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Contractor insurance protects contractors from unforeseen events that could disrupt business operations

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Contractor insurance safeguards your business against unexpected risks

Contractor insurance is a specialized type of insurance designed to protect contractors from the unique risks and liabilities they face in their line of work.

This insurance typically includes a combination of various coverage types, such as general liability, professional liability, workers’ compensation, commercial auto, and tools and equipment insurance.

Each type of coverage addresses specific risks associated with contracting work, providing financial protection against potential lawsuits, property damage, bodily injury, and other unforeseen events that could disrupt business operations.


Importance of contractor insurance for different types of contractors

client covered by contractor insurance

Construction Contractors

Risk of Accidents: Construction sites are prone to accidents involving heavy machinery, falls, and structural failures. Contractor insurance provides coverage for bodily injury and property damage, protecting against costly lawsuits and medical expenses.

Project Delays and Damages: Builder’s risk insurance covers damage to buildings under construction, ensuring financial stability if a project is delayed or damaged by unforeseen events like storms or fires.

Electrical Contractors

Electrical Hazards: Electricians face risks of electrical fires, shocks, and other hazards. Insurance coverage includes protection against property damage and liability for injuries caused by electrical work.

Errors and Omissions: Professional liability insurance covers mistakes in wiring or installation that could lead to costly repairs or replacements, safeguarding the contractor’s financial health.

Plumbing Contractors

Water Damage: Plumbing work involves risks of leaks and water damage to properties. General liability insurance covers the costs of repairing water damage caused by the contractor’s work.

Equipment Theft: Tools and equipment insurance protects against the theft or damage of expensive plumbing tools, ensuring the contractor can continue operations without significant financial loss.


What Does Contractor Insurance Cover?

contractor helmet closeupContractor insurance is composed of several types of coverage designed to protect contractors from a wide range of risks associated with their work.

Each type of contractor insurance cost also addresses specific areas of risk, providing comprehensive protection for contractors.

General Liability Insurance

Coverage for Bodily Injury and Property Damage

Bodily Injury: This covers medical expenses, legal fees, and settlements or judgments if a third party (such as a client or passerby) is injured on a business property job site. For example, if a visitor trips over equipment and is injured, general liability insurance would cover the associated costs.

Property Damage: This covers the costs of repairing or replacing property that the contractor accidentally damages while performing their work. For instance, if a contractor accidentally breaks a client’s window while working, this insurance would cover the repair costs.

Professional Liability Insurance

Coverage for Errors and Omissions in Professional Services

Errors and Omissions: Also known as E&O insurance, this covers legal costs and damages related to claims of inadequate work or negligence.

For example, if an electrical contractor makes a wiring mistake that causes a fire, professional liability insurance would cover the resulting legal and repair costs.

Workers’ Compensation Insurance

Coverage for Employee Injuries and Illnesses

Medical Expenses and Lost Wages: This insurance, or workers comp, provides coverage for medical treatment and lost wages if an employee is injured or becomes ill due to their job.

For example, if a construction worker falls from scaffolding and is injured, workers’ compensation would cover their medical bills and a portion of their lost wages during recovery.

Rehabilitation Costs: It also covers the cost of rehabilitation services needed to help an employee recover and return to work.

Commercial Auto Insurance

Coverage for Vehicles Used in Business Operations

Vehicle Damage and Liability: This insurance covers damage to vehicles used for business purposes and liability for injuries or damage caused by those vehicles.

For example, if a contractor’s truck is involved in an accident while transporting materials to a job site, commercial auto insurance would cover the repair costs of car accident and any third-party injury claims.

Tools and Equipment Insurance

Coverage for Damage or Theft of Tools and Equipment

Repair and Replacement Costs: This covers the cost of repairing or replacing tools and equipment that are damaged, lost, or stolen.

For instance, if a contractor’s tools are stolen from a job site, tools and equipment insurance would cover the cost of replacing them.

Builder’s Risk Insurance

Coverage for Damage to Buildings Under Construction

Construction Site Protection: This insurance covers damage to buildings and structures while they are under construction.

It includes protection against risks such as fire, theft, vandalism, and certain weather events.

For example, if a partially completed building is damaged by a storm, builder’s risk insurance would cover the repair costs.

Umbrella Insurance

Additional Liability Coverage Beyond Other Policies

Extended Coverage: This provides additional liability coverage that exceeds the limits of existing policies, such as general liability and commercial auto insurance.

For example, if a lawsuit results in damages that exceed the coverage limits of the general liability or commercial property insurance policy, umbrella insurance would cover the excess amount.


How Does Contractor Insurance Work?

client and insurance provider signing contractor insuranceContractor insurance operates as a financial safety net for contractors, protecting them from the financial repercussions of accidents, errors, and other unforeseen events.

Understanding how contractor insurance works involves knowing how to obtain it, how coverage is determined and structured, and how to manage the claims process.

Process of obtaining contractor insurance

1. Assessing Risks and Determining Necessary Coverage

  • Identify Risks: Contractors start by identifying the specific risks associated with their type of work. For instance, a roofing contractor faces different risks than an electrical contractor.
  • Consultation: Consulting with an insurance broker or agent who specializes in contractor insurance can help identify the types and levels of coverage needed based on the contractor’s specific operations and risk profile.
  • Evaluate Coverage Options: Contractors evaluate different types of insurance (e.g., general liability, workers’ compensation, tools and equipment insurance) to determine what is necessary to adequately protect their business.

2. Selecting an Insurance Provider

  • Research Providers: Contractors research and compare insurance providers that offer policies tailored to their industry. This might involve looking at national insurance companies or specialized insurers for contractors.
  • Obtain Quotes: Getting quotes from multiple providers helps in comparing premiums, coverage limits, and policy terms.
  • Application Process: Contractors complete an application, providing detailed information about their business operations, the nature of their work, number of employees, and other relevant details.

3. Finalizing the Policy

  • Review and Adjust: After receiving the initial policy draft, contractors review it to ensure all necessary coverages are included and make any adjustments if needed.
  • Payment: Once the policy terms are agreed upon, the contractor pays the premium, and the insurance coverage begins.

How policies are structured and premiums are calculated

1. Policy Structure

  • Coverage Types: A contractor insurance policy typically includes multiple types of coverage such as general liability, workers’ compensation, and commercial auto insurance.
  • Coverage Limits: Each type of coverage within the policy has specific limits that define the maximum amount the insurance will pay for a covered claim.
  • Deductibles: Policies include deductibles, which are the amounts the contractor must pay out of pocket before the insurance coverage kicks in.

2. Premium Calculation

  • Risk Factors: Premiums are calculated based on several risk factors including the type of work performed, the contractor’s claims history, the number of employees, and the coverage limits selected.
  • Business Size and Revenue: Larger businesses or those with higher revenues may pay higher premiums due to increased risk exposure.
  • Location: The geographic location of the business also influences premiums, with areas prone to natural disasters or higher crime rates potentially leading to higher costs.

Claims process

1. How to File a Claim

  • Notify the Insurer: As soon as an incident occurs, the contractor should notify their insurance provider. This can typically be done online, via phone, or through an insurance agent.
  • Provide Details: The contractor must provide detailed information about the incident, including the date, location, nature of the damage or injury, and any supporting documentation such as photos or witness statements.
  • Complete Forms: The insurer will require the contractor to complete specific claim forms to provide a formal record of the incident.

2. What Happens After a Claim is Filed

  • Claim Review: The insurance provider assigns a claims adjuster to review the claim. The adjuster will investigate the incident, which may involve visiting the site, interviewing witnesses, and reviewing any provided documentation.
  • Assessment: The adjuster assesses the validity of the claim and estimates the cost of repairs, replacements, or settlements.
  • Approval and Payout: If the claim is approved, the insurance company issues a payout based on the terms of the policy. The payout will cover the costs up to the policy’s coverage limits, minus any deductibles.
  • Follow-Up: The contractor may need to provide additional information or documentation as requested by the insurer throughout the process. The insurer keeps the contractor informed about the status of the claim and any required actions.


How Much Does Contractor Insurance Generally Cost?

client covered by contractor insurance working in the sunset

The cost of contractor insurance can vary significantly depending on various factors that influence the level of risk associated with the business operations.

Understanding these factors is essential for contractors to anticipate and manage insurance costs effectively.

Average cost range for different types of contractor insurance

The average cost of contractor insurance varies depending on the type of coverage and the specific circumstances of the contractor’s business.

Here are some general cost ranges for different types of general contractor and insurance:

General Liability Insurance: Typically ranges from $500 to $2,000 per year for a small business or contractors, but costs can be higher for larger businesses or high-risk trades.

Professional Liability Insurance: Costs vary widely based on the contractor’s profession and level of risk, but premiums can range from $1,000 to $5,000 or more annually.

Workers’ Compensation Insurance: Costs are typically calculated based on payroll and the level of risk associated with the contractor’s work. Premiums for liability insurance can help range from a few hundred dollars to several thousand dollars per employee per year.

Commercial Auto Insurance: Costs vary depending on the number of vehicles, usage, and driving records of employees. Annual premiums can range from $750 to $3,000 or more per vehicle.

Tools and Equipment Insurance: Costs depend on the value and quantity of tools and equipment insured. Premiums for small business insurance may range from a few hundred dollars to over $1,000 per year.

Builder’s Risk Insurance: Costs depend on the value and duration of the construction project, with premiums typically ranging from 1% to 4% of the total project cost.

Factors influencing the cost of contractor insurance

1. Type of Work and Associated Risks

The nature of the contractor’s work significantly impacts insurance costs.

High-risk trades such as roofing or demolition typically incur higher premiums due to the increased likelihood of accidents or property damage.

Contractors engaged in specialized or hazardous work, such as electrical or asbestos removal, may face higher insurance costs due to the elevated risks associated with these activities.

2. Size of the Business and Number of Employees

Larger businesses with more employees often face higher insurance costs due to increased exposure to potential liabilities.

More employees mean more opportunities for accidents or injuries to occur, leading to higher premiums.

The scope and scale of operations also influence insurance costs. Contractors with multiple projects or larger-scale projects may require higher coverage limits, resulting in higher premiums.

3. Coverage Limits and Deductibles

Contractors can adjust coverage limits and deductibles to tailor their insurance policies to their specific needs and budget.

Higher coverage limits and lower deductibles typically result in higher premiums.

Conversely, opting for lower coverage limits and higher deductibles may reduce premiums but could increase out-of-pocket expenses in the event of a claim.

4. Location and Regulatory Environment

Geographic location plays a significant role in determining insurance costs.

Contractors operating in areas prone to natural disasters, such as hurricanes or earthquakes, may face higher premiums due to increased property damage risks.

The regulatory environment also impacts insurance costs, with stricter regulations and higher legal liabilities potentially driving up premiums.

Additionally, insurance costs may vary based on local market conditions and competition among insurers.


Where Can You Get Contractor Insurance?

client signing contractor insurance

Contractor insurance can be obtained from various sources, including specialized insurance providers, national insurance companies, and online platforms.

Each option has its advantages and considerations, allowing contractors to choose the most suitable avenue for their business liability insurance needs.

1. Insurance providers specializing in contractor insurance

Specialized Insurers

There are insurance companies that specialize in providing coverage specifically tailored to the needs of contractors.

These insurers have in-depth knowledge of the industry and offer policies designed to protect your business and address the unique risks faced by contractors in various trades.

National Insurance Companies

Established Providers

National insurance companies offer a wide range of insurance products, including contractor insurance.

While they may not specialize solely in contractor insurance, they often have extensive resources for business liability and financial stability, providing contractors with reliable coverage options.

Specialized Insurers for Contractors

Industry-Specific Coverage

Some insurers focus exclusively on providing insurance for contractors in particular industries or trades.

These specialized insurers understand the specific risks associated with different types of contracting work and offer policies tailored to meet those needs.

2. Working with insurance brokers

Personalized Guidance

Insurance brokers act as intermediaries between insurance companies and clients, helping contractors navigate the complexities of insurance policies and find coverage that suits their unique requirements.

Benefits of Using a Broker

Expert Advice

Brokers have specialized knowledge of the insurance industry and can provide personalized advice and recommendations based on the contractor’s specific needs and circumstances.

Access to Multiple Providers

Brokers work with multiple insurance companies, giving their contractors insurance and access to a broader range of coverage options and pricing.

Assistance with Claims

Brokers assist contractors throughout the business insurance claims process, advocating on their behalf and ensuring fair treatment from insurance companies.

3. Online platforms and marketplaces for comparing quotes

Convenience and Accessibility

Online platforms and marketplaces allow contractors to compare insurance quotes from multiple providers quickly and conveniently, often without the need for face-to-face meetings.

Pros and Cons of Using Online Services

  • Efficiency: Contractors can compare quotes and coverage options from multiple insurers in a matter of minutes, saving time and effort.
  • Transparency: Online platforms often provide clear, detailed information about coverage terms, premiums, and policy features, empowering contractors to make informed decisions.
  • Lack of Personalization: Online services may not offer the same level of personalized guidance and expertise as working with a broker, potentially leading to overlooked coverage needs or misunderstandings.
  • Limited Support: Contractors may have limited access to support and assistance in navigating complex insurance policies or handling claims.
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Commercial General Liability Coverage
Risk Factor

As a contractor, your business may be susceptible to many risks, such as claims due to bodily injury, property damage, personal injury, and more. And, if you hire other contractors to perform work on your behalf, you can be held responsible for any damage they cause on the job.


Commercial general liability insurance is an absolute necessity for every contractor. This type of protection provides broad coverage for premises, operations, products, and claims to third parties or property when you are deemed responsible and liable. It will also pay to defend any covered lawsuit or action regardless of its merit.

Commercial Property Coverage
Risk Factor

When a fire, theft, or another type of disaster strikes, your commercial property and everything within it can suffer a significant loss. This can have a detrimental effect on your business.


Commercial property insurance can help protect the property your business owns and leases, including things like equipment, inventory, furniture, and fixtures. Whether you own your building or lease your workspace, commercial property insurance can be purchased separately or can be combined with other necessary coverage to protect your business’ physical assets.

Contractors' Equipment Coverage
Risk Factor

You’re constantly moving your tools from one job site to another, exposing your contractor business to potential loss due to damage or theft. And without your specialized tools and equipment, your job site may come to a screeching halt.


As a contractor, you need contractors' equipment insurance - a policy specially designed to protect your tools and equipment on the move. The policy will cover equipment for a variety of losses, including fire, explosion, vandalism, theft, collision with other equipment or objects and overturning. Unlike standard commercial property insurance policies, contractors' equipment insurance often covers losses caused by floods and earthquakes.

Builders Risk and Installation Insurance
Risk Factor

A building under construction is not covered under a standard building insurance policy or a home insurance policy since it is not a complete structure. As a contractor, you may be responsible for unique loss exposures related to buildings under construction such as the theft of building materials and high valued equipment such as generators and compressors.


Builders risk and installation insurance provides coverage for homes or buildings while undergoing construction, until they are completed. The policy covers the contractors’ interest in materials at the job site before they are installed, construction materials in transit designated for the contractors' equipment insurance–a policy specially and the value of the property being constructed until it is completed.

Workers’ Compensation
Risk Factor

If one of your employees receives an injury or becomes ill due to a work-related occurrence, you are required by law to have the proper coverage in place.


Workers' compensation protects your employees should a job-related injury or sickness occur during the course of employment. This coverage is required by law and may vary by area, so be sure that you understand your obligations for all physical locations where your business operates in and all physical locations where you hire your employees.

Business Auto Insurance
Risk Factor

As a contractor, you have many exposures associated with your business vehicles–owned or leased. With a fleet of cars, trucks, vans, or other types of vehicles used in the course of business, a single accident can potentially put your contractor business in financial jeopardy.


Business auto insurance provides coverage for vehicles owned or leased by a contractor and provides coverage for bodily injury, property damage, and other exposures, and could include comprehensive and collision coverage as well.

Hold Harmless / Additional Insureds
Risk Factor

If you are performing as a contractor on a construction project where other contractors and vendors are involved, you could be held liable for any damages or injuries caused by the other contractors or vendors, leaving you with costly legal fees and settlement costs. Your business needs to be protected against the risk of some other company, vendor or subcontractor causing damage to people or property of your mutual customer.


Consider having a contract in place with each entity that includes a hold harmless agreement in your favor. A hold harmless agreement provides that the entity will hold you harmless for any injuries or damage caused by their negligence. In addition, the contract should require that the entity list you as an additional insured on their policy. This may provide you with coverage under their policy for injuries or damage they cause if you are named in a lawsuit.

Commercial Umbrella / Excess Insurance
Risk Factor

Losses and lawsuits are quite common in the construction business, and settlements can be substantial. If your business is found to be responsible for damage or injury on the job site, you could be facing a large liability loss that exceeds the basic limits of your standard policy.


You should consider purchasing a commercial umbrella insurance policy which provides higher limits, typically between $2,000,000 and $10,000,000, and often broadened coverages. Coverage is extended over various policies, including general liability insurance, business auto, and directors and officers liability insurance.

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9300 West 110th Street Suite 275
Overland Park, KS 66210

Overland Park, KS

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Overland Park, KS 66210

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