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Whether you design and install new HVAC systems or service existing ones, you need insurance to cover your equipment and protect against liability claims if something goes wrong on a job.

Heating, ventilation and air-conditioning (HVAC) contractors are in high demand, especially when there’s a cold snap or a heat wave. You’re a hero when you can fix someone’s air conditioner on a 90-degree day. But there are downsides, too. You could get hurt while repairing a unit, one of your employees could damage a customer’s property, or you could be sued if a system you installed doesn’t perform as promised.

Luckily, there is insurance to address these risks, allowing you to focus on what you do best — meeting the needs of your customers. Let’s look at some of the basic types of insurance that every HVAC contractor should have.


Getting started


At the outset, make sure you have your licensing and bonding requirements in order. You’re probably already familiar with the requirements in your state, but take the time to review what’s necessary to operate in your area.

In addition, review your certifications and those of your employees. The Environmental Protection Agency requires all HVAC technicians who work with refrigerants to hold a Section 608 certification. There are several industry certifications you can earn as well.

Getting licensed and certified is important, not just for satisfying the law but for protecting against liability exposure and ensuring your business operates in a safe manner — all of which can help keep your insurance premiums down. In your line of business, safety matters and should always be a top priority.


Commercial general liability insurance


Accidents do happen, however, which is why you need commercial general liability (CGL) insurance. CGL protects you from claims resulting from bodily injury, personal injury or property damage that occur at your business or on a job site.

For example, if you slip and drop a heavy air handler down the stairs of a customer’s house, your CGL policy would cover you for damage claims. If a child gets hurt playing with unattended equipment, you’d be covered. Or if you’re sued for slander or using someone’s marketing idea, you’d be covered.

CGL insurance helps pay for medical expenses, attorney fees, and judgments and settlements. Policies have limits, usually set at $1 million or more, on how much they’ll pay each year. An insurance professional can discuss your options and recommend a policy that’s best for your particular business.

Many customers will request proof that you have CGL coverage. And if you’re a subcontractor on a construction project, your contract will likely require it as well. Your bank may require it, too, before giving you a loan or extending a line of credit. It’s a core coverage that you need in order to stay in business and avoid costly legal bills.

Keep in mind that CGL insurance doesn’t cover your employees if they are injured (they would be covered by workers’ compensation insurance). It doesn’t cover professional or employment practices liability, either (these coverages can be purchased separately).


Auto and property insurance


Without a truck or van to make service calls, you wouldn’t last long as an HVAC contractor. Make sure your vehicles are adequately insured by a commercial auto policy. Your personal policy won’t be enough. Be sure the limits are set high enough and you have coverage for underinsured/uninsured motorists. And make sure the employees who drive your vehicles are named on the policy.

You’ll also need commercial property insurance to protect your business property, including your equipment, tools and other assets. Property insurance usually covers just the property at your business address. For equipment, tools and material you transport to a customer’s location, you may need an inland marine policy. These policies are designed to cover property in transit and used at a job site.

An insurance professional can help you select the right type of auto and property coverage.


Bundled policies can save you money


A business owners policy (BOP) has the insurance coverages most small businesses need bundled into one policy. BOPs typically include CGL, commercial property and business income insurance. Business income insurance replaces income lost due to fires, natural disasters and certain other perils.

With BOPs, you don’t have to shop for several policies, and the premium is usually lower. They’re a good starting point for small businesses, but they may not have the exact coverage or limits you need. For example, BOPs usually don’t include auto, professional liability or workers’ compensation coverage.

Most BOPs follow a set form, but some have the flexibility of adding coverage. A better option might be a commercial package policy (or CPP), which allows you to bundle the coverage you want and leave out what you don’t need. An insurance professional can help you decide which is the best approach to take.


Workers’ compensation insurance


Workers’ compensation insurance is required in nearly every state if you have employees on your payroll. If you’re a sole proprietor or just have one or two employees, you may be exempt in your state. Check your state’s requirements.

You can usually purchase workers’ comp insurance from a standard carrier. Employers who have been declined because of high risk or too many claims can buy coverage from their state’s assigned risk pool.
There are steps you can take to keep your workers’ comp claims and premiums down. Follow industry best practices for safety. You should at the very least follow Occupational Safety and Health Administration requirements that pertain to HVAC service and installation. Getting industry certifications is a good way to ensure that you and your employees are familiar with the latest standards and practices.


Professional liability insurance


Depending on the services you offer your customers, you may also need to purchase professional liability insurance. If you design HVAC systems or give engineering advice, you could be held liable for mistakes or negligence that result(s) in damages or injuries.

Suppose you design and install an HVAC system for a new apartment building. Later, it’s determined you miscalculated the required load for each floor, and the tenants aren’t able to properly cool or heat their units. The owner sues you for the cost of fixing the problem, plus lost income due to tenant departures.

Professional liability insurance covers these types of errors and omissions and helps pay your legal expenses and settlement costs up to the limits in your policy.

In summary, you’ll need a range of insurance coverages to protect your HVAC business properly. Contact V.F. McNeil Insurance today to learn more about tailored business insurance for the HVAC industry.

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