What contractor insurance costs

“What does contractor insurance cost?” has no single answer because it is not one product. A working programme is six separate purchases, each priced on a different basis, and only one of them is optional for most contractors.

An umbrella policy sits above several of these when a contract demands limits higher than the underlying policies carry. It is priced off the underlying programme, so it is usually the last piece bought, not the first.

Builders risk is usually tied to a project rather than to your business — see the builders risk guide and price one with the builders risk calculator. The licensing half of the start-up bill is in the license cost calculator.

Each line has one dominant input. Knowing which is which is how you read a quote instead of simply receiving it.

• General liability — class of work. Roofing, excavation and anything structural sit well above interior finish trades.
• Workers’ comp — the e-mod. Same payroll, same codes, and a 0.85 versus a 1.35 e-mod is a different business.
• Commercial auto — driving records. One bad motor vehicle record can outweigh the vehicles themselves.
• Builders risk — completed value and construction type. Frame construction is materially dearer than masonry or steel.
• Bond — personal credit. On a statutory license bond it is close to the only input that moves.

Whether a liability policy is written on an occurrence or a claims-made basis changes what you pay later; see occurrence vs claims-made.

Two brokers quoting the same contractor can be a long way apart, and it usually is not margin. Four causes account for nearly all of it.

This is where the statutory floors matter as a sanity check. If you license an LLC in California, a quote whose limit sits below $1,000,000 cumulative cannot satisfy the board no matter how attractive the premium is.

Three of them are real, and they compound over years rather than at renewal.

1. § 1Claim frequency. The e-mod is frequency-weighted. Reporting and closing small claims fast beats arguing about big ones.
2. § 2Records. Payroll split by class code, and a certificate on file for every sub. Both are pure premium, recovered at audit.
3. § 3Personal credit. The bond line responds to it directly, and it is the one input a contractor can genuinely improve inside a year.

Put numbers on your own case with the GL calculator, workers’ comp calculator and the bond calculator before you take the first quote to market.