Types of Insurance Contractors May Need

Independent contractors can purchase one or more insurance policies to shield themselves from unwanted financial problems. Let us find out the types of construction insurance, alongside what are the coverage and pricing options are for general contractor insurance.

General Liability Insurance

It saves contractors from the risk that may arise when they are at work. Not only contractors, but it also protects small business owners from common risks. Let’s say if contractors are installing kitchen cabinets and crack on the client’s marble. And this is where general liability insurance for contractors comes in handy.

How much is general contractor general liability insurance cost?

The independent contractor insurance cost is somewhere around $70-$140 per month and $850-$1000 per year.

Workers’ Compensation Insurance

Workers’ compensation insurance offers financial aid to contractors as well as businesses in case of bodily injury or illness. It is one of the most sought-after insurances in most US states. Businesses managing multiple employees can easily cover medical expenses or even claim employees’ death benefits by purchasing workers’ compensation insurance.

How much is workers’ compensation insurance cost?

The insurance cost is approximately $35-$55 per month if you choose to purchase it on a monthly basis. Or else, you need to pay around $350-$550 per year, depending on industry and state regulations.

Commercial Auto Insurance

Designed for business-owned vehicles, this insurance covers losses incurred due to vehicle accidents or other unforeseen events on the road. On top of that, it will also cover personal vehicle accidents only if the vehicle is used for business purposes.

How much is commercial auto insurance cost?

Contractors are expected to pay approximately $150-$200 per month and $2000-$2400 per year in a bid to purchase commercial auto insurance. The cost of contractor insurance for commercial auto may vary depending on the number of vehicles linked to your business.

Commercial Property Insurance

Commercial property insurance offers great financial help to a business’s physical assets. If your workspace or building is damaged because of fire incidents or vandalism, then this insurance makes sure you are financially protected. Construction contractors, or businesses, mostly buy commercial property insurance to keep their assets financially secure.

How much is commercial property insurance cost?

$65-$110 per month or $800-$900 per year is what you need to pay in order to purchase commercial property insurance. However, the premium may go up for higher-risk industries.

Business Owners Policy (BOP)

Made for the convenience of small and mid-size businesses, this insurance policy brings an all-in-one package that can be tailored to your business size. In other words, it eliminates the need for buying separate policies at different times. So, what it combines is several coverages and creates a policy customized to meet your business needs.

How much is business owners policy cost?

A business owner’s policy can be purchased for as little as $60-$90 per month or over $600-$1100 per year. The cost will go up the moment you add extra coverage.

Tools and Equipment Coverage

This type of contractor insurance covers losses to equipment, gear, or tools that are regularly used during the work. Suppose the contractor’s tools are stolen overnight; then this insurance can cover the replacement cost. Notably, tools and equipment coverage does not cover damage caused by wear and tear.

How much is general contractor tools & equipment insurance cost?

Buying tools & equipment insurance will cost you $40-$60 per month and $450-$700 per year, approximately. The coverage can also be brought as an add-on to general liability insurance.

Umbrella Liability Insurance

Commonly known as excess liability Insurance, commercial umbrella insurance aids in financial protection beyond what your standard insurance can cover. No, it doesn’t replace any other insurance, but it extends the coverage in case there is a claim limitation in your regular policy.

For instance, if the client demands $2 million, which is more than what your regular insurance covers, then umbrella liability insurance comes into effect. As a result, you don’t have to pay anything.

How much is umbrella liability insurance?

The cost of umbrella liability insurance falls between $70- $75 per month. The yearly cost of the insurance is over $600-$1000.

Key Factors Affecting Contractor Insurance Costs

As you know, the coverage benefits in many ways, but it also comes alongside risks and challenges. Here are some factors affecting contractor insurance costs.

1. Type of Work Performed

It’s one of the prominent factors that impact the general contractor insurance cost in the US. This is because the insurer determines the risk level based on the type of work you perform. So, the higher the risk level, the higher the premium you will pay. Such challenges are usually faced by roofing or flooring contractors, and therefore, they end up paying more insurance costs.

2. Business Size and Revenue

Another factor to be blamed for higher contractor costs is business size and revenue. If more employees are working in your company, then the premium will also rise. Similarly, revenue also impacts the contractor insurance cost. Because the insurer thinks the high income is possible due to large-scale project work, which often involves greater risks.

For instance, a well-paid independent contractor faces legal consequences for a poor installation, the claim could be possibly sky-high. That’s what the insurer reckons, which ultimately results in the growth of the premium.

3. Location

Next comes the business location, which plays a decisive role in determining whether the premium increases or decreases. Apart from assessing the business size, the insurance provider also learns from where you operate the business. If the business location is prone to accidents or bad weather, the premiums will be higher in order to match that exposure.

4. Claims History

The insurers are pretty much interested in unfolding your claim history before providing contractor insurance. In case you have previously made a claim for property damage or injuries to contractors, you are likely to see higher insurance premiums. Let’s say you have made claims citing employee injuries in the past. Then, the insurer will assume that you lack safety practices and eventually ask you to pay more premiums.

5. Coverage Limits and Deductibles

The business insurance company will cap the payout amount when settling a claim. You might have seen limits like $1 million or $1.5 million in a policy, which is your total payout during the current term. So, if you want to push the limits, remember you are going to pay a higher premium. This is because the insurance provider will not take a greater financial risk unless you are ready to pay hefty premiums.

6. Vehicles and Equipment

The more business vehicles, the higher the usage, and as a result, the more premium you pay. So, if you own heavy-duty trucks or pickup vans, then you will surely need commercial auto insurance, which will further increase the insurance cost. The insurer may ask you to pay even more if you transport hazardous materials, which usually have increased liability risks. Likewise, the use of expensive tools or equipment also contributes to the higher premium.

Average Cost Estimates for Different Contractors

The average cost of general liability insurance for contractors varies based on the contractor’s job and the industry. Let’s find out one by one.

1. Low-risk Contractors

Painters, flooring installers, interior remodelers, and handymen fall in this bracket. Their chances of injuries or equipment damage are very rare. Since the risk of accidents or large liability claims is too low, insurance companies are happy to offer lower premiums. Hence, these contractors don’t need to overpay when buying insurance.

General liability insurance for contractors: $400–$700 per year

2. Moderate-risk Contractors

Contractors occupying the middle of the risk spectrum are considered moderate-risk contractors. Electricians, drywall installers, or HVAC contractors are said to be among moderate-risk contractors. They utilize power tools and other machinery equipment, but they are not fully exposed to the dangerous risks. Hence, the insurance premium will come in a way that strikes a balance between price and protection.

General liability insurance for contractors: $800–$1,500 per year

3. High-risk Contractors (e.g., Roofers, Demolition)

Those contractors who are involved in dangerous environments or use heavy machinery as part of their jobs come into this category. Demolition contractors, electrical contractors, and steelworkers are part of this high-risk category. Since these jobs pose higher risks, insurance providers usually charge higher premiums.

General liability insurance for contractors: Over $2,000 per year

How to Save on Contractor Insurance

In case you are willing to buy contractor insurance, but the cost might disrupt your financial budget. Here are some best practices to cut down on insurance costs.

1. Bundle Policies

Opt for multiple insurance policies from a single insurance provider, so that you don’t have to buy them separately. By doing so, you may get a package deal at a discounted rate, which could help you save money.

2. Implement Safety Protocols

Follow safety protocols whenever the contractor is out for a job. Because providers mainly focus on what safety practices you follow when measuring the risk level. This way, if there are fewer accidents on the job site, insurance providers will offer premiums at a lower cost.

3. Review and Adjust Coverage Regularly

Consider scanning a policy at least once or twice a year to stay updated with the changes made to your existing policy. Such practices will not only assist you in knowing recent updates, but also in identifying overlapping coverages.

4. Compare Quotes

It’s a simple cost-saving practice that helps you get quotes from different insurance providers in a bid to find the lowest premium cost. Providers may offer more competitive rates in order to cater to your requirements. Hence, you should not forget to compare at least 4-5 quotes.

5. Ask About Discounts

In 5 out of 10 cases, contractors fail to ask about discounts when purchasing insurance in haste. Never do that; ask your provider about discount offers, which are usually not advertised upfront. In case you didn’t make claims in recent times, they may reward you with a loyalty discount.

Conclusion

Obtaining financial protection by purchasing reliable insurance has been the need of the hour for every major industry. The more time contractors spend on the job site, the higher the risk involved. Therefore, purchasing insurance is a worth move, especially for individuals falling into a high-risk category.

However, there are some factors affecting the contractor’s insurance cost that should not be overlooked. So, make them count before you finalize your pick. Plus, don’t forget to follow the best practices discussed above to save on contractor insurance.

General Questions & Answers for Contractors