The Best Type of Contractors Insurance: Types, Costs, & so Much More
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The Best Type of Contractors Insurance: Types, Costs, & so Much More
You know that awesome feeling…you’ve won the bid to be a contractor on a great project. You’re ready to get the job done and get paid.
But are you prepared to protect all your wins with all the right contractor’s insurance? Economists expect construction jobs to grow by 11% between 2016 and 2026. As the years go by, you might have a lot more to lose.
Let’s face it, being a contractor is risky business. A lot can go wrong – from an injured employee to damaged equipment. The more business you win, the more you have to lose. Learn to protect the wins and avoid the losses.
Protect yourself from lawsuits, property loss, and accidents. Let’s take a look at the best types of contractors insurance and how much it will cost you.
What Is Contractors Insurance?
You won’t find a provider who sells a policy called contractors insurance. This phrase refers to different policies that contractors need to mitigate business risks. General contractor’s insurance needs typically include:
- General Liability Insurance
- Commercial Property Insurance
- Commercial Auto Insurance
- Workers Compensation
- Surety Bond
How much do these types of construction insurance policies cost? Costs vary based on various factors:
- Type of work you perform
- Location of your business
- Number of employees you have
- Value of your business assets
- Number of years you have been in business
General Liability Insurance
If you accidentally shatter a client’s window while carrying tools, this policy helps cover costs related to the client’s claim. If a client trips over a table saw in your workshop, this policy covers their medical bills.
If a customer sues you, this policy covers your legal expenses. If you lose the case, the policy covers what you owe the customer in damages.
Bodily injury claims or property damage claims that happen as a result of your business’s operations are covered by this type of policy.
You can expect to pay about $1,000 to $2,000 a year for a policy.
Commercial Property Insurance
Do you know how much income you would lose if your tools, equipment or workspace were damaged or lost? Property insurance policies typically reimburse you for lost or damaged equipment due to:
- Fire, wind, or hail
- Theft
- Vandalism
- Accidental damage
- Interruption of business
When it comes to property insurance, don’t assume all damage is covered. Coverage depends on the cause of the damage. Think about this:
Extreme weather events take place six times more often today than they did 30 years ago. Yet most extreme weather events are not covered in property insurance policies. Talk to your insurance agent about which events you want to be covered.
A property insurance policy protects your business’s physical assets. It helps you pay for repairs so that you can start earning income as soon as possible after a loss.
You can expect to pay about $500 to $1500 per year for a policy.
Commercial Auto Insurance
Do you need insurance for your business vehicle? Yes.
Isn’t it covered by your personal auto insurance policy? Probably not!
Even if you use your personal vehicle for business purposes, you still need insurance.
If you or an employee are in an accident, you’re responsible for medical bills and vehicle repairs. A policy typically covers you, your employee and third-parties involved in an accident.
You may need extra coverage if you carry hazardous cargo or rent vehicles.
Commercial auto insurance costs vary. The type of vehicle, distances the vehicle travels, and the type of cargo it carries impact cost.
A policy on a car may cost you about $1,000 a year, whereas a policy on a semi-truck may cost you $2,000 a year.
Workers Compensation Insurance
Contractors with employees are required by law (in most states) to have a workers comp policy. States differ on specific rules and coverage, but most workers comp policies have two parts.
The first part protects you if your employee gets injured or sick due to work performed for your business. The policy helps you pay their medical bills and lost wages. You would pay benefits to survivors if the employee dies.
The second part of the policy covers your legal costs if your employee sues for negligence.
Unlike other insurance policies we’ve reviewed, rates for workers comp policies are determined by each state. Cost is calculated based on three variables: the size of your payroll, the level of risk on the job, and your safety record.
You could pay as little $100 per year to several thousand dollars per year.
Surety Bond
A bond is a promise to your client that you will complete the work agreed upon in the contract. If you don’t keep your promise, your client can file a claim with your insurance company.
There are three parties involved in a surety bond. You (Principal), your client (Obligee), and your insurance company (Surety). In the case of a claim, the insurance company pays your client. But you will reimburse the insurance company.
The cost of a contractor’s surety bond is based on a percentage of the total dollar amount of the bond. Your personal credit score and your experience can also be factors.
Data Breach / Cyber Liability Insurance
Sensitive customer information, like credit card numbers and social security numbers, can be stolen in a data breach.
Penalties, identity theft, legal fees, and credit monitoring are costly. A contractors data breach insurance policy can cover these costs.
The cost of a data breach policy ranges from $1,000 to several thousand dollars annually. Various risk factors impact cost.
What If You Need More Than One Contractors Insurance Policy?
You’re not alone. Contractors often need more than one policy to protect themselves from painful financial losses.
Most insurers offer policies customized to your needs, such as a Business Owners Policy. A BOP packages together two policies for a reduced cost.
The annual premium for a BOP can range from a few hundred to several thousand dollars.
Where Do You Start?
The Small Business Administration recommends four steps to buy insurance for your business:
- Assess your risks
- Find an insurance broker or agent
- Shop around
- Re-assess your insurance needs every year
Contractors insurance coverage can mean the difference between surviving a crisis and having to close the doors on your business. No matter how skilled and successful you are today, a disaster could arise on the next job. Protect yourself today.
