I am starting up a janitorial business in California, cleaning homes and office buildings. What insurance am I going to need?

Janitorial businesses and cleaning services in California, like any other business in any other state, need to protect their assets - their property, equipment, vehicles, and their ability to conduct business and earn money. The basic issue is liability, being held financially responsible when things go wrong. And there are plenty of things that can go wrong: a company vehicle gets T-boned in an intersection, an expensive piece of equipment bites the dust, an employee falls off a step ladder, someone steals a month's worth of supplies from your shop and the list goes on and on. Janitorial and cleaning services often end up with a number of different policies, each of which plays a specific role in the company's overall insurance strategy.

There are many kinds of businesses involved in providing janitorial, maintenance, and cleaning services. There are carpet cleaners, and window washers, and landscapers, and floor specialists, and so on. And let's not forget all the folks that provide disaster cleanup services after water, fire, or smoke damage like mold remediation companies. Each of these involves a different set of risks, so you will need to discuss with potential insurance providers the particular nature of your janitorial business and the risks it entails.

What specific coverages does California require me to carry for my janitorial service? Some insurance, like Workers' Compensation and commercial auto insurance, is required by the state of California.

You must have Workers' Compensation, no matter how few employees you may have. Even temporary employees must be included. If an employee is injured on the job or becomes ill as a result of the job, your Workers' Compensation policy will pay some of the lost wages and help pay the employee's medical bills. Failing to have a Workers' Compensation policy is a misdemeanor that can get you fined as much as $1,000 or put you behind bars for up to a year-not to mention the fact that your business would be responsible for paying the employee's medical bills.

Commercial auto insurance is required by the state of California for any vehicle used to transport your employees. If you are required to carry commercial auto insurance, but fail to do so, your business could be held liable for bills resulting from an accident, and you can be held personally liable as well. A commercial auto policy includes:

Liability insurance for bodily injuries and property damage Medical payments insurance for the medical bills Physical damage insurance includes both collision insurance and comprehensive insurance You may also want to include uninsured motorist coverage with your commercial auto policy.

What other insurance do I need to buy for my janitorial service? Some kinds of insurance, like general liability insurance, may not be required under California law, but clients will expect or even require you to have them. It's to your advantage to have general liability insurance to cover any costs that Workers' Compensation does not pay if there is a work-related injury. General liability insurance also provides coverage for property damage resulting from accidents at a client's location.

Property insurance provides coverage for damages to or loss of the space your business occupies or the equipment and supplies you use in your business. If you are leasing space, your landlord may require you to maintain property insurance. You will need to decide whether to insure your property for its full replacement value or the current value. There is a special property insurance endorsement for cleaning and maintenance companies, the SPICE endorsement, which extends coverage to company property when it is not on the premises-for example, in transit to a client's location.

Some insurance companies will bundle general liability and property insurance together as a business owner's policy, which could save your contracting business some money in premiums.

Excess liability insurance provides an extra layer of protection for janitorial, cleaning, or maintenance businesses. It is not required under California law, but some clients may require you to carry it, to increase the amount of your existing general liability and/or Workers' Compensation coverage. Excess liability insurance can also be added to a commercial auto policy to cover any gap between a successful claim against your business and the maximum the underlying policy would pay. You pay a separate premium for each policy you add excess liability coverage to.

Umbrella insurance bundles different types of insurance, such as general liability AND Workers' Compensation, or general liability and commercial auto, or perhaps all three together, and provides excess coverage for a single premium. The umbrella policy pays when a claim against any of the bundled policies exceeds its limit.

I'm about to sign my first contract with a corporate client. Why do they want me to pay for a surety bond? Is this something the state requires?

No, this is not a requirement of the state of California, but rather a requirement of the corporate client. A surety bond ensures that your client will get paid a certain amount if you are unable to fulfill the terms of your contract with the client. It's not uncommon for even companies with years of experience to be required to be bonded.

When you buy a surety bond from an insurance company, the insurance company is agreeing to pay back the client if you are unable to finish a job you have already been paid for and cannot repay the client directly. But you then have to pay back the insurance company. That's why insurance companies are careful about which businesses they will bond. They need some assurance that they will get paid back according to the surety bond agreement. It will usually be easier and cheaper for an established company with a proven track history to purchase a surety bond than it will be for a startup company to get bonded.