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Insurance? How much and what kind do i need?

Discussion in 'Business Operations' started by LAWNMAN777, Jul 14, 2004.

  1. LAWNMAN777

    LAWNMAN777 LawnSite Member
    Messages: 7

    How much insurance do I need and do I need to be bonded? What does insurance and bonding cost annually?
  2. JimLewis

    JimLewis LawnSite Fanatic
    Messages: 6,872

    First thing you'll want to determine is if you are required to have a bond and commercial liability insurance by the state for the type of work you do.

    In my state, if you are ONLY doing lawn care, you need not be bonded or insured. But if you do anything else (e.g. irrigation, new sod, retaining walls, etc.) then you DO have to get a bond and insurance, in addition to getting a license to work in these fields.

    So you'll want to brush up on your own state requirements.

    If you are not legally required to have a bond or insurance for the scope of work that you do, than the amount of the insurance and bond is more arbitrary - that is, you can determine for yourself how much you might need.

    If you are just doing lawn care, mulching, and clean-ups, you may not need a bond. A bond (or Performance Bond, as is it sometimes called) is a guarantee against poor workmanship. For instance, if a customer paid you $10,000 to install a large retaining wall. And it worked for a few months, then began falling down because you didn't build it properly - then the customer would make a claim against your bond. Your bond company would pay the cost for another Landscaper to fix the problem - or to totally re-do it. That's really the only purpose for bonds.

    Another example; suppose someone contracted with you to install an irrigation system. They gave you $3,000 as a down-payment but half-way through, it was very obvious to the customers and also you, that you were in WAY over your head. You had agreed to do something you really didn't have much expertise in and were really mucking it up. There were trenches all over the place. Pipe strung out everywhere and not glued together properly. You used the wrong kind of backflow device and didn't install it in the right place even. Etc. etc. etc. Well, maybe you'd been trying to wing it for 2 weeks and it was just painfully obvious you were just making a huge mess. So you decide to give up and just admit you can't finish the job. Well, in all of your efforts, you managed to spend the entire $3,000 they'd given you. You can't refund them their money because you've already spent (wasted) it. Well, a bond would protect the customer in this case because they'd be able to get that $3,000 back from you and give it to someone else who knew how to fix your mess and do it the right way.

    But again, if you are just doing maintenance-related services, there's little need for a bond. You can't really go against someone's bond and say, "this lawn was mowed improperly - I want you to pay for another company to come out and mow it correctly." That just wouldn't happen. There's no major problem with a lawn being mowed improperly. It's just aesthetics. Same with barkmulch, clean-ups, etc. No real reason why you'd have to call in another company to fix a maintenance problem. There's usually no impending danger from mulch being applied improperly, grass being cut sloppy, or a clean-up being done poorly.

    So you'll need to determine whether a bond even applies to what you do first.

    If you find you do want a bond, then your next step is to figure out how much of a bond you want. Our state requires a $3000 bond for general landscaping and a $10,000 if you are doing structural-related things like fences and decks too. But generally speaking the amount of the bond should be able to cover the amount of your biggest anticipated job. So if you totally screw everything up and the customer has to hire someone else to fix your screw up, the bond will cover that complete cost.

    As for insurance, it all depends again on what you do and what kinds of losses might happen. Anything is possible. Theoretically, a chunk of rock could come flying out from under your mower and strike a kid in the eye and blind him for life. But in all likelihood, the worse thing that's ever going to happen while mowing is a broken window. On the other hand, your spark arrester may not be working and you could start a fire. So how much insurance do you need???? Well, that's very arbitrary again. I've heard it said a lot that you should always carry as much insurance as you can afford - the more the better. I agree with that. If you can afford a $1,000,000 policy easily, you should probably do it. But if all you can afford is a $100,000 policy, then get that for starters. That will cover a lot.

    You asked for prices. I just renewed all of my insurances and bond for the year. So the prices are in my head. A $3,000 bond cost me about $400 for one year. $300,000 worth of commercial liability insurance cost me $2,100 for one year.

    There you are. Hopefully I helped clear some of this up a little. Sorry for the long post.
  3. Team Gopher

    Team Gopher LawnSite Platinum Member
    from -
    Messages: 4,040

    Hi Lawnman777,

    Here is some contact information for your state.

    Mailing address:
    Texas Department of Agriculture
    P.O. Box 12847
    Austin, Texas 78711
    For the hearing impaired: Relay Texas: 1-800-735-2988 (voice); 1-800-735-2989 (TDD)

    Send Questions and Comments to: contact@agr.state.tx.us


    You might want to contact them.

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