HVAC Business Insurance: What You Need To Know

May 18, 2020

HVAC contractors face a unique risk in the construction industry. Nearly every building in the United States has heat and air, and operations can range from small residential units to large industrial facilities with demanding needs.

Mistakes happen. Even if you do everything perfectly, you can still get involved in a lawsuit or be accused of poor workmanship.

And that's where HVAC business insurance comes in – to pay for these events so your business isn't negatively impacted.

Here is what you need to know:

Common HVAC Insurance Coverages

General Liability

An essential part of an HVAC contractor's insurance program is General Liability. General Liability covers property damage or bodily injury that your business causes others during the scope of your HVAC contractor operations.

This is an essential coverage that every contractor should have. It’s very likely that your clients or general contractors already require that you have it.

While on your client's property, this will cover you, your employees, and clients for most accidents.

Products & Completed Operations

For most HVAC contractors, Products & Completed Operations coverage is likely included in your General Liability policy. There can be exceptions to that rule, so we listed it separately since it is one of the most important coverages an HVAC contractor can buy.

This covers damage (or allegations of damage) that resulted from your work after you completed the job, as opposed to General Liability, which covers you on the job.

This coverage is important because sometimes the work that you perform (or items you install) can malfunction after you leave and cause damage to your client's property.

For example, in many HVAC insurance claims that we see, Products & Completed Operations coverage pays for the resulting water damage due to condensation on a defective AC unit installation.

Many times, this type of problem can be blamed on the manufacturer. Regardless, you will want your client's property fixed and your HVAC company's reputation saved by having insurance take care of it. Additionally, you can never rely on the manufacturer to take responsibility for the problem.

Contractors Equipment & Installation Floater

As an HVAC contractor, you most likely have a large toolbox or a vehicle full of expensive and specialized tools that would need replacing if something happened. You might also have expensive items such as heating and air units or materials that you are delivering to the job site to get installed.

Property insurance for these items would fall under a contractor's Equipment and Installation Floater policy.

Although it is entirely optional, it is a low-cost policy that contractors use to offset the cost of lost tools or equipment.

Workers Compensation

Workers compensation is a coverage dictated by the state that you are doing business in. Each state may vary in how it handles workers compensation claims, but this coverage is not determined by the insurance company, even though the insurance company pays for the claim.

Generally, workers compensation pays for the medical bills of the injured worker and some of the lost wages they experience during their recovery.

There are usually limits, called Employers Liability, that employees can collect from if they pursue additional damages caused by a situation, such as an unsafe work environment.

Commercial Auto

Many HVAC contractors have work vans or trucks that they use at the job site to transport their equipment and tools. If the business owns the vehicle or an employee is driving it, you need a Commercial Auto Insurance policy.

Like a Personal Auto policy, a Commercial Auto Insurance policy covers liability due to auto accidents. This insurance policy lets you purchase insurance for the damage caused to your own vehicle.

For more information on the difference between Personal Auto Insurance and Commercial Auto Insurance, check out our insight: Commercial Vs. Personal Auto Insurance - What's The Difference?

Excess Liability

Excess Liability Insurance increases the limit of liability to each of its underlying policies.

For example, if your General Liability, Products & Completed Operations, Commercial Auto, and Workers Compensation all have limits of $1,000,000 and you purchase a $2,000,000 Excess Liability policy, you now have $3,000,000 in limits for each coverage.

The amount of excess you purchase is determined by how large your business is, the size of your projects, and the assets the business owns.

Summary

HVAC business insurance should include many different coverages, but ultimately, we suggest talking with an insurance professional about what exactly you need for the type of projects you are working on and the scope of your risk.

For additional information on what insurance contractors need in the construction industry, check out our insight, "A Guide To Contractor Insurance".

About The Author: Austin Landes, CIC

Austin is an experienced Commercial Risk Advisor specializing in property & casualty risk management for religious institutions, real estate, construction, and manufacturing.

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