Everything You Need to Know About Insurance for Your Plumbing Business

Insurance is one of those business expenses that works behind the scenes. While it may often feel like an extra bill–there may be a time when it saves your business from financial ruin.  

Even minor mistakes can have a huge impact on a small business. Securing quality insurance safeguards your business, providing a crucial safety net. 

Since insurance can be a headache, this article will help examine the costs and coverages of a plumbing business insurance plan. We’ll look at prices, policies, and how to mitigate any big insurance claims.  

Why Every Plumbing Business Needs Insurance 

Any home service company should have some type of insurance. There are too many risks when providing services in homes and businesses. Especially for plumbing businesses. 

Plumbing accidents can have a serious impact on structural integrity. This means that company liability could get expensive.  

Here are a few reasons that insurance is worth the investment: 

Risk exposure 

Plumbing work is high-risk, which means employees may face injury and hazardous materials. Injured or ill employees, regardless of their company loyalty, could file a claim against the company. This is why certain insurance plans are required. 

Legal requirements 

Legal requirements vary by state and county. Typically, workers’ compensation and general liability insurance will be required. This way, your plumbing business can operate safely and with reduced financial risk.  

Industry standards 

Insurance helps plumbing businesses keep up with industry standards. Your business will need to be compliant in order to purchase an insurance plan. 

Client expectations 

Many clients may double-check that your business is insured. This can help reassure them that their property is protected and that your services are professional.  

If those reasons haven’t convinced you, then maybe some common claims in the plumbing industry will. Many risks, big and small, come with the territory. Avoiding having to pay out of pocket for big claims is a must.  

Here are a few of the most common claims made in the plumbing industry: 

Water damage claims 

This is a big risk in plumbing. If something goes wrong because of a job, you may be liable for it. Water damage can cause serious issues to homes and businesses. Which, of course, is why we need plumbers.  

However, water damage can get expensive, especially if your company is liable. The average cost of water damage repairs is between $1,300 and $5,600.  

Bodily injury claims 

Plumbing can be a risky business. Your employees (or you) may slip, trip, fall, or face any number of injuries on the job. Clients, too, may file a claim if they get hurt from a slip or injured on your company’s property.  

The average claim for a slip and fall usually costs between $10,000 and $50,000. 

Property damage claims 

Mistakes happen, regardless of how careful you may try to be. Accidentally damaging your client’s property may occur during any job. 

The average payout for property damage is around $15,000. 

Overview of Plumbing Business Insurance Policies 

Sifting through the insurance market isn’t an easy task. There are so many providers, plans, and coverage needs. And, often, insurance jargon can be difficult to understand. So, how do you know what policy is right for your company?  

Here, we’ll break down the essentials of the primary plumbing insurance plans.  

General liability insurance 

General liability is basic coverage for all things business-related. These plans can cover claims for bodily injury, property damage, copyright infringement, and even slander against your company.  

Many states require general liability insurance, which makes it a necessity for many plumbing companies. However, even if it isn’t required, it is still vastly beneficial to any small business.  

Without basic coverage like this, your business and assets are at financial risk if a claim is filed against you.  

Workers’ compensation insurance 

Worker’s compensation provides benefits to those who are injured or become ill while on the job. It covers medical expenses, lost wages, and rehabilitation costs. In the unlikely event of a death, it also pays out benefits to the family of the deceased.  

If your business has employees, it’s required to have a worker’s comp policy. This policy protects your business from having to pay for medical expenses and potentially being sued. It also promotes employee satisfaction because they know they will be taken care of if something happens. 

Commercial auto insurance 

Commercial auto policies protect businesses from liabilities and costs associated with company vehicles. These policies insure against vehicle damage, any damage caused by the vehicle, and medical payments. They essentially cover any damages, injuries, or costs associated with a vehicle accident or issue.  

If your plumbing business has a fleet of company vehicles, or even just one, this is a necessary policy. It covers any type of vehicle and protects your business from being liable in the event of an accident. Driving is high risk regardless of the job–commercial auto insurance protects you against those risks.  

Professional liability insurance 

Professional liability insurance protects plumbing businesses from any financial or reputational harm. These policies cover a variety of claims, such as negligence, copyright infringement, misrepresentation of services, misleading advice, and breach of professional services.  

These plans can be bundled with other plans. However, they’re not to be overlooked. Mistakes happen, and unhappy clients can sometimes be vindictive. These policies protect you from any costs, settlements, fines, or penalties filed against your business.  

Business income insurance  

Business income insurance covers business expenses and financial losses. This coverage kicks in when the company can’t operate. It typically covers fixed expenses and/or lost revenue when the company is closed for repairs or restoration.  

A business income policy will help pay employees’ wages, location rent/mortgages, and any lost income for the duration of the closure. This also applies to any government-ordered shutdowns. Since the COVID lockdown, we all know how damaging those can be to businesses.  

Business owners’ insurance 

Business owners’ insurance policies bundle business, property, and liability insurance. These plans cover damage to equipment, property, and inventory. They also protect the business against any claims or business interruptions.  

Business owners’ insurance is a great general coverage policy. These policies work best with small businesses, as they are tailored to individual business owners.  

Cost of Plumbing Business Insurance 

Pricing for plumbing business insurance varies across the industry. Costs for individual plans are affected by many factors. This includes business size and location, the type of plumbing work you conduct, and the number of employees you have on payroll.  

On average, a basic plumbing business insurance plan will cost around $166 a month. These rates will be proportionate to the size of your business and may be affected based on your claims history. 

More employees mean more workers’ compensation and likely a bigger auto insurance plan. If you have previous claims, insurance companies will place you at a higher risk, which may also increase the cost of your policy. 

Most plans will vary and may cost more depending on the type of insurance coverage. For example: 

• Commercial auto insurance costs an average of $2,700 a year. 

• Workers compensation insurance costs an average of $2,300 a year. 

• General liability insurance costs an average of $1,300 a year.  

• Professional liability insurance costs an average of $888 a year.  

How to save on insurance costs 

Insurance policies are expensive, and the more coverage you have, the pricier they get. The expenses of running a small business can start to add up quickly. Here are a few ideas on how to reduce the cost of insurance policies: 

Bundle 

Many insurance companies offer discounted rates if you purchase multiple policies with them. Things like workers comp and professional liability policies can often be bundled together.  

When shopping for insurance policies, always request information on bundles and discounts.  

Increasing deductibles 

Increasing the deductible means you’ll pay out more after a claim. However, this also lowers your monthly costs. It’s up to you to decide when and where you’d like to save the money. 

Maintain a good credit history 

Paying off debts and making all payments on time increases your credit score. Insurance policies will evaluate this when calculating policies.  

Choosing the Right Insurance Policies 

Every plumbing business is unique. The types of services you provide, the number of employees you have, and the scale of jobs you take on will all affect which policies you need.  

Insurance policies aren’t one size fits all. This means there will be a bit of homework involved to find the right policy for your company.  

Here are some of the factors that will influence which policy you choose: 

Evaluating insurance needs 

Consider the number of employees, company vehicles, and complexity of the jobs you work on. The bigger and more robust your company is, the more intricate insurance policy you’ll need. Protecting your assets and employees is vital for a thriving business.  

For smaller companies, something like a business owners’ policy could be perfect. This is fairly all-encompassing and should cover most risks.  

Comparing insurance quotes 

With insurance companies, it’s important to collect quotes and policy information. Comparing costs and coverage will help you get the most for your money.  

You may also consider reading online forums and reviews. This could help you get insight into how these companies have actually paid out and supported their clients.  

Understanding policy exclusions and limits 

Insurance policies have a lot of fine print. Be sure to review this and compare exclusions between plans. Many insurance policies will only offer coverage for certain things, and it’s good to be aware of this before signing up. That way, you know what you’ll be dealing with if something ever comes up.  

Legal and Compliance Considerations for Plumbing Business Insurance 

As mentioned before, legality and state compliance are crucial for choosing insurance. The requirements for insurance policies vary depending on your location. Some states require a certain level of coverage, while others don’t. 

Federal law requires that any company with employees have a workers’ compensation policy. This means that regardless of what other insurance policies you take out, your employees will be protected. 

Staying current on industry standards and regulations is also important for mitigating mishaps. It helps ensure high standards and lowers the risk of costly accidents and property damage.  

Here’s how to stay up to date on changing insurance laws: 

Regularly check with governing bodies 

Governing agencies will release updates on regulations. You should check in with agencies like the National Association of Insurance Commissioners (NAIC). 

Subscribe to industry publications  

Sites and publications like Plumber magazine consistently update the industry on all things plumbing. This is a great way to stay on top of regulations and standards.  

Create internal compliance policies 

If you don’t already have them, your plumbing business should create internal compliance programs. Whether this is just a section in the handbook or consistent training, your employees should be aware of compliance policies.  

Network with other plumbers 

Consider joining plumbing associations. This is a great way to connect with others in the industry and get updates and suggestions.  

You may consider The International Association of Plumbing & Mechanical Officials or the American Society of Plumbing Engineers. 

Utilize software tools 

Consider utilizing compliance management software. There are many programs and tools available for you and your team. These systems can help you stay ahead of regulations and compliance standards.  

Risk Management Strategies 

While insurance is a helpful backup plan, the goal is never to need it. Risk management should be used to help plumbers and plumbing companies stay on top of safety and what-not-to-dos. Whether your company is new or has years of experience, you should stay current on these strategies. 

Let’s look at some of the basics of risk management: 

Implementing safety protocols 

Your plumbing business should have high standards for safety. Every employee should know and practice your safety regulations. This means safety training, on-the-job oversight, and continued accountability by each employee.  

This should include health policies, equipment inspection, personal protective equipment, and training on how to handle hazardous materials.  

Maintaining proper documentation 

For every job, there should be documentation of the process. Field service software programs can help employees maintain documentation on-site. They can record arrival times, document photos or problem areas, and enter any necessary notes.  

Documentation helps relieve the stress of any claims filed against you. This reduces the risk of being sued, as everything should be done according to regulation. And you’ll have documentation as proof. 

Regular policy reviews 

Ensure that your business regularly reviews its policies and standards. These should always comply with industry regulations. Update your protocols according to how your business operates.  

This includes company size, the types of jobs you take on, and any changes in industry standards.  

Seeking professional advice 

Advice from experienced professionals is a great way to create company policies. This could be beneficial if you’re just starting to bring on new employees. An industry pro could help with guidance on maintaining company standards and training.  

You can also consult things like the Occupational Safety and Health Administration Handbook.  

Regular training and reviews 

We’ve mentioned it before, but that’s because this is such a crucial component of compliance. Your employees are the face of your business. Their services represent your company.  

Create a high-quality training program for health, safety, and proper protocol. This will help ensure that every job is done right and that employees know how to do their jobs safely.  

4 Tips to Select the Best Insurance for Your Plumbing Business 

Insurance can be a decent investment, especially for small businesses. Choosing the right policy is crucial for both coverage and financial purposes. There are a lot of factors that will influence your decision, and it doesn’t need to be rushed.  

However, if you’re ready to start narrowing down your options, here are a few tips for finding the right insurance policy: 

Consider local insurance providers 

While many insurance plans can be filed and managed online, local insurance providers could be the better option. Local providers often have deals for small, local businesses.  

Additionally, these insurance providers are your community members. If and when something happens, they’ll likely be more helpful and have your back. Getting to know your insurance agent can be tricky, so knowing them face-to-face can make it an easier relationship.  

Evaluating financial ability 

The investment in insurance will impact what type of policy you choose. Whether your business is thriving or just starting up, it will add a significant bill to your overhead.  

Evaluate your financial situation. Create a spreadsheet with all of your monthly expenses and your revenue. Weigh the risks of a cheaper policy versus full coverage. Insurance shouldn’t break the bank for a small business.  

Consider the size of your business 

The size of your business will encompass both the number of employees and the capacity of jobs. How often are you being hired? How big or small are these jobs?  

If your company doesn’t have a big payroll and is focusing primarily on simple jobs, a simple insurance policy could be fine. The more complex jobs your company takes on, the higher the risk. The same goes for the amount of employees you have in the field.  

Connect with local businesses 

Community makes a great sounding board. Reach out to other plumbing businesses, contractors, and home service providers in the area. Ask them what policies and companies they use.  

This is a good way to gather intel and stories of how these policies have been used. Knowing what is effective and what isn’t will help you evaluate what policy is best.