HVAC insurance is required by technicians and small business owners in the heating, ventilation, and cooling construction industry. Most HVAC business owners are covered by general liability and workers compensation, although there are other recommended insurance types. Typical cost per coverage ranges from $300-$10k annually, with variable deductibles and coverage up to $1 million per claim.
Every HVAC business is going to need general liability insurance. Next Insurance can help protect your HVAC business with general liability coverage up to $1 million per claim. They’re also extremely fast at getting you covered, with the entire process being completed online in as quick as 10 minutes.
Types of HVAC Insurance
|Commercial General Liability||Required||$350 - $1,500|
|Workers Compensation||Required (if you have employees)||$300 - $10,000|
|Commercial Auto||Recommended||$1,000 - $4,000|
|Errors & Omissions||Recommended||$500 - $1,000|
|Umbrella Insurance||Recommended||$500 - $2,000|
Required HVAC Contractor Insurance
HVAC technicians don’t typically need a lot of insurance, but there are a couple of required policies that everyone in the industry should carry. Every HVAC technician and business owner is required to carry commercial general liability insurance, and those who own a business with employees will also be required to carry workers compensation coverage.
Commercial General Liability
Commercial general liability insurance covers potential liability for property damage, moisture damage, injuries caused by you or your employees, including any installation or repair problem. This is the most important insurance coverage for HVAC businesses because of the nature of the work.
For example, ventilation installation requires skill and precise placement to avoid leaks or moisture build ups, which could damage your customer’s home or business. General liability protects you from these mistakes and any potential damage you may cause, either to the HVAC units you’re installing or to the physical property where you’re working. These are the two biggest liability areas for the HVAC industry that general liability covers.
Commercial general liability coverage will typically cost you between $350 and $1,500 annually, depending on where you operate your business and who your clients are. Businesses working on large construction jobs – like hospitals – will typically be charged more than those working in residential homes.
Next Insurance offers commercial liability coverage for the HVAC industry with competitive rates thanks to the online nature of their business. You can sign up online or from your phone and be covered in as quick as 10 minutes.
If your HVAC business has employees, you’ll likely be required by law to have workers compensation coverage. This covers your business from liability related to accidents that happen to your employees while on the job, including any injuries they sustain because of those accidents. This includes coverage for the costs of medical bills related to these injuries or missed wages during a recovery period.
Workers compensation costs are going to vary due to the type of work you perform and how many employees you have. Annual premiums could range from $300 to $10,000 for coverage up to $1 million per claim. To learn more, you can read our ultimate guide on workers compensation.
Recommended HVAC Insurance
While most HVAC businesses will be completely covered by the two required policies above, others will need additional add-on policies. These coverages are typically for larger businesses that perform work on large commercial projects like hospitals or office buildings. However, some of these coverages like commercial auto or umbrella insurance could be used by any HVAC business.
Commercial auto covers vehicles owned by your business from damage. This will also cover you from any liability your employees create while driving company vehicles during work hours. It is usually required by law if the company actually owns and operates any vehicles. You can check the requirements in your state by looking at the map put together by the National Association of Insurance Commissioners.
Commercial auto insurance is going to vary in cost depending on how many vehicles you have and who you have driving them. Employees with bad driving records could cause your annual premium to increase. This insurance will typically cost between $1,000 – $5,000 annually, depending on how many vehicles you have and the nature of your work.
Errors and Omissions Insurance
Errors and omissions (E&O) insurance covers you from any liability related to your recommendations as a professional, and is sometimes referred to as professional liability insurance. For example, if your recommendations or analysis of an HVAC problem is wrong and your customer has resulting damage to their home or business, E&O insurance might protect you.
E&O insurance is a nice addition to your total insurance coverage on top of general liability and workers compensation if you’re working on projects in expensive facilities. This is due to the fact that these projects requiring you to make more decisions and judgment calls based on your expertise. E&O coverage will typically cost you between $500 – $1,000 depending on the nature of your work.
Umbrella insurance extends your other coverages and gives you more protection than $1 million per claim (or the maximum your policy allows). This is another insurance type that might make you feel more confident if you work on big commercial projects. You’ll want umbrella insurance if you’re working on large commercial projects where you think the $1 million general liability policy won’t be enough.
Umbrella insurance costs will vary depending on how much extra coverage you’re wanting. For a maximum of an extra $1 million per claim, you can get Umbrella coverage for $500 – $1,000 annually. Umbrella insurance is only offered for the coverages you have at the same insurance company you’re receiving it from. If you want to maximize the use of umbrella coverage then you’ll want to house all of your insurance policies at a single company.
HVAC Insurance Costs
Your HVAC contractor insurance costs are made up of your annual premium and your deductible. If you have a full blown HVAC insurance business owners policy (BOP), you could pay anywhere from $2,650-$18,500 in annual premiums, depending on your business. You’ll also have to cover the deductible on any claims.
Your deductible is a set cost that you must pay on any claims against your insurance policy before the policy pays out. There’s also a possibility for out of pocket costs if you have a claim that is above the maximum limits on your policy.
If you need multiple types of insurance coverage you could find a single insurance carrier who will cover all of your needs in a combined BOP. These are rare for construction related businesses though, due to the risk of your work. Typically, costs are more affordable in a BOP over buying them all individually.
Average Annual HVAC Insurance Costs
|Commercial General Liability||$350 - $1,500||$1,000|
|Workers Compensation||$300 - $10,000||None|
|Commercial Auto||$1,000 - $4,000||$500|
|Errors & Omissions||$500 - $1,000||Varies based on work you perform|
|Umbrella Insurance||$500 - $2,000||Varies based on coverage amount|
Example of HVAC Insurance Costs
An HVAC technician who owns his own business without any employees will likely only need general liability insurance. He might want to also get commercial auto if the vehicle he uses on the job is owned by his business. If he gets both, he’ll be paying a minimum of $1,350 annually in premiums ($350 general liability + $1k commercial auto), even if he never has to file a claim.
If the HVAC technician makes a mistake while in a residential client’s home and causes $50,000 in damage, he can make a claim against his insurance general liability policy to cover the costs. Assuming his policy has a claim limit $1 million and a deductible of $1,000, he would be required to pay the first $1,000 out of his own pocket and then the insurance policy will cover the remaining $49,000.
The deductible is good for the entire policy year. This means that if he has a second claim in the same year then he doesn’t have to pay the deductible he already paid during his first mistake earlier. However, if he has a second claim in a different area, like on his commercial auto policy, then he’ll have to pay a new deductible for that type of insurance when filing a claim.
Keep in mind that the more claims you must file against your insurance the higher chance your annual premium cost will go up in the next policy year.
Where to Get HVAC Insurance
Many insurance carriers specialize in offering general liability insurance to the HVAC industry, but there isn’t a specific product that only works for HVAC businesses. Most general liability insurance products will work for you, regardless of the insurance company you choose. We recommend finding a company that is experienced in approving policies for HVAC businesses, because those companies have more knowledge about your specific claims.
When you’re looking for HVAC contractor insurance, you can either hire a broker who will find a large insurance company to cover all of your needs with a BOP, or you can choose an individual company for each insurance type. Most HVAC technicians and small business owners won’t need a broker. Instead, you should find an experienced insurance company with affordable premiums for general liability insurance and/or workers comp.
Next Insurance is experienced at approving general liability coverage for HVAC businesses. You can get approved for up to $1 million per claim and they can get you covered in as quick as 10 minutes. To apply you’ll fill out an online form directly from your computer, tablet, or phone.
HVAC Insurance Application Process
The application process for HVAC insurance is similar, regardless of whether you’re applying directly with an insurance company or using a broker. You’ll still have to provide the same amount of information either way, but the process could take longer if you’re working with some of the larger insurance companies when compared to a broker.
The application process to get HVAC insurance involves these 4 steps:
1. Inquire About Insurance Coverage
The first thing you need to do is to ask for coverage. You’ll either reach out to a broker who can shop your business to various insurance companies as a potential customer, or you’ll likely need to reach out to multiple companies yourself to see if they’re interested in covering you and to price and/or coverage shop. This process involves inquiring to each insurance company about the specific insurance you need, including their deductibles and premiums.
One of the benefits of using a broker is not having to work directly with the insurance companies during the application process. Some insurance companies are difficult to work with when you’re trying to get your business approved, and it’s easier to have a broker work directly with them. However, this isn’t that important if you find the right insurance company that’s familiar with your industry.
Next Insurance is a great example of a business that focuses on helping small HVAC businesses get the general liability coverage they need. You can get approved for up to $1 million per claim and they can get you covered in as quick as 10 minutes.
2. Provide Necessary Information
Once you’ve found at least one insurance company that is interested in working with you, they’ll ask you for information about both you and your business. The information isn’t nearly as invasive as getting a business loan, but you’ll want to be prepared before you apply. Some information to have prepared ahead of time includes:
- Revenue booked
- Number of employees
- Driving records or driver’s license for everyone driving company vehicles
- Explanation of your business and nature of work
According to Maureen Brogie, Senior Advisor at InsuranceBee, you’ll need to provide the following information during the application process:
“Typically, to in order to apply you’ll need to answer all the usual questions about revenue, whether the business is run from home or an office, the number of years you’ve been in business, and the amount of work subcontracted. Things can get more complicated depending on the percentage of work that you subcontract, as some insurance carriers will not allow over 20%.”
3. Negotiate Insurance Terms
Based on the information you provide to the insurance company, you’ll then either be asked for more information, certain documentation, or you may need to negotiate the terms the insurance company is offering you. Brokers can do this better than you can as an individual with the larger insurance companies.
4. Sign Documentation
Once the insurance company has offered you something that works for your business, all that is left is to sign the documentation. Once you do you’ll be covered and ready to use your insurance as needed. Your first payment will typically be required up front before your coverage begins, but some insurance companies may agree to just bill you and start your coverage.
While brokers can be very helpful during the application process, they’re not necessary if you find the right insurance company. A good example is Next Insurance, which makes the process of applying for HVAC contractor insurance easy and quick. You can apply online and get covered for up to $1 million per claim in as quick as 10 minutes.
Benefits of HVAC Insurance
HVAC insurance isn’t just required for you to work on projects, but it carries many great benefits for your business, including protecting you from potential liability you can’t afford to pay. It can give you the peace of mind necessary to perform your work at the highest level, and make necessary recommendations on each project you’re working on without worrying about potential liability.
Some of the more specific benefits of carrying the proper HVAC insurance includes:
1. Protects You From Your Mistakes
When you’re dealing with ventilation in homes or large office buildings, there’s a lot of risk involved. One big mistake could create a leak or water damage that could cost thousands of dollars to fix. You don’t want your business to be on the hook for repairs if you happen to make one of these mistakes. Having the right insurance coverage will protect you from that liability and give you a peace of mind in operating your business.
2. Helps You Get Larger Projects
If you perform work on large commercial projects, HVAC insurance can help you get awarded more work. Many of these project managers won’t even look at you if you don’t have proof of insurance or if you don’t have enough coverage for their project.
The larger projects you work on the more insurance coverage you may need. If you’re not sure how much coverage you need then you should speak to an insurance company or broker who’s experienced with HVAC projects.
3. Gives You Confidence to Make Recommendations
Many small businesses become fearful to give customers recommendations as a professional unless they’re 100% certain of the result. Having E&O insurance lightens this burden a little bit because you’re covered if your recommendation is wrong for any liability you may cause. HVAC insurance can provide you the confidence to give customers feedback and recommendations without worrying about the downside, which could create referrals or repeat customers for additional work.
Protects You From Employee Mistakes
Once your business gets large enough, it becomes difficult to complete all of the work on your own and you’ll need to hire employees. It’s impossible to be with all of your employees all the time. One of them could make a mistake that could create the same liability for your business if you made the mistake yourself.
Your employees won’t typically have the same experience as you so they’re more likely to make a mistake, which could cost you more money then you expect. It’s important to have HVAC insurance to protect your business from these mistakes and to give you the confidence you need to grow your business by taking on more projects.
Example of How HVAC Insurance Can Save You Money
Let’s look at an example of how mistakes can cost you money if you’re not covered by HVAC insurance. For this example, we’ll assume you have an employee who is working on a project in a large office building. During installation, your employee mistakenly installs the draining system for the main air conditioner.
Over a small period of time, the waste water builds up and freezes in a pipe, which bursts and creates water damage inside the building. Not only did the HVAC system fail, but half of one of the floors in the office building takes on water and needs to be repaired. The total costs of this damage include fixing the water damage and installing a new HVAC system with a new duct system will cost nearly $100k.
If you don’t have HVAC insurance, then this will all come out of your business’s pocket. However, with insurance it will only cost you whatever your deductible is, which could be around $1,000. That’s a significant amount of savings to a small HVAC business, and should be more than worth the annual premium costs you’ll have to pay for coverage.
HVAC insurance is important to protect you and your business from financial loss due to either a mistake or an unexpected event out of your control. Most HVAC business owners will be covered by having general liability and workers compensation coverage, if you have employees. Those working on large projects might find others necessary to be fully protected financially.
Next Insurance offers general liability coverage to HVAC businesses. You can get a policy with a $1 million per claim limit – which many commercial jobs will require – at competitive premiums. You can apply from your phone or computer and be covered in as quick as 10 minutes.