Contractor Insurance

Here are some of the top factors that determine insurance premiums for contractors during the underwriting process:

• Industry risks. Insurers will look at the risks associated with your specific work. For example, a landscaping contractor will likely pay less for insurance than a roofing contractor.
• Business property and equipment. Expect to pay more to insure an office building and expensive equipment than basic tools and personal protective equipment (PPE).
• Number of workers. Every subcontractor or employee added to a project increases the risk of workplace accidents and mistakes, which raises the cost of workers' comp, general liability, and similar policies.
• Annual revenue. Increased revenue is associated with bigger projects, higher risks, and more frequent claims, which results in higher insurance costs.
• Coverage limits and deductibles. Policies with higher per-occurrence and aggregate limits cost more but cover more expensive claims. Choosing a higher deductible can lower your premium, but your insurance won't activate until you pay the full amount.
• Claims history. A contractor who has filed an insurance claim in the past can expect higher rates than one that has a clean history of claims.
• Location. Crime rates, population density, healthcare costs, property values, and other regional factors affect how much you pay for insurance.
• Workplace safety. Insurance companies may offer lower rates to contractors who implement safety and security measures to avoid claims. For example, installing an approved security system can help you save money on property insurance.

Contractor licenses and permits are often needed in order to comply with state laws and local regulations. For example, your state might require a license to do plumbing or electrical work, or you may need a town permit for pesticide application or tree removal.

To get licensed, you may need to pass an exam, have a certain amount of education or experience, or be bonded and insured. Here are a few examples of when you might need a license:

• California requires all contractors who build or modify buildings to be licensed if the job cost exceeds $1,000 or if the project requires permits or employees.
• Florida mandates a license for any work that becomes part of a structure and the total cost is $500 or more.
• New York only requires a license for home improvement contractors in certain cities or counties, but not statewide.
• Texas does not require a license for contractors at the state level, but some city and county governments do require it.

The type of work you do and the value of your projects help determine when you need a license in your area. Permits, on the other hand, are often required for specific construction projects, especially larger ones involving structural changes, demolition, or specialized work.

Even when it's not required by law, clients may ask for proof of insurance, a bond, or some other qualification before they'll hire you. Having everything lined up in advance shows your business is reputable and gives your clients peace of mind, which is especially helpful when you're working to grow your business.

Business insurance is essential and often mandatory for independent contractors who work in construction. You might need it to comply with the laws in your state or fulfill contractual requirements for a client.

Here are the insurance policies you might need to run your business:

• General liability insurance covers accidental bodily injuries and property damage, such as a passerby who trips over your toolbox and gets injured. You might need proof of liability insurance to obtain a license, sign a commercial lease, or qualify for a business loan.
• Workers' compensation insurance is required in most states for businesses with employees, and in some states for high-risk contractors who work alone. It pays for medical treatment if a worker is injured on the job and provides them with disability benefits while they're recovering.
• Commercial auto insurance covers accidents involving business vehicles. Almost every state requires this coverage for vehicles owned by a business.

Without insurance, a single accident or lawsuit could devastate your contracting business financially or even force you to close. You can buy insurance to protect against everything from customer falls to fires, so you can recover quickly and focus on getting the job done.

Depending on the work you do, you may need additional types of construction insurance. Other policies commonly purchased by contractors include:

• Commercial property insurance covers your business’s physical location and business personal property (BPP) at that location, such as computers and construction equipment. You can bundle this coverage with general liability insurance in a business owner's policy at a discount, or just add a BPP endorsement to your general liability policy if you don't have an office.
• Business interruption insurance provides reimbursement for lost income and daily operating expenses during a forced closure due to a storm or other covered property claim. It's also called business income insurance.
• Contractors pollution liability (CPL) insurance pays for legal fees and cleanup costs related to harm caused by pollution at a construction site. It's also called environmental insurance.
• Owners and contractors protective (OCP) liability insurance provides liability protection for the project owner or general contractor who hired you. Contractors are often required to buy this coverage for high-risk contracts, such as utility work.
• Installation floater insurance is a type of inland marine insurance that covers materials being installed or assembled by a contractor during a construction project.
• Hired and non-owned auto (HNOA) insurance covers personal, rented, and leased vehicles used for business purposes, such as a personal van used to transport tools to jobsites.
• Commercial umbrella insurance, similar to excess liability insurance, boosts the coverage on your general liability, commercial auto, and employer's liability insurance once the policy limit is reached.

Contractors and construction businesses can save money on insurance by comparing quotes from different providers. With Insureon, you can get free quotes from top-rated insurance companies by filling out our easy online application.

Other ways to save money include:

• Bundle policies. Contractors who have an office or other space can often buy general liability coverage and commercial property insurance together in a business owner's policy, which costs less than buying these policies separately.
• Customize your coverage. Choose lower limits or higher deductibles to reduce your premium, but make sure your policy can still cover a potential claim and that you can easily afford the deductible.
• Avoid accidents and claims. Contractors can prevent employee injuries and customer accidents that lead to claims by implementing a strong risk management strategy that includes employee training and strict enforcement of safety protocols.

Our licensed agents can help you find the right contractor liability insurance for your budget and your business needs, whether you take on minor home improvement tasks or large-scale commercial projects.