Contractor Insurance

The world of insurance is often confusing and frustrating, especially when it comes to specialized industry-specific policies, such as contractor insurance. It’s important to protect your company with adequate coverage so you can focus on growing your business into the future and avoid costly liabilities. 

 

However, choosing the right insurance can seem downright daunting. Let’s take a look at the key coverages and details that all contractors and similar professionals should keep in mind.  

 

Jump To: 

• What Is Contractor Insurance?

• Who Needs Contractor Insurance? 

• What Types of Insurance Do Contractors Need?

• Contractor Insurance State Requirements 

• How Much Does Contractor Insurance Cost? 

• FAQs

• Get Coverage Today!

What is Contractors Insurance?

Contractor insurance is a collection of policies that protect contractors, subcontractors, and independent tradespeople from financial losses. It covers accidents, theft, lawsuits, and lost income to ensure that your business stays secure. Many employers and clients also require it before work can begin.

Who Needs Contractor Insurance? 

Trades that commonly need contractor insurance include:

• Carpenter
• Electrician
• Handyman
• Heating and Air Conditioner 
• Landscaper
• Painter
• Plumber
• Roofer

What Types of Insurance Do Contractors Need?

General Liability

General liability insurance is often required before a contractor can start a job. It helps protect your business from financial loss if you’re found responsible for injuries or property damage.

Tools & Equipment Insurance

This insurance protects against theft, loss, or damage to your tools and equipment. For example, if your cutting tools are stolen from your truck, this policy helps cover replacement costs.

Business Owners Policy (BOP)

A BOP combines contractor liability, personal property coverage, and commercial building protection into a single policy. 

Workers’ Compensation

Workers’ compensation provides coverage if your employees become sick or injured on the job, ensuring financial protection and support. This is required legally in all states, but Texas.

Commercial Auto

A commercial auto policy covers vehicles used for work, including transporting tools and materials. You can also choose to insure attached equipment like ladder racks and permanently mounted toolboxes. However, individual tools and materials are typically not covered under this policy.

Health Insurance

While growing your contracting business is important, protecting your health is just as crucial. Individual health insurance is ideal for independent contractors, while group plans suit those with employees. Most policies cover doctor visits, prescriptions, hospital stays, and preventive care, ensuring you stay healthy and ready for the job.

 

Contractor Insurance State Requirements

Contractor insurance requirements vary by state, with common mandates including general liability insurance, workers’ compensation insurance, and contractor license bonds. Here’s an overview:

 

General Liability Insurance

While not universally mandated by law, many states require contractors to carry general liability insurance as part of their licensing process. For instance, California mandates that contractors maintain general liability insurance and secure a $25,000 contractor license bond.

Workers’ Compensation Insurance

Most states require businesses with employees to carry workers’ compensation insurance. The specific requirements can vary. Check out EZ Insure’s Workers’ Compensation State Guide for more helpful and specific information.  Some states with unique requirements include:

 

• California: Requires workers’ compensation insurance for contractors with employees.
  
• Massachusetts, Montana, Nevada, New Hampshire, New Mexico, Ohio, Washington, and Wisconsin.  These states require state-specific workers’ compensation coverage, either under certain circumstances or always.
  

Contractors License Bonds

Many states require contractors to obtain license bonds to ensure compliance with state regulations and protect consumers:

 

• California: Requires a $25,000 contractor license bond.
• Nevada: Mandates both a license bond and general liability insurance, with bond amounts varying based on project size and scope.
• Oregon: Requires contractors to hold both general liability insurance and a contractor license bond.

It’s important to note that requirements can also vary within states, as local jurisdictions may impose additional mandates. For example, while Texas does not require a state-level general contractor license, many cities and counties do mandate both insurance and bonds for contractors. Given the variability in requirements, it’s essential for contractors to consult their state’s licensing board and local authorities to ensure compliance with all applicable regulations.

 

At the federal level, contractor insurance requirements are generally outlined in the Federal Acquisition Regulation (FAR) and specific federal contract provisions. These requirements are designed to ensure that contractors performing work for the federal government maintain the proper insurance coverage to protect both their business and the government

How Much Does Contractor Insurance Cost? 

The cost of contractor insurance can vary widely based on several factors, including the size of the business, the type of work performed, location, and the specific coverages required. Here are some general estimates for the most common coverage types:

 

1. General Liability Insurance– typically ranges from $400 to $1,500 per year for small contractors, depending on the level of coverage and the nature of the work.
2. Workers’ Compensation Insurance– this can range from $500 to $2,000 per year for small businesses with a few employees, but it can be higher if you have more workers or high-risk activities.
3. Commercial Auto Insurance– for contractors who use vehicles for work, this can range from $1,200 to $2,500 annually for a single vehicle, depending on the vehicle type, usage, and location.

Other factors that affect costs:

 

• Industry Type: Contractors in high-risk industries (e.g., roofing, electrical, or construction) typically pay more.
• Location: Insurance costs can vary by state or region, based on local laws and risk factors.
• Coverage Limits: Higher coverage limits or additional endorsements (e.g., pollution liability, equipment coverage) will increase premiums.
• Claims History: Contractors with a history of claims may face higher premiums.

FAQs

Can I tailor my insurance policy to meet the specific needs of my business?

Absolutely! Most insurers offer customizable packages, letting you choose the coverages that best suit your business. This flexibility ensures you get the protection you need without paying for unnecessary coverage.

 

Which types of insurance are required for my business?

The insurance you need depends on your industry, location, and unique risks. Common coverages typically include general liability, commercial property, workers’ compensation, and professional liability insurance. A business insurance expert can help you create a policy tailored to your specific needs.

How much can I expect to pay for business insurance? 

The cost of business insurance depends on factors such as your company’s size, industry, and the coverage options you choose. For instance, small businesses typically pay between $400 and $2,000 annually for general liability insurance. However, it’s best to consult with an insurance expert to get a more accurate estimate.

Get Protected Today with EZ.Insure!

Now that you have more knowledge and confidence in choosing the kind of coverage you need, let us help you find the perfect coverage for your business. Don’t wait, protect your business today with EZ.Insure!

 

As an insurance leader, our fast and easy process gives you access to a free business insurance quote, comparison tools, and a team of experts to help you find a policy tailored to your needs.

 

For free quotes and more information, click the button below or give us a call at 844-770-0876