Contractor Insurance: Contractor Liability Insurance Quotes & More

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A contractor takes charge of a construction project, from planning up to its completion. You also hire other firms to cover some aspects of the work that fall out of your expertise. It’s even safe to say that it’s your responsibility to inspect the quality of the materials to be used.

That said, you have to ask yourself. What if a masonry contractor you hired commits an error when determining the mixture of cement? How bad can things get if a structural engineer you’re working with overlooks some things? Also, how can you ensure that the client stays happy in case supplies from the hardware store don't arrive on time and cause delays?

Contractor insurance can help. With this, you get protection against claims for bodily injuries, negligence lawsuits, business income loss, commercial property damage, and other exposures. Read this guide to know how each type of business insurance for contractors work, the cost of premiums, and more.

Do Contractors Need Insurance?

Contractors might need insurance to satisfy licensing requirements as in the case of those who do plumbing and electrical work.

Most purchase general liability and professional liability insurance to get protection when working with clients and subcontractors. 

In connection, specific insurance products are useful depending on the needs of a contractor. 

For example, general liability insurance is a requirement for renting a commercial space or equipment. Authorities will require workers compensation insurance from contractors who have one or more employees. 

Contractor Liability Insurance

General liability insurance for contractors is a primary inclusion in contractor insurance packages. You use this insurance when:

• An accident happens during the project, and an independent contractor or member of the public sustain property damage or bodily injuries

• Someone slips and falls while in your office

• Another contractor sustained injuries or property damage after renting defective equipment from you

As the examples above show, contractor liability insurance grants protection if you’re liable for bodily injuries or property damage sustained by independent contractors, members of the public, clients, and other third parties. 

You get $1 million-$5 million from general liability insurance. Use this to cover these costs each time a claim is filed:

• Medical expenses of the claimant

• Reimbursement for the damaged property of the claimant

• Attorney fees, court filing fees, and other defense costs

• Court judgments

Claims for bodily injuries or property damage aren’t the only things you have to worry about. Extensions are commonly included in general liability insurance, such as:

• $2 million products and completed operations coverage

• $300,000 tenant legal liability coverage

• $1 million coverage for slander, libel, and copyright infringement

• $5,000-$15,000 medical payments coverage

• $15,000-$25,000 non-owned/hired auto liability coverage

Short-Term General Liability Insurance for Contractors

Thimble, Hiscox, The Hartford, and Putty sell short-term general liability insurance for contractors. A short-term general liability insurance grants protection for hours, days, weeks, or months. In other words, you can use this as a contractor insurance for one day or more. 

Short-term general liability insurance can’t be bundled with commercial property insurance and other business insurance. Moreover, it doesn’t grant additional perks. Nonetheless, consider getting it if you’re looking for emergency coverage to satisfy contractor insurance requirements. 

Professional Liability Insurance for Contractors

Other than bodily injuries or property damage, clients might file a claim because your work has flaws. It’s also possible for them to accuse you of misconduct while providing a service. This isn’t impossible. Here are some examples:

• A Sewell contractor had to pay a $400,000 settlement for a misrepresentation lawsuit filed due to issues in a railroad project in South Jersey

• A contractor was sued by a Cleveland woman who stated allegations of unfinished the project despite receiving the payment

• A Minnesota contractor faced a $1 million federal lawsuit for breach of contract, negligence, and breach of warranty

Clients can always cite issues with your work, even if there are none. And so, it’s good to add a professional liability policy to your insurance plan.

This contractor business insurance provides a minimum of $2 million-$5 million you can use to cover settlements, defense costs, and court judgments if a client accuses you of committing:

• Misrepresentation

• Leaving a project unfinished

• Inflating the cost of your services

• Negligent hiring of subcontractors

• Missed deadlines

• Violation of good faith

• Breach of confidentiality

• Breach of contract

By default, your professional liability insurance only covers the services provided by your business and its employees. Subcontractors aren’t automatically covered. However, you can name subcontractors as additional insureds to protect yourself against liability for their mistakes and oversights. 

Excess Liability Insurance for Contractors

Comprehensively designed contractor and independent contractor insurance packages offer an excess liability policy. Excess liability insurance doesn’t grant protection against any claims. So what does this do?

Also called umbrella liability insurance, excess liability insurance provides additional funds when:

• Your general liability and professional liability insurance run out of money

• Your general liability and professional liability insurance can’t provide adequate coverage for a claim

While available as a stand-alone policy, it’s possible for excess liability insurance to be offered as part of your general liability or professional liability insurance. You get $1 million-$10 million from this. 

Contractors Pollution Liability Insurance

Sometimes, the negligence or oversights of your employees while working on a project can result in the spillage of chemicals or release of harmful gasses and particles. 

Your client has liability over any pollution authorities trace from his project. Nonetheless, you can be pulled into the mess. This is why it’s great to have a pollution liability policy in your general contractor insurance program. 

Pollution liability insurance kicks in when you release waste, chemicals, fuel, waste water, or debris that result in the death of wildlife, environmental harm, bodily injuries, and property damage. 

You get $5 million-$50 million from pollution liability insurance. Use this insurance money to pay for the following expenses:

• Environmental restitution

• Public relations

• Attorney fees, court filing fees, and other defense costs if a lawsuit is filed

• Containment of the pollution

• Compensation for the losses or injuries of persons affected by the pollution you caused

Pollution liability insurance doesn’t provide automatic coverage to independent contractors. You need to add them as additional insureds for coverage to apply. 

Commercial Property Insurance for Contractors 

It’s impossible to work as a contractor if you don’t have an office and warehouse. Consider protecting some of your business’s physical assets with commercial property insurance. 

This type of contractors insurance policy reimburses losses and allows you to cover reconstruction costs if the office or warehouse gets damaged or destroyed because of:

• Fire

• Theft

• Vandalism 

• Civil commotion

• Riot

• Impact

• Aircraft

• Vehicle

• Lightning

• Volcanic action

• Sinkhole collapse

• Winds

• Snow

• Hail

Commercial property insurance also takes care of expenses if valuable equipment gets lost or damaged while in the office or warehouse due to fire, theft, vandalism, and other perils we mentioned above. 

In most cases, commercial property insurance is underwritten broadly. It will also provide these additional perks:

• $5,000-$10,000 for lost or damaged credit cards

• $10,000 for accounts receivable

• $5,000 for off-premises business property

• $2,500 for rented equipment 

Commercial property insurance can be bundled with general liability insurance. If you do this, what you’ll get is a business owner’s policy that grants protection against liability lawsuits and commercial property damage. 

Inland Marine Insurance for Contractors 

Contractors like you constantly ship materials and equipment using your own commercial vehicle or one that’s hired or borrowed. The thing is, commercial property insurance doesn’t cover equipment or materials once they’re transported. 

Because of this, you need to get inland marine insurance. Inland marine insurance will reimburse your losses if the business property gets damaged or lost during the trip because of:

• Fire

• Theft

• Vandalism

• Negligence

• Vehicular accident

• Lightning

• Mysterious disappearance

Builders Risk Insurance for Contractors

Does the contract state that you have responsibility if ever supplies and equipment for the project get lost or damaged? If so, it’s a good idea to add builders' risk insurance to your protection plan. 

Builders risk insurance reimburses losses if the equipment and supplies such as drills, cement, wirings, beams, cables, and mixers get lost or damaged due to the following while the project is ongoing:

• Explosions

• Theft

• Vandalism

• Lightning

• Water

• Winds

• Impact

• Operator error

• Negligence

• Mechanical breakdown

By having a builder's risk insurance, you can complete the project without incurring any additional costs. It also assures your client that you can finish the project even if something happens to the supplies and equipment. 

Equipment Breakdown Insurance for Contractors

Malfunctioning equipment takes a ton of money to replace or repair. This is why you might want to get coverage against such exposure. A product that you’ll find useful is equipment breakdown insurance. 

Equipment breakdown insurance grants $5,000-$50,000 worth of coverage you can use to cover repair or replacement expenses if equipment such as drills, mixers, and others get lost or damaged because of:

• Fire

• Theft

• Vandalism

• Electrical surge

• Electrical shorts

• Operator error

• Impact

• Mechanical breakdown

You can get equipment breakdown insurance as a floater to general liability or commercial property insurance. However, you only get $2,500-$5,000 if you avail the policy this way. Therefore, the best way to get equipment breakdown insurance is to purchase it as a stand-alone policy. 

Commercial Auto Insurance for Contractors 

You might own commercial vehicles as an independent contractor, which employees can use to reach project sites, transport materials and equipment, or haul supplies. 

We suggest you get commercial auto insurance. Commercial auto insurance grants protection against the uncertainties associated with using a vehicle for business purposes. These are the coverages you get from it:

• Auto liability coverage-The auto liability coverage of commercial auto insurance covers medical treatment or reimbursements for financial losses if your business’s vehicle caused an auto accident, resulting in injuries or property damage to third parties

• Physical damage coverage-Physical damage coverage is offered as a collision or comprehensive policy. Collision physical damage coverage takes care of parts repair or replacement if your vehicle got damaged after crashing to an object or another vehicle. On the other hand, comprehensive physical damage coverage takes care of costs if you’re vehicle got damaged because of fire, theft, vandalism, and other covered perils

• Rental reimbursement coverage-Rental reimbursement coverage recovers what you spent for vehicle rental if you need to hire another vehicle because the one that you own can’t be used for the meantime

• Emergency roadside assistance coverage-Emergency roadside assistance accounts for the cost of tire delivery, battery delivery, gas delivery, and other resulting expenses if your commercial vehicle stalls on the road

• Uninsured/underinsured motorist coverage-Uninsured/underinsured motorist coverage covers the medical treatment of the driver and passengers if your commercial vehicle got involved in an accident caused by a driver with no insurance or no adequate insurance

You can use commercial auto insurance to cover multiple vehicles. However, you have to provide their details one by one. If you find this process time-consuming, then get commercial fleet insurance. 

Workers Compensation Insurance for Contractors 

All contractors need to get workers' compensation insurance. After all, workers can easily experience accidents and get injured while working. 

Workers' compensation insurance allows you to cover employment benefits without using company funds when an employee sustains an occupational disease or injury. Specific costs covered are:

• Medical treatment and ambulance fees

• Hospitalization

• Medication

• Rehabilitation and retraining

• Lost wages

• Funeral expenses and allowance to dependents

Except in Texas, you must get workers' compensation insurance wherever state you’re in. Failure to get this insurance when you have one or more employees will result in:

• An accumulating fine 

• A fine that amounts to twice you would’ve paid for workers comp premiums

• Imprisonment

• Cease-and-desist order 

So how much money can you get from workers comp? The worker's comp law of your state determines how much coverage workers' compensation insurance provides. 

Having worker's compensation is very handy. Aside from covering costs, it protects your business against lawsuits too. In most states, employers who have workers' compensation insurance can’t be sued by employees for negligence. This is what’s called an exclusive remedy. 

Employer’s Liability Insurance for Contractors

Employer’s liability insurance comes as part of workers' compensation insurance. This grants protection when employees state that your negligence and inaction caused their occupational disease or injury. 

You get $100,000-$5 million from employer’s liability insurance. Use this insurance money to cover the following costs:

• Compensation for the employee’s pain and suffering

• Compensation for punitive damages

• Defense costs

• Court judgments

Employment Practices Liability Insurance for Contractors

Employment practices liability insurance is another policy that protects your business against claims filed by employees. However, instead of negligence or inaction, this kicks in when an employee cites the following:

• Discrimination

• Sexual harassment

• Wrongful termination

• Retaliation

• Negligent hiring

• Failure to promote

• Exploitation

• Other violations of employee rights

Contractor Insurance Cost

Expect to pay $47 per month or $564 per year for a $1 million general liability insurance policy. This estimate assumes that you work with 5 employees and make $500,000-$750,000 per year.

Many factors determine the independent contractor insurance cost. For one, your choice of insurance company is a prime determinant. Other factors are location, claims history, business history, deductibles, number of employees, and annual revenue. 

That said, here’s a table showing the best companies’ general liability insurance cost for contractors: