As a contractor, there is a lot of insurance coverage you need in place to run a profitable, protected business. Construction sites, regardless of size, are risky places to work, so it's important that you have General Liability coverage to protect you from minor to major accidents that can occur. But with all the other coverage that you have to purchase, finding the right quote can be confusing and stressful. Let us help you break down the cost and make sure that you have sufficient coverage without draining your account.
What Does General Liability Cover?
General Liability insurance is one of the most important types of insurance that contractors can have. It's best for protecting small businesses from the inherent risks of working with third parties. Some aspects it can cover include:
- Third party injuries
- Third party property damage
- Personal and advertising injury
How Much is General Liability Insurance for a General Contractor?
The average cost of general liability insurance for a general contractor is $142/ month, or $1,700 annually, for a policy with $1M/ $2M limits.
The best way to get an accurate estimate for general liability insurance for a general contractor is to request a quote from an insurance broker, because your quote could be vastly different than another licensed contractor — even if you do business in the same area.
The factors that determine your insurance costs include:
Classification Code and Risk Exposure
Risk is expected in the construction industry, and the higher your risks in your specific specialty, the higher your premiums may be. Classification codes are a significant factor in determining insurance rates for licensed contractors.
A roofing contractor may have higher risks and rates compared to a contractor focused on carpet and tile installation, for example. Contractors providing tree pruning and cutting services have a higher risk and higher insurance premiums than plumbing contractors.
Location of Business
The more populated your area of work is, the higher your risk for claims. Insurance rates can vary significantly from one state to the next, as the cost of settling or paying a claim can vary by location and each state's regulatory climate.
Years in the Business
Your experience and how long the business has been running also plays a role in premiums. Newer businesses have the potential for more risks and claims, which could increase costs.
Coverage and Deductible Limits
Your coverage limit, also known as your coverage amount, is the maximum amount your insurance provider will pay for a claim, and your deductible limit is the maximum amount you are responsible for paying before your insurer starts paying for a claim. The higher your coverage limits, the higher you can expect your coverage costs to be.
Claims History
If your business has received claims in the past or your business demonstrates safety and experience, it can either help to lower or raise your premiums.
Who Needs to Carry Insurance?
Unlike workers compensation insurance, general liability coverage isn't usually required by law. However, if you have an accident occur and aren't covered, it can severely affect your business or even end it. General contractors aren't the only ones who can benefit from GL coverage. If you are a contractor operating in any of the following trades, general liability can protect your business:
- Appliance technician
- Carpenters
- Concrete contractors
- Construction workers
- Drywall contractors
- Electricians
- Excavators
- Handyperson
- HVAC contractors
- Landscapers
- Painters
- Plumbers
- Masons
- Roofers
- Snow plowing
- Tile, stone and flooring installers
- Tree service
- Welders
What Isn't Covered?
There are some accidents that are typically excluded from coverage by most providers; these include:
- Floods (you need to buy a separate flood insurance policy)
- Earthquakes (you need to buy a separate earthquake insurance policy)
- Radioactive fallouts
- War
- Infectious diseases
- Government seizures
- Wrongful termination (unless you have employment practices liability insurance)
- Intentional and fraudulent acts
How to Save
- Compare quotes: Like with any big investment, it's important to check with multiple providers to find the best price. An insurance broker like Aegis Insurance Markets can compare rates for you, saving you time and ensuring you get the best coverage for your budget.
- Bundle up: A business owner's policy (BOP) bundles three important coverage types: general liability insurance, independent contractor liability insurance, and commercial property insurance. Sometimes, purchasing these in a bundle can help reduce costs.
- Implement a safety program: The fewer risks that present themselves, the better. Implementing safety procedures and training your team properly will help reduce risks, claims, and premiums.
- Join a trade or industry association: Joining trade associations with at least 300 members that share similar risks and responsibilities as your business. Industry associations sometimes apply for group rates.
- Pay your premium in full: Sometimes, if you pay your premium in one lump sum, you can save rather than pay monthly.
Given the construction industry's high-risk nature, contractors must have General Liability coverage to protect against unforeseen accidents and damages. While the cost can be on the higher side, understanding the factors that influence these rates, such as risk exposure, business location, and claims history, can provide clarity in what quotes you receive. Additionally, while there are exclusions to the coverage, knowing how to save, such as by bundling insurance, implementing safety measures, and taking advantage of industry association rates, can significantly mitigate these costs. Whether you're an electrician, landscaper, or roofer, proper insurance is not just a recommended step but a necessary foundation for sustainable success in the construction world.