An overview of the most important insurance policies for tradespeople. (Photo: © Jozef Polc/123RF.com)
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Many tradespeople feel overwhelmed by the question: What insurance do they really need for their business? An overview of the most important types of insurance can help.
Generally speaking, the most important insurance policies are those that threaten the very existence of a business. These are primarily claims for damages, because statutory liability is unlimited.
Next, it's time to cover risks that could result in enormously expensive losses. The probability of occurrence is secondary. Anyone who still has money left can also cover less threatening risks.
Where there's sawing, there's shavings. Everyone makes mistakes sometimes. Business liability insurance at least protects against the financial consequences. For example, if customers, neighbors, or others hold the business liable for property damage, an injury, or loss of income. That's why it's an absolute must. Liability insurance first examines whether the claims are justified. If not, it acts like integrated legal expenses insurance and ensures that you don't have to pay.
Legitimate personal injury, property damage, and financial loss incurred by third parties in the course of business activities are compensated. The insured amount represents the upper limit of reimbursement. However, the business owner's liability is unlimited. Unfortunately, this discrepancy cannot be eliminated. Therefore, do not skimp on the amount of the insured amount. Make sure to keep it up to date. It is advisable to have precautionary coverage for potential new risks, as well as continued liability for damages that may arise after the business is closed.
The classic liability case is when a tradesman or an employee damages, for example, the parquet floor during repairs in the customer's home. In this case, liability insurance covers the damage (up to the amount insured for property damage).
Operations management
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Operations management
If environmental damage is caused by a business's activities, the business owner may be held liable as the party responsible. German environmental regulations meet very high standards. Therefore, anyone who works with substances (such as chemicals or heating oil) that have the potential to cause environmental damage through their exposure to soil, air, or water should definitely take out supplemental coverage to their business liability insurance.
Environmental damage is usually not covered under standard business liability policies. While this costs extra, the consequences could be devastating. Costs for disposal and renaturation are included.
After welding work at a chemical plant, a chemical leaks from the pipeline through a leaky seam and seeps into a nearby stream. This causes fish kills at the neighboring trout farm.
Liability for defective products is no less strict than that for environmental damage. Incidentally, it applies throughout the EU regardless of whether the manufacturer is at fault (strict liability). According to the Product Liability Act, a product is already "defective" if, for example, the instructions for use are misleading. It is particularly dangerous if a defective product ends up in the USA with a tourist, for example, where even stricter compensation rules apply.
Therefore, if in doubt, also look for coverage for so-called "indirect exports." Product liability is often included in standard business liability insurance. Asking for clarification will help!
A butcher delivers buffets. The next day, guests suffer from severe gastrointestinal problems. The health department quickly discovers salmonella in the dessert during its investigation. It was apparently caused by the raw eggs. The insurance company covers the personal injury and property damage.
Companies are hacked every day. It's not always the individual perpetrator in a hoodie. Sometimes it's vengeful employees or organized gangs demanding ransom for data recovery. The Federal Office for Information Security (BSI) claims that anyone who hasn't been the target of a hacker attack just hasn't noticed. The methods are becoming increasingly brazen. Insurers are therefore working hard on so-called cyber policies.
Since new risks are difficult to calculate, they approach them with caution. This is why they are initially quite expensive. However, the price-performance ratio steadily improves. It's definitely worth getting a quote. Sometimes attacks on your own IT infrastructure are even covered by financial loss or fidelity insurance, which also protects against dishonest employees.
The long-time accountant has run into personal trouble. No one suspects it, and no one notices that for years she's been adding a few cents to every invoice and diverting it to her own account. Over the years, this has added up to a considerable financial loss, which a suitable insurance policy would cover.
The business premises are often the most important asset of a trades business. They should be protected, at a minimum, against damage caused by fire, lightning, hail, storms (wind force 8 and above), and tap water. It is advisable to take out extended natural hazard coverage, which also covers earthquakes, floods, and landslides.
Separate fire insurance is recommended for shell construction. Construction contractors also have construction performance insurance to protect them against unforeseen damage during construction, such as vandalism, construction and material defects, or flooding.
A tornado swirls across the factory premises, leaving a trail of destruction. To ensure you escape with "only" a scare, the building insurance covers cleanup and reconstruction costs.
This is essentially the contents insurance for the company. It covers burglary, robbery, fire, lightning, explosions, storms (wind force 8 and above), hail, tap water, and vandalism. The inventory is insured up to the insured amount, on the entire company premises, on the construction site, or at the assembly site – provided it is properly secured.
Necessary cleanup, demolition, and firefighting costs, including damage caused by extinguishing water, are also reimbursed. Inventory can also be insured against natural hazards such as earthquakes, floods, and landslides. This costs a bit more, but is worth the money in almost all regions. Anyone who needs expensive machinery should also consider purchasing machinery insurance.
The Müller construction company goes on its well-deserved winter vacation on December 22nd. The heating is turned off, the warehouse is locked. But the main water valve is forgotten. While the Müllers are enjoying the New Year's on a ski vacation, it freezes so bitterly at home that the pipes burst. Upon seeing the damage, the Müllers were suddenly ready for vacation again. Fortunately, their insurance was up to date.
Often overlooked, yet relevant: the shutdown of a business following fire or storm damage. This can cost skilled trades businesses more than the original property damage. During such forced downtimes, wages, loan interest, and other fixed costs must continue to be paid. However, no more work is being done, and therefore no income is being earned. This is where business interruption insurance comes in. It covers the costs and lost profits – for up to one year.
It's just a shame if the downtime is forced by damage to a supplier. This is a delicate matter and usually not insurable. Business interruption insurance usually follows your own contents insurance and therefore only covers the consequences resulting from the damage covered by it.
After a fire in the warehouse of a wood processing company, the material burned, and what wasn't consumed by the flames was consumed by the firefighting water. The company has been forced to close. The insurance company will reimburse costs and profits until business operations resume.
Motor vehicle liability insurance is mandatory in Germany for anyone who owns a vehicle, whether it's a sports convertible or a van. This is intended to protect accident victims. Motor vehicle liability insurance covers the damages incurred by the other party in an accident. Damage to your own vehicle can be covered by comprehensive or partial comprehensive insurance.
Partial insurance covers theft, fire, stone chips, and hail. Fully comprehensive insurance also covers damage to your own vehicle following an accident for which you are at fault.
Tip: The more vehicles in your fleet, the greater your negotiating leverage with the insurance company. A good claims history will give you even more leverage with fleet insurance (for three or more vehicles).
Schmitt's commercial cleaning company operates ten small cars and three station wagons. One day, the company experiences a double whammy: A brand-new Smart is stolen from a customer's door. Another Smart is deliberately scratched in the parking lot. Both damages would have been covered under the fully comprehensive insurance. Partial comprehensive insurance would have only covered the theft, not the deliberate damage.
Transport insurance offers a comprehensive range of coverage for your fleet. The coverage can be tailored to suit your needs. This includes, first of all, insurance for stolen or destroyed goods (goods insurance). Furthermore, the means of transport can be covered, i.e., comprehensive insurance (see "Fleet"). Freight forwarders can also use this to protect their transport liability.
Another option is for stored goods. Tools carried along are particularly valuable for tradespeople, and are covered by car contents insurance as part of the transport insurance. Transport insurance is generally designed as all-risk coverage, meaning the goods or vehicles are insured against all risks not expressly excluded in the policy.
In a traffic accident, goods and tools are damaged to the point of being unusable. Transport insurance covers both.
A legal dispute not only costs money, but also stress. It's convenient to have a lawyer handle it for you, but they're expensive. Legal expenses insurance covers not only legal fees but also those for expert witnesses and court appearances. However, comprehensive legal expenses policies aren't cheap. Company legal expenses policies often combine professional, personal, and traffic legal protection. These can be individually expanded to include, for example, landlord/tenant legal protection and criminal legal protection.
A painting company is supposed to beautify the walls in a customer's bathroom with waterproof paint. The customer complains that moisture seeps into the masonry after showering and keeps part of the invoice. Thanks to an expensive expert report and his legal expenses insurance, the master painter is able to sue for the remaining amount. Or: Things aren't going so well at the moment. You have to fire an employee. The employee sues and takes you to labor court.
Trust is good, but security is better. Surety bond insurance offers an alternative to bank guarantees. It can be tailored precisely to your security requirements. Unlike surety bonds or security deposits, it does not burden your credit limit. Existing bank guarantees can also be replaced in this way to protect your credit line.
The Schöne painting company is delighted to have secured a major new contract. However, the customer is demanding a guarantee for defect-free completion. The bank wants to offset the guarantee against the existing credit line. This would, in case of doubt, negatively impact Schöne's liquidity. With surety insurance, the master craftsman maintains financial flexibility while also protecting himself against any potential customer claims.
No matter how well the company is insured, it won't help if the manager falls ill or is suddenly unavailable for some other reason. To keep the money flowing and not jeopardize the company's existence, precautions must be taken early on.
The insurance market offers numerous options for this. The most important is comprehensive disability coverage through occupational disability insurance or at least incapacity insurance and accident insurance, as well as health and long-term care insurance, including daily sickness benefit insurance.
Relatives and heirs can be provided for in the event of death through term life insurance.
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