Contractor business insurance costs

Contractors pay an average of $83 per month, or $990 annually, for general liability insurance. You may need a certificate of insurance (COI) to get licensed in your trade or sign a contract with a client.

General liability insurance provides financial protection against common lawsuits from customers. It can cover costs if someone sues your business for a bodily injury, property damage, or copyright infringement.

Most policies include products-completed operations insurance, also called product liability insurance. This type of coverage pays for harm caused by a company's product or completed service, such as a newly installed sink that leaks and damages a customer's floor.

This is the average general liability policy for contractors who buy from Insureon:

Insurance premium: $83 per month
Policy limits: $1 million per occurrence; $2 million aggregate
Deductible: $250

Small business owners can often save money by bundling general liability coverage with commercial property insurance in a business owner’s policy (BOP).

General liability insurance costs depend on factors such as the coverage limits you choose, the size of your business, the amount of foot traffic you have, and any subcontractors or additional insured endorsements.

The cost of general liability insurance depends on your risk of a customer lawsuit.

Among contractors who purchase general liability insurance with Insureon, 44% pay less than $75 per month and 78% pay $150 or less per month.

Contractors who have many customer interactions and a high risk of claims in their industry typically pay more for general liability insurance.

For example, a plumber can expect to pay more for general liability insurance than a profession that's less likely to cause third-party bodily injuries or property damage, such as a painter. Similarly, a general contractor will often pay a higher premium for this coverage than an electrician or other low-risk professional.

The average cost of general liability insurance is $147 per month for plumbers and $162 per month for general contractors. Painters pay an average premium of $72 per month, while electricians pay an average of $61 per month.

As you can see, premiums vary significantly across professions.

Policy limits are the maximum amounts your insurance company will pay for covered claims.

The per-occurrence limit is the most your insurer will pay for claims from a single incident, while the aggregate limit is the maximum your insurer will pay on any claims during the policy period, typically one year. Higher limits cost more—and provide better coverage.

Most contractors (91%) choose a $1 million per-occurrence limit and a $2 million aggregate limit for their general liability policy. As your small business grows, taking on more customers and more risks, you may need to expand your policy limits.

Learn more about factors that affect your general liability premium or how to save money on your policy.

Contractors pay an average of $115 per month for a business owner's policy, or $1,374 annually. Most choose a BOP with a $1 million per-occurrence limit and a $2 million aggregate limit.

A BOP bundles general liability coverage with commercial property insurance at a discount. It provides financial protection against common lawsuits from customers and also covers the cost of stolen, damaged, or destroyed business property.

For example, a BOP would pay for accidental damage to a customer's home that happens during a project, or a fire that destroys your business's office and its contents. Many BOPs include business interruption insurance, which covers financial losses related to temporary forced closures.

The cost of a business owner's policy depends on factors such as the limits you choose, the size of your business, the amount of foot traffic you have, and the value of your business's property and equipment.

Contractors pay an average of $160 per month, or $1,916 annually, for workers’ compensation insurance. Most workers' comp policies include employer's liability insurance, which covers employee lawsuits related to workplace injuries.

Workers' comp is a key policy in construction, as workers face a high risk of injury. It helps cover medical expenses from job-related injuries and supplies partial lost wages during recovery in the form of disability benefits.

State laws determine when you're required to buy workers' comp. Most states require workers' compensation as soon as you hire your first employee, while a few require it for contractors who work alone in high-risk trades, such as roofing.

Sole proprietors sometimes buy this coverage for themselves to protect against costly work-related medical bills, which are often excluded by personal health insurance.

The cost of workers' compensation insurance depends on several factors, including payroll, how many employees you have, and the level of risk involved with their work. Focusing on workplace safety can help you save money on workers' comp, as businesses with a clean claims history pay less for coverage.

Among contractors who purchase workers’ compensation insurance with Insureon, 48% pay less than $150 per month and 73% pay less than $300 per month.

A larger workforce brings a higher risk of worker injuries, which is why bigger businesses tend to pay more for this type of insurance.

Contractors pay an average of $270 per month for commercial auto insurance, or $3,239 annually.

Most states require commercial auto coverage for vehicles owned by a business. For personal, rented, and leased vehicles used by your business, look to hired and non-owned auto insurance (HNOA) instead.

A commercial auto policy provides financial protection in the event of an accident involving your business vehicle. It can help pay for property damage, medical costs, and legal expenses.

For example, if a renovation contractor runs a red light in their work truck and hits a sedan, it will help pay for the damage or injuries they caused, including the cost of hiring an attorney if the other driver files a lawsuit.

The cost of commercial auto insurance depends on several factors, including the policy limits you choose, whether you buy physical damage coverage, the value of your vehicles, and the driving records of anyone permitted to drive.

On average, contractors pay $42 per month, or $502 annually, for tools and equipment insurance.

Also called inland marine insurance, this policy covers the cost of lost, stolen, or damaged tools and equipment. Unlike standard property insurance, it protects your items while they're in transit, at a customer's home, or stored off-site.

For example, tools and equipment insurance will provide financial reimbursement if a landscaper's leaf blower is stolen from a client's property, or an excavation company's equipment is destroyed in a fire at a construction site.

The cost of tools and equipment coverage depends mostly on the value of your tools and equipment. Items valued at over $2,500 may need to be scheduled separately on the policy.

Contractors pay an average of $58 per month for professional liability insurance, or $702 annually. State laws occasionally require this coverage in order to get licensed in a specific trade, though it's more often needed to fulfill the terms of contracts.

Professional liability insurance covers the cost of lawsuits from clients who sue over a mistake, missed deadline, or breach of contract. It's sometimes referred to as errors and omissions insurance (E&O).

Contractors who buy this coverage from Insureon can often bundle it with general liability insurance at a lower cost than buying the policies separately. The average cost of this bundle is $151 per month for Insureon customers.

The cost of professional liability insurance depends on several factors, including the type of business you have, the policy limits you choose, and your history of claims. Clear communication with clients can lower your risk of a claim and help you save money on your premium.

Small businesses pay an average of $129 per month for cyber insurance, or $1,552 annually. This policy is sometimes called cyber liability insurance or cybersecurity insurance.

Cyber insurance helps contractors recover financially after a data breach or cyberattack. It can help pay for customer notification costs, fraud monitoring services, and other costs necessitated by state data breach laws.

This policy is vital for contracting businesses that collect customer credit card numbers, email addresses, or other personal information. Small businesses often have weak cybersecurity, which makes them a frequent target for ransomware attacks and other cyber risks.

The cost of cyber insurance depends on the amount of sensitive data your company handles. You can often save money on this policy by implementing multi-factor authentication (MFA) and other cybersecurity controls.

Contractors pay an average of $92 per month for commercial umbrella insurance, or about $1,102 annually. Small businesses and independent contractors sometimes need this coverage to fulfill a client's requirements for higher-than-average liability limits.

Umbrella insurance boosts the limits of your underlying general liability, commercial auto, or employer's liability insurance. When the underlying policy reaches its limit, commercial umbrella insurance activates to protect your business from losses.

The cost of commercial umbrella insurance depends on the amount of coverage you purchase, typically available in $1 million increments.

Contracting businesses pay an average of $117 per month for builder's risk insurance, or $1,398 annually. This policy is also called course of construction insurance.

A builder's risk insurance policy covers structures in progress and materials at a worksite. It helps pay for fires, theft, vandalism, and other types of damage to a structure while it's under construction.

The cost of builder's risk insurance depends on the value of the structure, including materials and labor.

Contractors pay an average of $9 per month for surety bonds, or $112 annually. A surety bond reimburses your client if you're unable to fulfill the terms of a contract or other agreement.

You might need a surety bond in order to get licensed in your trade or to sign a contract with a client. Several types of bonds are common in construction, including bid bonds, performance bonds, and payment bonds.

The cost of a surety bond is a percentage of the total bond amount (usually 1% to 15%), so expect higher premiums for bigger bonds. The type of work you do and your credit score can also impact the cost.