How to Get HVAC Business Insurance? A Complete Guide

The increase in urbanization, the introduction of super energy-efficient HVAC systems, and government incentives have made the HVAC industry grow highly in recent years. 

Studies on the HVAC market project a compound annual growth rate of 6.6% from 2021 to 2026. So this means the HVAC industry is expected to grow, and it is high time you start your business in this industry. 

One of the necessities to get your HVAC business licensed is to get the right insurance cover. This is because the HVAC contractors perform different works in commercial and residential buildings, which involves many risky processes. 

The HVAC contractor insurance can protect you and your HVAC company from financial risks while performing the services. Otherwise, your business would be vulnerable to income loss or bankruptcy if an employee or a client sued against your service. 

So this article has highlighted the importance of having HVAC business insurance, its types, and insurance requirements for licensed contractors. Now without further ado, let’s get started.

A Guide to Get HVAC Business Insurance

Starting an HVAC business and running it successfully takes immense effort as a small mistake on your service can cost you a hefty price. So, insure your HVAC company and save yourself from unnecessary financial crises. Continue reading to choose solid insurance for your company.

Why is insurance for HVAC businesses crucial?

Not just an HVAC business, but any business requires insurance to handle the financial consequences caused due to a potential mishap. The right insurance coverage can save a business from losses. 

With that said, HVAC business owners face the risk of injuries and other damages every day, which is unavoidable in this type of business. So HVAC contractor insurance and bonds can help protect your business and your employees from losses. 

Apart from this, HVAC insurance can help the business in many other ways, such as:

1. Get high-paying bids

In most cases, premium clients prefer to hire HVAC businesses that are insured and licensed. This is why some even seek your certificate of insurance before closing a deal. If the HVAC contractor insurance covers general liability and seems safe, it attracts more clients.

2. Give recommendations more confidently

Some professionals hesitate to recommend and go with the clients’ needs fearing what would happen if things don’t work and cause a loss. But with professional liability insurance covering the HVAC businesses’ losses due to mishaps, HVAC contractors can confidently give recommendations.

Types of HVAC insurance

Business owners must be aware of various types of insurance and consider the relevant ones for their HVAC business. 

Some popular HVAC business insurance policies include

1. Commercial general liability insurance

The typical commercial general liability insurance policy is an important HVAC insurance that a business owner must purchase. 

This insurance helps you in protecting from claims of bodily injury or property damage for which your business may be responsible. Depending on the damage done to the client’s property, the claims from the client/house owner can become expensive. 

So to avoid these hefty billings, ensure to get Commercial General Liability Insurance. Also, some places request HVAC coverage verification for general liability insurance to obtain an HVAC contractor license or while signing a commercial lease or customer contract.

The HVAC general liability insurance covers:

  • HVAC installation problems
  • Physical injuries caused on a job site
  • Repair costs for property damage on a client’s home or goods
  • Moisture damage caused by your HVAC work

Recent data points out that, on average, this general liability insurance costs between $398 and $1204 annually for HVAC service techs. It can cover up to $1,000,000 per claim with an upper limit of $2,000,000. However, one can customize the insurance based on their particular general liability needs.

2. Workers compensation insurance

A worker’s compensation insurance policy is another commercial policy that covers the legal liability of an employer to provide compensation for its workmen in case of their accident or death caused while working on the job site. 

This policy pays the medical expenses and payroll costs of injured company employees and protects employers from lawsuits related to worksite employee mishaps. This insurance is highly recommended if an HVAC company hires more than one employee. 

According to the US Bureau of labor statistics, more than 13,000 work injuries of HVAC employees were reported.

Many US states demand workers’ compensation insurance for HVAC businesses with employees. And the requirements for this policy differ for each state.

3. Commercial property insurance

A commercial property insurance policy is crucial for business owners to protect their business property, including office space, equipment, tools, and inventory stored on a company’s owned or leased property.

So this HVAC insurance policy covers the value of any business equipment and buildings damaged or destroyed by fire or similar disaster. It also covers the expense of replacing equipment if lost, stolen, or simply damaged in ways specified in your insurance policy. 

Most HVAC business owners can’t afford any damage caused by unfortunate circumstances, which is why this type of commercial insurance is crucial to obtain.

4. Commercial auto insurance

Commercial auto insurance is another type of HVAC insurance covering HVAC vehicles and the HVAC technicians driving the vehicles from one job site to another. If your employees cause an accident where the property is damaged, and the concerned is injured, it can result in medical bills and damage costs.

Most US states require every registered vehicle to carry liability insurance to protect your vehicles.

So the commercial auto insurance for HVAC covers: 

  • Property damage caused in an accident
  • Collision damage to another driver’s vehicle
  • Medical bills arising from a third-party injury
  • Theft or damage done to the company’s vehicles

5. Business owner’s policy

Business Owners Policy or BOP combines both general liability and commercial property, covering the business at a reasonable price for the common risks the business owners may encounter. So this HVAC insurance policy is a must-have for HVAC business owners and contractors.

This policy is designed to support small- and medium-sized HVAC companies, and each insurance company that issues this policy has its own rules. 

BOPs suit businesses with two qualities: a business that employs fewer than 100 people and makes less than $1 million in annual revenue. 

Additionally, BOPs include business interruption coverage for a situation where the business is affected by a disaster like storm damage and also cover extra expenses of operating in a temporary location.

6. Professional liability insurance

If a business owner or a professional HVAC technician commits an error or is accused of being negligent, then professional liability can cover the damage cost. 

For instance, if the technician fails to notice a small hole in the duct and if that has caused mold, health problems, and damage to the building, then it is obvious that the client would claim for the damage. So here, professional liability insurance comes to the rescue and saves the business owners from unexpected or unwanted expenditures. 

7. Surety bonds

Surety bonds are not exactly insurance but specialty divisions of the insurance companies where the company promises to pay in case of any damage done by its employees. These bonds are a must-have for the HVAC contractors to obtain and maintain licensing, and since it offers trust and guarantees for their job, it quickly wins bids. 

So HVAC contractors are expected to have at least a $15,000 surety bond, and in the claim, the bond issuer pays for the damage done but regains it from the HVAC technician.

What are the HVAC insurance requirements for licensed contractors?

The HVAC licensing requirements may vary for every US state and local municipality. However, major places require some level of licensing or registration for HVAC contractors to practice their business.

The business owner must provide general liability insurance to obtain an HVAC contractor license. Some states and local governments expect to provide additional HVAC insurance and bond to grant a license or permit to work in a particular area. 

For instance, to get licensed and run an HVAC business in New Jersey, you must hold $500,000 in general liability insurance and post a $3000 bond. Whereas in Kansas, the HVAC contractor licensing is handled at the local level, with counties and cities determining the insurance and bond requirements for contractors to get licensed in their area. 

So HVAC insurance plays a crucial role in determining whether or not a contractor gets their license. Before starting a business in HVAC, ensure to obtain the necessary licenses, permits, and HVAC insurance to avoid the risk of fines, legal action, and your job getting shut down.

How much does HVAC insurance cost?

An annual HVAC insurance costs a total of $350 for small startup HVAC service companies to $10,000 and more for large HVAC businesses. So getting insurance for your company won’t cost much. 

The insurance cost varies for each company as no two companies operate exactly the same. 

An HVAC insurance cost can be influenced by various factors, such as:

  • Location and size of the service area
  • Number of employees
  • Company revenue 
  • Types of HVAC insurance policies you invest in
  • Technical and business experience

Apart from these, there are still a few more factors that can influence your insurance cost. So it is recommended to speak to an experienced licensed insurance agent to get an accurate quote for your HVAC business insurance.

How to get insurance for the HVAC business?

By choosing a reliable insurance company, you can easily get the HVAC insurance for your business in simple steps. 

Go to their website, fill out the application, compare the insurance quotes, and choose policies. Then pay for your policy and download the certificate. It is that simple. 

However, if you are not sure about the insurance need, you can get help from the insurance broker or their company.

Frequently Asked Questions

Why do HVAC businesses fail?

There are various reasons why HVAC businesses fail. But the most crucial reasons are poor pricing model, failure to employ a dedicated sales team or the right sales process, and not acquiring business skills to run and grow their business. Also, the inability to manage business growth, not having a proper business structure, and not getting the appropriate insurance policies for the company.

How profitable is an HVAC business?

The HVAC business is profitable if it is done right. Currently, the HVAC business is on an upward curve, with an average net profit of 2.5% to 3.5%. If an HVAC business aims to achieve 10 percent of margins, it must plan a proper structure and execute its business plans well.
Some essential steps to achieve this are calculating the overhead, tracking the HVAC job and labor costs, designing a profitable pricing model, and monitoring each department’s net profit.

What is covered under commercial general liability insurance?

This insurance majorly covers property damage and accidental injuries caused to the client by your employee.
So this insurance covers:

  • Compensation for the damage done to the client’s property and assets
  • HVAC installation or replacement problems
  • Medical bills for physical injuries caused to the client
  • Moisture damage caused by your HVAC work

What risks do HVAC contractors face?

HVAC contractors face various risks in their business. These include:

  • Employees getting injured on the job site
  • Contractors fail to complete a task on time
  • Faulty diagnosis leading to the breakdown of HVAC systems

How do HVAC business insurance and HVAC homeowner insurance differ?

HVAC business insurance coverage is different from HVAC homeowner insurance coverage. HVAC insurance policies for businesses cover labor costs, damage-related costs, and any issues that pop up after setting up the HVAC systems or replacing them.
Meanwhile, the HVAC insurance covers the only issues related to the homeowners and their HVAC systems.

Conclusion

Now that you have read about the significance of HVAC insurance and its different types, you must start to choose a reliable insurance provider.

To determine whether the insurance provider you choose is reliable, check if they have experience with HVAC contractor’s insurance and the financial strength of the provider’s companies and compare their prices and policies with other insurance companies. 

A qualified insurance broker conducts a deep analysis of your HVAC company and the business and helps you determine what HVAC insurance policy you need to protect your company. So remember these key points while choosing an insurance broker, and claim the benefit of the various insurance policies to run a successful HVAC business.

Gaurang Bhatt

Written by

Gaurang Bhatt

Guarang Bhatt has 15+ years of experience in serving different businesses through advanced technology-based solutions. He has special expertise in Saas-based software solutions and solving complex business problems and challenges. Passionate about HVAC software solutions, he shares his knowledge and learnings on HVACsoftware.com.