Construction and Contracting Business Insurance
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Workers’ compensation insurance for contractors and construction businesses

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Workers' compensation insurance

Workers’ compensation insurance covers medical costs and lost wages for work-related injuries and illnesses. This policy is required in almost every state for businesses that have employees.

Workers’ comp protects employees at your construction or contracting business

In the construction industry, physical labor brings a high risk of injuries that could place a tremendous financial burden on your business. For instance, if a carpenter has an accident with a nail gun, it could lead to hefty medical bills and downtime.

Workers’ compensation insurance can pay for medical expenses and partial missed wages when an employee is injured on the job or develops an occupational illness. Sole proprietors may also decide to buy this policy for financial protection against work injuries, which health insurance might not cover.

Workers’ compensation can help pay for an injured employee’s:

  • Immediate medical costs, including emergency room expenses
  • Ongoing medical costs, such as physical rehabilitation
  • Partial lost wages while the employee is unable to work

Workers’ comp protects construction and contracting business owners

Employer’s liability insurance – typically included in a workers’ comp policy – protects general contractors, roofing companies, and other construction businesses when an employee decides to sue a business owner over an injury.

Employer’s liability insurance typically helps cover:

  • Attorney’s fees
  • Court costs
  • Settlements

Even when a lawsuit is without merit, you might still have to pay for an expensive court battle if not properly insured.

Compare workers' compensation insurance quotes for construction businesses

How are workers' compensation costs calculated for construction and contracting businesses?

The amount you pay for workers’ compensation is a specific rate based on every $100 of your business’s payroll. Your premium is determined by the type of work done by your employees (classification rate), your experience modification rate (claims history), and your payroll (per $100).

The formula is:
Classification rate x Experience modification rate x (Payroll / 100) = Premium

State laws set workers’ comp requirements for construction and contracting businesses

Every state creates its own laws for workers’ compensation requirements. For instance, every construction business in Pennsylvania is required to carry workers’ compensation insurance for its employees – even part-time workers. Georgia businesses, on the other hand, only need to carry workers’ comp when they have three or more employees.

States often have stricter requirements for construction businesses than other types of businesses due to the industry's increased risk of injury. Roofers in particular are usually required to buy workers' comp, regardless of whether or not they have employees.

Even when independent contractors, sole proprietors, and partners don’t have to carry workers’ compensation insurance, they can choose to purchase coverage for the financial protection it offers.

Monopolistic state funds

In certain states, construction and contracting businesses must purchase workers’ compensation insurance through a monopolistic state fund. Those states are:

If you purchase workers’ comp through a monopolistic state fund, it may not include employer’s liability insurance. However, you can purchase it from a private insurer to fill this gap in coverage.

Lower workers’ comp costs with risk management

Construction professionals face high risks due to the physical nature of the work – not to mention the hazards of saws, ladders, and other essential equipment. If an employee suffers an injury, it can lead to a costly insurance claim – and a rise in your premiums.

Luckily, the owners of construction companies can mitigate risks by providing safety training and reducing hazards in the workplace. You can also make sure your workers are equipped with protective gear, such as gloves and goggles. This can lower your rate of workplace injuries, along with your insurance rates.

How much does workers' comp for construction businesses cost?

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Construction and contracting professionals pay a median of $275 per month for workers' comp.

Insurance costs for construction and contracting professionals are based on a few factors, including:

  • Construction and contracting services
  • Business equipment and property
  • Revenue
  • Location
  • Number of employees

Other policies for construction and contracting professionals to consider

Workers’ compensation insurance provides protection for your employees and to some extent your business, but it doesn’t cover property damage, client injury, or company vehicles. Construction and contracting business owners should also consider:

General liability insurance: This policy can cover expenses related to client injury and property damage, along with copyright infringement issues.

Commercial auto insurance: This policy covers vehicles owned by your construction or contracting business. It typically pays for accidents, vehicle theft, and vehicle damage.

Contractor’s tools and equipment insurance: This policy helps pay for repair or replacement of a contractor’s tools and equipment if they are lost, stolen, or damaged.

Professional liability insurance: This policy covers professional mistakes and oversights, such as a contractor missing a deadline for a project.

Surety bonds: These bonds provide a guarantee that your company will fulfill its contract. Otherwise, it reimburses the client for their loss.

Builder’s risk insurance: Builder’s risk insurance can pay for damage done to a structure still under construction, such as fire or vandalism at a construction site.

Get free quotes and compare policies with Insureon

Are you ready to safeguard your construction or contracting business with workers’ compensation or another type of insurance? Complete Insureon’s easy online application today. Once you find the right policy, you can begin coverage in less than 24 hours.

Updated: April 29, 2022
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