Running an HVAC business means a lot more than installing air conditioners and repairing furnaces. Every day, HVAC contractors are driving service vehicles, carrying thousands of dollars in tools and equipment, working inside customers’ homes and businesses, and sending employees onto job sites.
Each one of those activities creates a different insurance exposure.
One of the biggest mistakes I see contractors make is assuming that having general liability insurance means the entire business is protected. General liability is important, but it is only one piece of an HVAC contractor’s insurance program.
For most HVAC companies, there are three major areas that deserve special attention: tools, trucks, and liability.
1. Are Your HVAC Tools and Equipment Actually Covered?
Think about what is inside the average HVAC service truck.
Recovery machines, vacuum pumps, refrigerant tools, meters, drills, saws, ladders, diagnostic equipment, hand tools, and other specialized equipment can add up quickly.
Now imagine walking outside one morning and discovering that someone broke into your truck overnight and stole $15,000 worth of equipment.
Would your insurance cover it?
That depends entirely on how your policy is written.
Inland Marine Coverage for HVAC Tools
HVAC contractors should consider inland marine coverage, sometimes referred to as contractors equipment or tools and equipment coverage.
This coverage is designed to protect equipment that moves from location to location with your business.
That distinction is important because business property coverage may be designed primarily for property located at your business premises. HVAC contractors rarely leave all of their equipment sitting inside an office or shop. Your tools travel with you.
When reviewing inland marine coverage, don’t just ask whether you have it. Look at:
- The total limit for tools and equipment
- Per-item limits
- Deductibles
- Coverage for employee-owned tools
- Coverage for rented or leased equipment
- Theft limitations or exclusions
- Where equipment can be stored overnight
You also need to keep your limits updated. If you started your business with $10,000 worth of equipment five years ago and now carry $40,000 worth of tools, your insurance needs to grow with your business.
2. Your HVAC Trucks Need the Right Commercial Auto Coverage
Your service vehicles are another major exposure.
Whether you operate one pickup truck or a fleet of vans, your vehicles may be transporting employees, tools, equipment, refrigerants, parts, and materials from one job to another every day.
That generally calls for a properly structured commercial auto insurance policy.
One area I pay particular attention to is liability limits.
An HVAC contractor with multiple vehicles on the road has significant automobile liability exposure. A serious accident involving one of your employees could potentially result in a claim far larger than the cost of the vehicle itself.
The value of the truck isn’t necessarily the biggest concern. The liability created by the truck can be.
Who Is Driving Your HVAC Vehicles?
As an HVAC company grows, this becomes even more important.
Your insurance agent should understand:
- Who regularly drives company vehicles
- Whether employees take vehicles home
- Whether employees use personal vehicles for company business
- Whether you rent vehicles
- Whether you borrow vehicles
- Who is allowed to drive company vehicles
- Your procedures for checking driving records
If employees occasionally use their own vehicles for business errands or service calls, you should also discuss hired and non-owned auto liability with your insurance agent.
Commercial auto shouldn’t simply be treated as insurance for the truck. It should be viewed as protection against the liability created when your business puts vehicles on the road.
3. General Liability Is the Foundation — But Know What It Does
General liability is usually one of the first policies an HVAC contractor purchases.
There is a good reason for that.
HVAC technicians work inside other people’s homes and businesses. A mistake can cause property damage or bodily injury.
Imagine an employee accidentally damaging a customer’s flooring while replacing an HVAC system. Or a customer trips over equipment your crew has placed in a walkway. Or work performed by your company contributes to property damage after the job has been completed.
These are the types of situations that make general liability coverage so important.
But contractors also need to understand that general liability does not cover every possible mistake your business can make.
Policy exclusions, completed operations provisions, subcontractor requirements, and the exact type of work your company performs can all affect coverage.
Your insurance agent needs to know what you actually do — not simply that you’re an “HVAC contractor.”
Installing residential air conditioners may present a different exposure than working on commercial refrigeration systems, boilers, industrial equipment, or large commercial HVAC systems.
4. What Happens If an HVAC Employee Gets Hurt?
HVAC work can involve ladders, electrical systems, heavy equipment, rooftops, confined spaces, extreme temperatures, and other hazards.
That makes workers’ compensation insurance another important part of an HVAC contractor’s insurance program.
Workers’ compensation can provide benefits for employees who suffer covered work-related injuries or illnesses, including medical expenses and a portion of lost wages, subject to the policy and applicable state law.
For an HVAC company, properly classifying employees is also important.
Don’t assume everyone working for the business has the same exposure. Office employees, salespeople, service technicians, installation crews, and other workers may need to be classified differently depending on their duties and the applicable workers’ compensation rules.
5. What About Expensive HVAC Equipment Before It Is Installed?
This is an exposure contractors sometimes overlook.
You may have expensive equipment sitting at your shop, inside a truck, at a customer’s property, or temporarily stored at a job site before installation.
Where is it covered?
The answer isn’t always the same.
Your insurance program should account for materials and equipment while they are being transported and while they are temporarily located away from your primary business location.
If you’re handling expensive commercial HVAC units, this exposure can become significant very quickly.
Ask specifically how your policy treats equipment and materials in transit, at temporary locations, and awaiting installation.
6. Do HVAC Contractors Need an Umbrella Policy?
As an HVAC business grows, a commercial umbrella can become increasingly important.
An umbrella can provide additional liability limits above certain underlying policies, depending on how the policy is structured.
For example, an HVAC contractor may have liability exposure coming from both its general liability policy and commercial auto policy. A serious auto accident or major liability claim could potentially exceed the limits carried on the underlying policy.
This is why I don’t like looking at insurance policies individually.
The better question is:
How do all of these policies work together if your HVAC company has a serious claim?
7. Don’t Forget About Subcontractors
If your HVAC business uses subcontractors, your insurance program needs to account for them.
Simply hiring someone as an independent contractor doesn’t automatically eliminate your exposure.
Before allowing a subcontractor onto a job, HVAC contractors should have procedures for collecting and reviewing certificates of insurance.
Depending on the work being performed and your insurance company’s requirements, you may need to verify general liability and workers’ compensation coverage and make sure required limits are being maintained.
Your subcontractor practices can also affect how your own insurance company underwrites your business.
8. Your Insurance Should Grow With Your HVAC Business
A policy that worked when you were a one-person HVAC operation may not work when you have five technicians, six vehicles, a shop, significant equipment, and hundreds of customers.
Growth changes your insurance exposure.
Some of the biggest changes you should discuss with your agent include adding employees, buying vehicles, purchasing expensive equipment, moving into a new building, using subcontractors, expanding into new types of HVAC work, or taking on larger commercial projects.
Insurance shouldn’t be something you purchase once and forget about.
It should change as your business changes.
What Insurance Should an HVAC Contractor Consider?
There isn’t one policy that covers everything an HVAC contractor does. Depending on the business, an HVAC insurance program may include:
- General Liability
- Commercial Auto
- Workers’ Compensation
- Inland Marine / Tools and Equipment
- Commercial Property
- Business Owners Policy (BOP)
- Hired and Non-Owned Auto
- Commercial Umbrella
- Cyber Liability
- Employment Practices Liability
- Bonds
The right combination depends on your employees, vehicles, equipment, revenue, subcontractor use, type of work, and where your company operates.
Build Your HVAC Insurance Around the Way You Actually Work
The goal shouldn’t be to simply get a certificate of insurance so you can start the next job.
Your insurance should protect the business you’ve spent years building.
At MBG Insurance, we work with trade contractors and can compare coverage through multiple insurance companies rather than being limited to a single carrier. If you own an HVAC company, you can learn more about our HVAC Contractor Insurance options here:
HVAC Contractor Insurance | MBG Insurance
Whether you have one service truck or multiple crews on the road, the important part is making sure your tools, vehicles, employees, and liability exposures are addressed together.
About the Author
Brandon Thompson is CEO and co-founder of MBG Insurance and works with business owners and contractors to structure commercial insurance programs around their actual operations and exposures. MBG Insurance is an independent insurance agency with offices in Springfield and Oak Grove, Missouri, and Bentonville, Arkansas.