TX Liability Insurance

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  • Bonded vs. Insured in Texas: What’s the Difference for Contractors?

    Bonded vs. Insured in Texas: What’s the Difference for Contractors?

    Insurance protects you. A bond protects the other guy. That’s the whole difference, and it’s the one most contractors get backwards. General liability pays for damage your work causes to someone else and defends you when you’re sued. A surety bond is a guarantee to a city, a license board or a project owner that you’ll do what you agreed to, and if you don’t, the surety pays them and then comes to you for the money. “Bonded and insured” means you have both, and in Texas you’ll need both to pull permits and win most commercial work.

    What a surety bond actually is

    A bond has three parties. The principal is you, the contractor. The obligee is whoever requires the bond: a city permit office, the state license board, a project owner. The surety is the company that backs the guarantee. If you fail to perform, pay your subs, or comply with the code the bond covers, the obligee makes a claim, the surety pays, and you reimburse the surety. That last step is what makes a bond different from insurance: you are expected to pay the loss back. A bond is closer to a line of credit than to a policy, which is why approval is based on your credit.

    Bonds Texas contractors actually run into

    • License and permit bonds. Many Texas cities require a bond before issuing building, electrical, plumbing, mechanical or right-of-way permits. Amounts are typically $5,000 to $25,000 and the premium is a small percentage, usually issued in a day.
    • Bid bonds. Submitted with a bid on a public or large private project. They guarantee you’ll sign the contract and provide performance and payment bonds if you win.
    • Performance bonds. Guarantee you’ll complete the project per the contract. Required on most public work above a threshold and on many large commercial jobs.
    • Payment bonds. Guarantee your subcontractors and suppliers get paid. On Texas public projects, payment and performance bonds are required by statute above set contract amounts.

    What insurance covers that a bond doesn’t

    A bond will not pay if your crew damages a customer’s property, if a passerby trips over your materials, if an employee is hurt, or if your truck hits someone. Those are general liability, workers’ comp and commercial auto. A GC’s certificate requirements will list those policies; a bond requirement, if there is one, is usually a separate line in the bid documents.

    How bonds are priced and approved

    License and permit bonds are cheap and fast. Bid, performance and payment bonds depend on the contract size. For projects under $750,000 we use a one-page application and a soft credit check that doesn’t affect your score; approval can be same day. Larger projects require financial statements and a longer review. Premium is a percentage of the bond amount, generally in the low single digits, and scales down as the contract grows. Because we hold power of attorney for the sureties we represent, we produce the bond documents in our office instead of waiting on the surety to mail them.

    “I’m bonded” on a truck door

    When a contractor advertises “bonded,” they usually mean a license or permit bond, which protects the city, not the homeowner. It’s not a guarantee of quality work to the customer, and it’s not a substitute for liability insurance. If a customer asks whether you’re bonded and insured, the honest answer is to show the certificate of insurance and, if you hold one, the bond. We issue both from one application.

    Next step

    If a city, a license board or a bid package is asking for a bond, start on the Texas surety bonds page. Tell us who’s requiring it and the amount, and we’ll tell you the premium and how fast we can issue it. Most license and permit bonds go out the same day.

    Sources: Texas Department of Licensing and Regulation; Texas Department of Insurance.

  • Do I Need Commercial Auto Insurance If I Use My Personal Truck for Work in Texas?

    Do I Need Commercial Auto Insurance If I Use My Personal Truck for Work in Texas?

    If the truck is doing the work, you almost certainly need commercial auto. Personal auto policies in Texas are written for commuting and errands. Most exclude or sharply limit coverage once the vehicle is used “in the business of” the insured: hauling tools and materials, towing a trailer, carrying a crew, driving between jobsites all day. The exclusion doesn’t show up when you buy the policy. It shows up when you file a claim and the adjuster asks what you were doing at the time of the accident.

    Where the line is

    There’s no single statute that says “commercial use starts here,” which is why people get it wrong. The practical test carriers apply:

    • Who owns the vehicle? If it’s titled to your LLC or corporation, a personal policy won’t cover it at all. It needs a commercial policy.
    • What’s it used for? Occasionally driving to a customer’s house in your own name is usually fine on a personal policy. Daily use carrying ladders, pipe, a compressor or a crew is business use.
    • Is there a trailer? Towing a work trailer is one of the clearest signals of commercial use, and many personal policies limit trailer liability.
    • Is it lettered? A logo on the door isn’t the legal test, but it tells an adjuster exactly what the truck is for.

    What happens if you’re wrong

    Worst case, the claim is denied and you’re personally on the hook for the other driver’s injuries and damage. Texas minimum liability limits are 30/60/25 ($30,000 per person, $60,000 per accident for injury, $25,000 property damage). A truck full of tools hitting a newer vehicle on I-35 can exceed that in the first hour. A commercial policy is normally written at a $1,000,000 combined single limit, which is also what general contractors, leasing companies and lenders ask to see on a certificate.

    What commercial auto changes

    • Higher limits. $1M CSL is standard for contractors; some GC contracts require it.
    • Business use is covered, not excluded. Tools, materials, trailers, crews.
    • Hired and non-owned auto. This extends liability coverage to employees driving their own vehicles for the business, which is the gap we fix most often. If a helper drives his own truck to pick up material and causes an accident, your business can be sued. Hired and non-owned coverage responds.
    • Certificates. A GC asking for an auto certificate wants to see a commercial policy; a personal auto ID card won’t satisfy the requirement.

    What it costs compared to personal

    Commercial auto for a single work truck in Texas usually runs more than a personal policy on the same vehicle, sometimes meaningfully more, because the limits are higher and the use is heavier. The gap narrows when you bundle it with general liability and workers’ comp with the same carrier, and it narrows further with a clean driving record and a newer vehicle. For fleets, per-vehicle cost usually drops as you add units.

    The owner-operator shortcut that doesn’t work

    Some contractors keep the truck in their own name and on a personal policy to save money, reasoning that “I’m the only one who drives it.” The carrier doesn’t care who drives it; it cares what it’s used for. If the truck is on a jobsite with a bed full of tools when the accident happens, the business-use question is going to be asked. The savings aren’t worth the exposure.

    Next step

    Tell us how many vehicles, who drives them, and whether you tow. We’ll quote Texas commercial auto insurance across our carriers, include hired and non-owned coverage, and issue the auto certificate the same day coverage is bound.

    Source: Texas Department of Insurance, automobile insurance guide.

  • How Much Does General Liability Insurance Cost for a Contractor in Texas?

    How Much Does General Liability Insurance Cost for a Contractor in Texas?

    Most Texas trade contractors pay somewhere between a few hundred and a few thousand dollars a year for general liability, and the spread is that wide because the price is driven by your trade, your revenue and your claims history, not by a rate card. A one-man handyman with $80,000 in revenue and a roofing crew doing $2 million are both “contractors,” and their general liability premiums can differ by a factor of twenty. Here’s what actually moves the number, and how to get a real one.

    The four things that set your premium

    • Trade (class code). Carriers rate each trade by how often it causes third-party injury or property damage. Painting, handyman and low-voltage work sit at the cheap end. Plumbing, electrical and HVAC sit in the middle. Roofing, framing, demolition, excavation and anything structural sit at the top, and some carriers won’t write them at all.
    • Revenue (or payroll). Most contractor GL policies are rated on gross receipts: more work, more exposure, more premium. Some carriers use payroll instead. Either way, the number you give at quote time is an estimate, and the policy is audited at the end of the year against your real numbers.
    • Limits. The standard Texas contractor policy is $1,000,000 per occurrence and $2,000,000 aggregate. Going from $500,000 to $1,000,000 costs less than people expect; going above $1M is usually done with an umbrella rather than by raising the base policy.
    • Claims history and years in business. A clean five-year record earns credits. A recent claim, or a brand-new business with no record, pays more until it proves itself.

    Rough ranges for Texas trades

    These are the ranges we see most often for small-to-mid contractors at $1M/$2M limits. They’re a sanity check, not a quote.

    • Handyman, painting, cleaning, low-voltage: roughly $400 to $1,200 a year.
    • Plumbing, electrical, HVAC, landscaping: roughly $800 to $3,000 a year.
    • Remodeling, carpentry, concrete, masonry: roughly $1,500 to $5,000 a year.
    • Roofing, framing, demolition, excavation: roughly $3,000 to $15,000+ a year, and strongly dependent on which carriers will write the trade.

    If a quote you’re holding is wildly outside these ranges in either direction, something is off: either the class code is wrong, the revenue estimate is wrong, or the policy has exclusions you should read before you sign.

    Why a cheap quote can cost you the job

    General liability policies for contractors are not interchangeable. The cheap one often comes with exclusions that a general contractor’s certificate requirements will reject: no coverage for work performed by subcontractors, no completed-operations coverage, a roofing exclusion on a “general contractor” policy, or no ability to add the GC as an additional insured with primary and non-contributory wording. You find out when the GC bounces your certificate and you’re scrambling the week the job starts. A policy that costs $300 more and gets the certificate accepted is the cheaper policy.

    What’s not included in general liability

    People assume GL covers everything. It covers third-party bodily injury and property damage and your legal defense. It does not cover your employees (that’s workers’ comp), your trucks (commercial auto), your own tools (tools and equipment), or faulty workmanship on the work itself. If a GC’s requirements list all of those, that’s normal, and it’s why most contractors end up with three or four policies from one agency rather than one.

    How to get a real number in minutes

    You need three things ready: your trade, your estimated annual revenue, and whether you use subcontractors. With those, we send the risk to the carriers that actually want your class of work in Texas, line the options up side by side, and call you with the real premium and what the certificate will say. Start on the Texas general liability insurance page; name and phone is enough to begin, and the certificate goes out the same day coverage is bound.

    Source: Texas Department of Insurance.

  • Does Texas Require Workers Comp?

    Does Texas Require Workers Comp?

    Short answer: no. Texas is the only state that lets most private employers opt out of workers’ compensation. But if you’re a contractor, the state’s rule barely matters, because the general contractors, project owners and commercial customers who hire you will require it before your crew sets foot on site. In practice, Texas contractors carry workers’ comp to win work, not because Austin makes them.

    What Texas law actually says

    Under the Texas Workers’ Compensation Act, private employers can choose to be a “subscriber” (they carry a workers’ comp policy) or a “non-subscriber” (they don’t). Non-subscribers must file an annual notice with the Texas Department of Insurance, Division of Workers’ Compensation, and post a notice to employees. There are exceptions where coverage is mandatory: public employers, contractors on government construction projects, and certain motor carriers and other regulated businesses.

    So a private plumbing, roofing or electrical contractor working on private jobs is legally allowed to go without it. That’s the part everyone has heard. What they haven’t heard is what it costs them.

    Why contractors carry it anyway

    Three reasons, in order of how often they come up in our office:

    • General contractors require it. Nearly every GC in Texas writes a comp requirement into the subcontract and asks for a certificate of insurance before you start. No certificate, no job. This is the number one reason a contractor calls us about workers’ comp.
    • Non-subscribers lose their legal defenses. If you opt out and an employee is hurt, they can sue you for negligence, and Texas law strips you of the common-law defenses an employer would normally have (contributory negligence, assumption of risk, fellow-servant rule). One serious injury can be a six- or seven-figure claim with no policy behind you.
    • Government and commercial work demands it. Any state, county, city or school-district project requires coverage for every contractor and subcontractor on the job. Many large commercial owners follow the same rule.

    “I’m an LLC with no employees. Do I need it?”

    If you truly have no employees and you’re not required by a contract, no. But two things trip people up. First, the GC may still require a comp certificate even for an owner-only sub, because their own policy or their customer demands it; some carriers will write an owner-only policy for exactly this situation. Second, the moment you hire your first helper, even part time, you have an employee and the exposure above applies. If you’re about to hire, the cleanest path is to bundle workers’ comp with payroll so the premium is calculated from real wages each pay period, with nothing big due up front. We cover that on our Texas workers’ compensation insurance page.

    What it costs in Texas

    Workers’ comp premium is based on your payroll and the class code for the work. Roofing, framing and anything at height sit at the expensive end; electrical, plumbing and HVAC sit lower; office staff are cheap. Rates are quoted per $100 of payroll and vary widely by carrier, which is why shopping it across many carriers matters more for comp than for almost any other policy. A small trade crew with $150,000 in payroll might see anything from a few thousand dollars a year to well into five figures depending on the trade and the carrier’s appetite.

    Two ways to keep the number sane: make sure every employee is assigned to the right class code (a helper doing cleanup shouldn’t be rated as a roofer), and use pay-as-you-go so you’re never paying an estimate up front and never getting a surprise bill at the year-end audit.

    Subcontractors and the 1099 question

    If you hire subs who don’t carry their own comp, your carrier can charge you for their payroll at audit, because in a claim they may be treated as your employees. The fix is to collect a certificate of insurance from every sub before they start and keep it on file. If a sub is owner-only with no coverage, talk to us; there are ways to structure it so you’re not carrying their exposure.

    What to do next

    If a GC is asking for a comp certificate, or you’re about to hire, send us your name, phone and trade on the workers’ comp page and we’ll quote it across our carriers and tell you what the certificate will look like. If a job needs it by Monday, say so; same-day certificates are normal for us.

    Source: Texas Department of Insurance, Division of Workers’ Compensation, employer resources.