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.
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):
To make things easier, let’s break down each one by its individual costs.
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:
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:
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’ 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:
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:
Premiums are typically calculated using a formula that looks like:
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.
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:
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:
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.
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:
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:
Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.
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