The topic of finding a good and affordable liability insurance policy for remodeling and building contractors continues to come up again and again here at General Contractor License Guide. In our last post on contractors liability insurance, readers weighed in on their experiences, and we got a good discussion going about what to look out for, what policies cost in different parts of the country, and where to shop around.
We wanted to touch on the topic again and provide some additional things contractors should consider when looking for an insurance policy. Whether you are just starting out with a brand-new license or looking to restore your basic contracting license after letting it end, you might not be familiar with current requirements to become a licensed contractor, such as the expenses of a general contractor liability insurance coverage policy.
Standard aspects influencing your insurance coverage policy expenses will differ based on your sales volume, the number of workers you have and the type of your work you do, such as completed woodworking or framing.
Completed work will be lower due to the fact that the volume of work you do will most likely be lower. As a result, most construction professionals and companies need a few pointers in finding insurers who will write contractor’s liability coverage.
According to the US Small Business Administration (SBA),
The coverage you need depends on the type of business you are in and the perceived risk associated with it. For example, a building contractor will need more coverage than a web designer or consultant. Your business location is also another factor that comes into play.
How Much Should You pay for a Contractors Liability Insurance Policy?
Here are some price points to guide you:
- In New England, for example, $900 per year for an insurance coverage policy would be extremely low-cost. In other states, common policies for a million dollar policy may run around $750 yearly. In basic, you desire to look for an insurance coverage policy that charges your rates based on payroll as opposed to income.
- In other states, normal policies for a million dollar policy may run around $750 every year. Here’s a good tip: Look for an insurance coverage policy that charges your rates based on payroll as opposed to earnings (premiums will be much cheaper, as premium rates based on earnings can range from 0.7% of sales to over 3%.).
- If you want to compare quotes, sites like einsurance.com and netquotes have comparison engines. However, before you purchase a policy, ensure that the company your purchase insurance from is authorized to do business in your state. Check their licensure with your state’s insurance regulatory agency. (See how state licensure helps protect consumers?)
Additionally, contractors who are buying liability insurance should pay close attention as to whether risk is transferred in any contract between parties. For example, between a general contractor and a subcontractor, does the risk match the coverage in the insurance policy being considered? Sometimes contractors get burned finding out that their insurance contracts do not provide coverage for contractual liability assumed by parties to a contract. Most insurance available from insurers is on company-standardized policy forms, and may not
meet the unique or individual needs of each contractor business. You would be wise to seek advice from your agent or attorney before finalizing any insurance contract.