Why $300,000 in Liability Insurance May Not Be Enough for a Growing Plumbing Company

Many plumbing companies started with a policy that met the Responsible Master Plumber requirement and never revisited it. That made sense when the business was small. It often doesn’t now.

Contracts set the real floor

General contractors, property managers, and commercial owners routinely require $1,000,000 per occurrence and $2,000,000 aggregate in general liability, plus umbrella limits. Institutional and public work can require more. If your limits fall short, you either can’t sign the contract or you sign it out of compliance — which can create problems if a claim happens.

Claims don’t scale down

A failed connection that floods three floors of an office building, damages tenant equipment, and closes a business for weeks can produce a claim well beyond $300,000. So can an injury to a third party on a job site. Defense costs add up too, and depending on the policy they may or may not erode the limit.

Completed operations accumulate

Every job you finish adds to your completed operations exposure. A company that has installed thousands of water heaters and repiped hundreds of homes carries more potential liability than it did when it started.

The aggregate matters

Policies usually have an aggregate limit — the most the policy will pay in a policy period. A low aggregate can be exhausted by a few claims, leaving the company exposed for the rest of the term.

How to decide on limits

1. List the highest limits required by the contracts you hold or bid.
2. Consider your largest realistic loss: your biggest commercial customer, your highest-value residential work.
3. Look at your total exposure: fleet, employees, and assets.
4. Price primary limits and umbrella options together. Adding an umbrella is often more efficient than raising primary limits alone.

See general liability for Texas plumbers and umbrella and excess liability.