Contractor insurance shields your construction company from liability claims, worker injuries, equipment breakdowns, and more. Legal requirements or your employer’s policies may necessitate purchasing contractor insurance.
To safeguard themselves from these various dangers, most contractors invest in multiple commercial insurance policies, all of which may typically be purchased at once from the same insurer.
The cost of your contractor’s insurance coverage varies based on several criteria, including the age of your firm, its location, the nature of your business, the policy’s terms, and the magnitude of your organization. It’s essential first to determine exactly what your business needs.
This post will discuss the cost of buying contractor insurance for your business.
What Is Contractor Insurance?
Contractors insurance is a type of company insurance designed to protect against the unique dangers of the contracting industry. In the event of an accident, lost income, legal action, stolen, destroyed, or damaged equipment, a comprehensive contractor’s insurance policy will have you covered.
If you accidentally cause damage to a client’s property while on the job, the general liability coverage of your contractors’ insurance would cover the costs associated with making things right.
How Much Does Contractors Insurance Cost?
Insurance premiums for contractors depend on several variables, including:
- The requirement for insurance coverage: Your insurance premiums can vary depending on the levels of coverage and deductibles you select. Insurance prices are proportional to the quantity of coverage purchased and tend to rise as limits increase.
- The total number of workers: Workers’ comp premiums rise directly to the number of employees covered.
- A record of previous claims: Before deciding on a policy’s premium, an insurer will look at a business owner’s claim history.
- Other aspects that affect pricing: In determining premiums, your insurer also considers the value of your business’s assets and property, the location of your company, and the number of employees you have.
Types of Contractor Insurance and Their Costs
Here are a few types of contractor insurance, along with the factors that affect their cost. Let’s simplify things by breaking down each one according to its components.
1. Contractors’ General Liability Coverage
- Injuries to third parties;
- Damage to another party’s property; and
- Injuries to reputation and privacy
Due to the high prevalence of accidents in the construction business, general liability insurance is among the most expensive available. General liability insurance costs contractors and construction enterprises an average of $69 per monthly, or $825 annually.
Moreover, there are a variety of other variables that can affect the price:
- Location: Where you do business significantly affects your insurance premiums. For instance, accidents are more likely to happen to workers because of the greater number of individuals in urban settings. As your level of risk rises, so will your premium.
- Crew Size: Crew size significantly contributes to the likelihood of an incident—the risk of injury and property damage increases when crew members split their time between many construction sites.
- Coverage Limits: Costs associated with insurance policies’ coverage limits reflect the increased safety provided by those with higher limits.
2. Workers’ Compensation for Contractors
You must carry workers’ compensation insurance (except for business owners in Texas) if you employ people. It shields your team from financial ruin in the event of an illness or workplace injury. This policy may be able to help with the following:
- Treatment costs;
- Continued care;
- Income lost while sick or injured;
- Costs of rehabilitation and retraining; and
- Funeral expenses.
The price of this coverage will vary greatly depending on where in the country you set up shop. With an average cost of $275 monthly or $3,295 annually for construction enterprises and contractors, this coverage might just enable you to save thousands in medical expenses if you or an employee get hurt.
Other factors affect your cost as well, including:
- Your industry;
- Annual payroll;
- Various tasks that employees are responsible for; and
- A review of your prior insurance claims.
The standard formula for determining premiums is as follows:
(payroll/100) x (rate per job classification) x (experience factor)
3. Equipment Insurance for Contractors
You’ve probably put a lot of money into your tools and machinery. In the end, they are what you employ to do anything.
When your business’s equipment and property are not physically present at an insured building but in a new location or used on a project site, they are not covered by commercial property insurance. You need inland marine insurance, more commonly known as equipment insurance.
The average monthly price for contractor’s tools and equipment insurance is $14, or $169 annually.
When tools and equipment are lost, stolen, or destroyed in an accident, this insurance policy can cover the costs of fixing or replacing those items.
4. Auto insurance
Does your company employ company-owned or leased vehicles? If so, you must purchase auto insurance or face legal consequences. You can probably get by with a personal auto policy if you use your car to commute between job sites, but you should verify this with your insurer just to be safe.
You will undoubtedly require a business auto policy if you transport people other than your staff. Whatever the case may be, auto insurance can help pay:
- Expenses related to car damage;
- Personal or third-party injury expenses;
- Damage to others; and
- Destruction of someone else’s property.
Auto insurance costs depend on several variables, not the least of which is the driver’s driving record:
- Employees’ records behind the wheel of the vehicles;
- Cost to repair or replace the cars;
- The policy’s protections;
- Traveled distance;
- Vehicle usage; and
- The area in which you park.
Almost everywhere in the United States, commercial vehicles must have a certain amount of liability insurance, including protection against uninsured drivers. For commercial auto insurance, construction companies and independent contractors pay an average monthly premium of $150, or $1,820 annually.
There is a lot of danger involved in the contracting industry. That’s why the average insurance cost for this profession is higher than for others.
While the specific policies you need as a contractor will vary depending on your business, you should always consider the four we’ve discussed in this article.
Choose JMG for Contractor Insurance Needs
We at JMG Insurance truly understand your predicament, as you not only wish to safeguard your company but also must do so to provide a sufficient financial foundation upon which to build.
Because of this, JMG Insurance sets out to assist small business owners by providing temporary general liability insurance. Contractors, or those needing other types of insurance, can obtain coverage inexpensively.