies—you need. Fortunately, it’s often possible to bundle together several kinds of insurance into one policy, such as a BOP policy, so you’ll only have one payment to make. It may take some time and thought to pull together everything you need, but it’s worth it. A solid insurance portfolio can be a business owner’s best asset.