Running the Business · Part 1
The insurance stack: general liability, commercial auto, the bond, and workers' comp. What each covers, what each does not, and who will demand it
A new contractor deals with four products that all get called "insurance" and do four different jobs. The bond pays the customer when you break license law, then bills you. General liability pays for damage your work causes to other people's property and bodies, but not for redoing the work itself. Commercial auto covers the van that your personal policy quietly stopped covering the day you lettered it. Workers' compensation covers the person you hire, and is on the way to being mandatory for everyone. This lesson explains each one plainly, the exclusions that surprise plumbers most, the sentence about insurance that state law makes you put in every home improvement contract, and who will demand a certificate before you can start.
What the full lesson covers
- The bond is not insurance for you. It pays consumers and employees for your license-law violations, and the surety collects from you. General liability is what actually protects you.
- General liability covers damage your work causes to other property and people (the flooded floor, the ceiling below); it does not pay to redo your own defective work, and many policies exclude sewage and pollution-related losses unless endorsed. Ask.
- A personal auto policy generally excludes or limits a vehicle used in business. The lettered van needs a commercial auto policy, and the day-rate helper driving it needs to be a listed driver.
- Every home improvement contract must state, under required headings, whether you carry commercial general liability insurance and with whom, and whether you have workers' compensation or are exempt (B&P 7159(e)). Customers read it.
- General contractors, property managers, and commercial customers will require a certificate of insurance naming them as additional insured before you start. Set the policy up so the certificate is a phone call, not a scramble.
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More lessons in Setting Up the Business
- 1The entity is a one-way door: why you decide sole owner, LLC, or corporation before the license issues
- 2Sole owner vs. LLC vs. S corporation for a plumbing contractor: liability, tax, cost, and the small claims limit
- 3EIN, the business bank account, and separating the money: the first bookkeeping setup that survives an audit and a lawsuit
- 4City business licenses: every city you work in, the Los Angeles business tax, and the seven-day rule
- 5The insurance stack: general liability, commercial auto, the bond, and workers' comp. What each covers, what each does not, and who will demand itYou are here
- 6Sales tax for contractors: materials vs. fixtures. The CDTFA rule most plumbers get wrong
- 7Quarterly estimates, self-employment tax, deductions, and mileage: the tax calendar for a first-year contractor
- 8Hiring readiness: what has to exist before the first helper's first day
- 9Template: the business setup checklist, from pass letter to first invoice
- 10Template: the insurance requirements matrix. Who demands what, and the certificate that satisfies each one