If you work as a contractor, your job site is about as risky as they come. Even the most well-oiled project is primed for third-party accidents. A slip and fall, damaged property, you name it—all it takes is one incident to threaten the success of your small business.
This is why almost every contractor will get liability insurance. For a modest upfront investment, you can protect yourself from the inherent risks in your line of work and keep things running smoothly.
But how much does general contractor insurance cost? And is it worth it?
Let’s crunch some numbers.
How much does contractor insurance cost?
It primarily depends on the type of policies you get. But there are also other factors that must be added to the formula. For instance, a contractor will typically have the following types of business insurance (at a minimum):
- Contractor’s general liability
- Workers’ compensation
- Coverage for loss or damage to equipment
- Auto liability
To make things easier, let’s break down each one by its individual costs.
General liability insurance for contractors
General liability coverage is one of the most important types of business insurance a general contractor can have. It protects your small business from the inherent risks of interacting with third parties, such as:
- Third-party injuries
- Third-party property damage
- Personal & advertising injury
General contractor insurance cost ranges from $796 to $1230 per year.1 Across all industries, it’s among the most expensive types of general liability insurance because accidents are so commonplace within the construction industry.
In addition, costs depend on a number of other factors, including:
- Location – The area of operation can have a noticeable impact on the cost of premiums. For example, working in a big city increases the likelihood of an accident occurring since there are more people in close proximity. Your risk increases, so your cost follows suit.
- Crew size – The more people you employ, the higher the chance one (or more) of them will cause an accident. If you have crew working on multiple job sites, that too increases the number of injuries or damages that can occur.
- Coverage limits – General liability coverage via Thimble can have a $1 million or $2 million coverage limit. The higher coverage limit will cost more since it offers greater protection should an accident occur.
Although $800 a year for construction insurance may seem like a lot of money, compared to the sky-high costs of a single bodily injury claim, it’s a negligible expense. It’s paying a bit now to ensure your finances aren’t demolished in the future.
Workers’ comp for contractors
Workers’ compensation insurance is legally required if you have employees (unless you live in Texas). It protects your team from the implications of being injured or getting sick while on the job. This insurance policy can help cover:
- Medical bills
- Continued care
- Settlements
- Missed wages during recovery
- Rehabilitation and retraining expenses
- Funeral expenses
Like general liability insurance, workers’ compensation insurance is generally more expensive for contractors than almost any other field of work, with the average annual cost being $3,264 per year2. Because this insurance is regulated by the state, the cost of a policy is largely dependent on your area of operation.
In addition, there are other factors that contribute to your price, such as:
- Annual payroll
- Your industry
- Different types of work performed by individual employees
- Your claim history
Premiums are typically calculated using a formula that looks like:
- Job classification rate x experience modification factor x (payroll/100)
Equipment insurance for contractors
Your tools and equipment represent a sizable investment. After all, they’re what you use to get the actual work done.
Commercial property insurance protects your equipment and property that is regularly located on your premises, but not when it’s on the job site or being transported between locations. For that, you’d need equipment insurance, also known as inland marine insurance.
This type of policy can help pay to repair or replace tools and equipment that are lost, stolen, or accidentally damaged. At Thimble, if you purchase monthly general liability insurance, we’ll bundle this type of insurance in your policy. Our Business Equipment Protection (BEP) can have a $1000, $2500, or $5000 limit, and you can add up to two $2,500+ items on your policy. Of course, should you not want to protect your equipment with this coverage, the BEP add-on is optional.
Overall, the cost of inland marine insurance largely depends on the size of your business, and total costs of your tools and equipment. That said, it can range from $250 dollars per year to $1,000 dollars per year.
Auto insurance
Does your business have vehicles—owned or leased—it uses for work purposes? If so, you’re legally obligated to have auto insurance. If you only use your vehicle to go between job sites, most likely your personal auto policy will suffice, but you should check with your insurance agent. However, if you carry passengers (crew) or passengers, you’ll likely need a commercial auto policy. Regardless of which one it is, auto insurance can help cover:
- Damage to your vehicle(s)
- Injury to driver or passengers
- Injury to third parties
- Damage to someone else’s property
The average commercial automobile insurance annual cost ranges from $800 to $2,400.3
Aside from the type of vehicle, the price of the auto insurance policy is determined by a variety of additional factors, including:
- The driving records of employees who may be driving the vehicles
- The value of the vehicles or cost to repair them
- The coverages provided by the policy
- Distance driven
- Use of vehicle
- Area where vehicle is principally garaged
Most every state requires work vehicles to carry minimum amounts of bodily injury and property damage liability coverage, and in most cases, uninsured motorist coverage. So, check what the requirements are in your state in order to see what the baseline insurance coverage looks like. That will help you estimate the cost of your insurance policy.
Affordable & flexible protection for contractors
The contracting business is a risky one. That’s why insurance tends to cost more on average than it does for other jobs.
Although the types of contractors insurance you get depend on your unique operations, you should always consider a baseline protection of:
- General liability insurance
- Workers’ compensation
- Equipment insurance
- Automobile liability insurance
We understand you want to protect your business but also need to protect your budget to have enough to grow your business. That’s why we set out to offer short term general liability insurance to help small business owners. You can get affordable on-demand contractor general liability insurance arranged via Thimble. Better yet, our policies can be the hour, day, or month. It’s your choice. You pay when you’re on the job and save when you’re off.
Getting insurance coverage takes less than a minute. Simply download the Thimble mobile app or click “Get a Quote,” input a few brief details about your small contractor business, and we’ll generate a free quote. From there, you can purchase the small business insurance and have a policy and any necessary Certificates of Insurance (COI) in your email inbox instantly!
You focus on constructing buildings. We’ll focus on building you affordable policies.
Sources:
- California Contractors Insurance Services. Contractor General Liability Insurance.
- Insureon. How Much does workers’ compensation insurance cost?
- Trusted Choice. How much does commercial vehicle insurance cost?
