CHEAPEST CONTRACTORS INSURANCE (HOW MUCH DOES IT COST?)
Cheapest Contractors Insurance
While firms whose employees do no actual construction work are commonly called “paper” contractors, they generally act as “prime” contractors for such tasks as framing carpentry, structural masonry, or metal building erection. Mechanical tasks such as plumbing, heating, and electrical are usually completed by subcontractors.
Once the land has been purchased and the design or architectural work has been done, the general contractor takes the project from the site or land preparation, through excavation and laying of the foundation, to the completion of the building, including the interior finish. Typically, the general contractor first turns the architect’s design into specifications for work and materials, setting quality standards, scheduling the phases of the project, and dictating insurance requirements for the project as a whole and for the subcontractors. The contractor then gets bids (solicits competitive proposals) from potential subcontractors and suppliers.
Together with the customer (the project owner), the general contractor awards the bids to the successful subcontractors. The general contractor is also responsible for complying with all local and state ordinances, codes and zoning requirements, including purchasing the necessary permits and obtaining the necessary surety bonds.
Some business owners have store fronts that potential clients can visit, and if someone gets hurt while visiting, the injured person’s medical bills could become the responsibility of the contractor. Other contractors’ risks come while on the construction site. They could be held liable for accidents or products that cause physical harm and this is why they need the cheapest contractors insurance.
People in the construction and contracting business rely on a type of insurance called general liability insurance. This type of commercial insurance, also known as contractor’s insurance, can offer protection from potential lawsuits if accidents, injuries, or some other types of mistakes happen while on the job (there are also many other policies available, but this GL is foundation).
This type of insurance can be invaluable in protecting a business owner from an expensive setback. The questions many contracting companies ask is, “Where do I find the cheapest contractors insurance?”
When Do Contractors Need Insurance?
As a construction worker or contractor, you may need contractor’s insurance in several different situations. One is if you work with a client who requires this type of coverage. Many clients require proof of this coverage before you begin work on their project.
Another situation where one might need to have contractor’s insurance is if you offer design and build services. If you are sued for professional mistakes in your design work, certain types of contractor’s insurance can protect you from financial loss.
You might also need the cheapest contractors insurance if you are hired by a contractor to be part of a larger project. General contractors frequently require subcontractors to maintain their own insurance rather than provide the coverage themselves.
When in doubt, talk to your insurance agent and your client and find out what types of contractor’s insurance you need for the types of services you provide. Having the right kind of coverage allows you to protect your business while fulfilling the obligations of your job.
How Does Commercial Insurance Protect Contractors?
Having the cheapest contractors insurance protects your business in a variety of ways. First, it is a survival plan for when things go wrong. Accidents happen even in the most controlled and careful environments. They are unpredictable, but coverage can help handle these unexpected events without jeopardizing the stability of your business.
Contractor’s insurance protects your assets. If a third-party claims that you or your services caused property damage or physical harm and you don’t have adequate coverage, you would be responsible for paying those damages out of your own pocket; jeopardizing your bottom line.
Lastly, having cheapest contractors insurance coverage allows you and your employees the comfort of carrying out the duties of the job without worry of uncertainty. Contractor’s insurance protects your business and individuals employed by you from claims brought against the company or an individual within the company.
What Types Of Commercial Insurance Policies Should Contractors Should Have
There are several types of business insurance policies that general contractors are either legally or contractually required to carry or should strongly consider carrying. These policies provide protection for your property, the property of the clients you serve, as well as accidents and injuries your clients or employees could sustain. Business insurance policies that are considered crucial for general contractors include:
Commercial General Liability – Considered the most essential form of insurance coverage for business owners in every industry, commercial general liability coverage provides for the risks that are commonly associated with owning and operating a business, such as third party injuries and property damage. For instance, if a client sustains an injury on the property you operate your general contractor business out of and files a lawsuit, commercial general liability insurance would help to cover medical costs and legal fees.
The firm may allocate the work to subcontractors who perform specialized tasks in accordance with the terms outlined in the primary contract that is worked out between the property owner and the general contractor. With so many potential risks, contractors general liability insurance helps to protect contractors with lawsuit coverage for accidents, property damage, injuries, and some work mistakes.
Professional Liability – Also known as errors and omissions insurance (E&O), professional liability coverage protects your business against any claims that state you caused your client to sustain financial hardship as a result of a mistake that was made on your behalf (errors), or because you did not perform a service that you said you would (omissions). This type of insurance can assist with the cost of legal defense if your business is involved in a civil suit and damages are awarded in that suit. In some areas, general contractors are required to carry professional liability insurance by law.
Commercial Property – This type of coverage protects the property your business operates out of, including the physical structure of the property and the elements within it. It covers perils, including fire, natural disasters, theft, and vandalism. For example, if a hail storm damages your commercial property or if someone breaks into your business and steals equipment, commercial property insurance would assist with the cost of any necessary repairs or replacements.
Workers’ Compensation – In most states, businesses that hire employees are legally obligated to carry workers’ compensation; however, even if your state (i.e. Texas) does not require this type of insurance, you should still consider carrying it. Workers’ compensation insurance assists with the costs that are associated with injuries or illnesses that employees sustain while they are on the job. For instance, if an employee falls off of a ladder and breaks his back, workers’ comp insurance will cover the cost of medical expenses. It will also pay for any lost wages, rehabilitation, and job training and placement for injured or sick employees.
Although contractors can bid for work despite not having contractors general liability insurance, it is not advisable to work without it. In many cases, the contractor may not be permitted to start the construction work without adequate proof of insurance (Certificate of Insurance – Acord 25). This is because contractors general liability insurance covers third-party claims that a contractor is likely to face during the course of operations.
What Does Contractor Insurance Cover?
As professionals in a hands on, labor-intensive profession, contractors know that accidents happen, no matter how careful they are. The cheapest contractors insurance offers protection from these frequent accidents and the potential lawsuits that come up as a result of them.
It helps to protect the contractor from accidents, liability, and law suits that may result from contracted work. Insurance can help contractors by paying for legal defense, including fees, court costs, awards and judgements. That’s is why all contractors should have contractors general liability insurance that provides protection against claims with regard to property damage, personal injury or negligence. This insurance also protects your business if a third-party, not an employee, gets injured on the work site.
Your own employees’ injuries are not covered by this insurance. For that, a business needs worker’s compensation insurance.
Contractor’s insurance can also protects your business if someone claims you damaged their property or provided faulty workmanship on their project. For example, if a client claims that you didn’t finish a project on time or went over budget, this insurance could protect you from paying for these damages out of your own pocket.
Contractors insurance covers bodily injury and property damage that is likely to occur during the course of work. There are exclusions that exclude coverage for damages that may arise on account of faulty workmanship, provided the damage occurs prior to the completion of the construction project. Contractors general liability insurance also provides coverage for claims arising on account of property damage and bodily injury after the completion of the project.
The Owners and Contractors Protective (OCP), which provides coverage relating to subcontractors and independent contractor, is not included as a part of the general liability policy. Typically, a general contractor is not responsible for the subcontractor’s mistakes. However, attorneys for subcontractors have found loopholes that allow them to sue the general contractor for negligence.
So before hiring subcontractors, the general contractor needs to ensure that the former has their liability insurance. General contractors should always require subcontractors to have their own general liability coverage, and named them as an additional insured on their policy. This will assure the general contractor is notified if the sub cancels their policy.
Contractors general liability insurance also provides coverage for claims on account of personal and advertising injury, which insures the following offenses in connection with the insured’s advertising of its goods or services: libel, slander, invasion of privacy, copyright infringement, and misappropriation of advertising ideas.
A very common request of contractors to get a job or meet a municipal or contractual requirement is an ACORD 25 Certificate of Liability Insurance, which is a document that provides information about insurance policies to third parties.
Following are some contracting business types needing liability protection:
- Air Conditioning
- Alarm Installation, Service And Repair
- Awning Service
- Boiler Services
- Building Cleaners
- Cabinet, Millwork and Finish Carpentry
- Cable Layers
- Ceramic and Mosaic Tile
- Chimney Sweeps
- Construction Zone Traffic Control
- Dock or Pier
- Door or Window Installers
- Earthwork and Pavings
- Environmental Remediation
- Fire Protection
- Fire Suppression Systems
- Floor Installers and Refinishers
- Flooring and Floor Coverings
- Foundation Layers
- Framing and Rough Carpentry
- Garage Door Sales, Service And Repair
- General Manufactured Housing
- Heating Plant Services
- House Cleaners
- House Movers
- Insulation and Acoustical
- Interior Decorators
- Janitor Services
- Lathing and Plastering
- Limited Specialty
- Linoleum Layers
- Lock and Security Equipment
- Low Voltage Systems
- Ornamental Metal
- Painting and Decorating
- Paper Hangers
- Parking and Highway Improvement
- Power Washing
- Reinforcing Steel
- Sanitation System
- Septic Tank Cleaning and Repair
- Sheet Metal
- Sign Painters
- Snow Plow
- Steel Erection
- Structural Steel
- Swimming Pool
- Tank Cleaners
- Termite Control
- Terrazzo, Tile, Marble and Mosaic
- Tree Surgeons
- Warm-Air Heating, Ventilating and Air-Conditioning
- Water Conditioning
- Well Drilling
- Window Washers
How Much Does Contractors Liability Insurance Cost?
How much does contractors general liability insurance cost? It varies depending upon the level of risk, the nature of work, the payroll expenses, the gross receipts of the company and the amount of coverage required. The contractor is required to make a down payment for a general contractor liability insurance, and follow it up with 9 or 10 consecutive monthly payments.
What's The Difference Between Being Bonded And Insured?
We often hear of a contractor being bonded. Bonded is not the same as being insured:
- Bonding protects the clients if a contractor or builder fails to obtain or pay for required permits, fails to pay for supplies or other financial obligations, or fails to complete the job.
- Insurance covers situations where someone or something might be damaged during the process of completing the job.
General Contractor's Risks & Exposures
Premises liability exposures at the contractor’s office and storage facility are usually limited due to lack of public access. Equipment or materials provided by subcontractors are not stored at the building contractor’s office location. At the job site, the general contractor is ultimately responsible for all injuries or property damage that results from construction operations, including those that are due to the acts or omissions of subcontractors.
Lack of adequate communication between the different subcontractors can cause hazardous working conditions, especially if blasting or similar hazardous operations are taking place. Heavy machinery used for excavation may cut power lines, disrupting service to other homes or businesses in the vicinity. Welding presents potential for burns or setting the property of others on fire if not conducted safely. The contractor’s employees can cause damage to the client’s other property or bodily injury to members of the public or employees of other contractors. Tools, power cords, and scrap all pose trip hazards even when not in use. If there is work at heights, falling tools, or supplies may cause damage and injury if dropped from ladders, scaffolding, or cranes.
Failure to protect equipment, building materials, and property of others left at job sites from theft and vandalism may result in a subrogated loss. Construction sites create attractive nuisance hazards, particularly to children who enjoy climbing and vandals after operations have ceased for the day and on weekends. Safety barriers such as perimeter fencing should be used to control access to the jobsite.
Contractual liability exposures are very high for general contractors. While it is important to control physical hazards, the absolute key to successful performance is likely to be the management of contractual language. Catastrophic financial losses and expensive litigation may arise if the general contractor fails to verify that subcontractors’ certificates of insurance are accurate and the limits are adequate for both liability and workers compensation coverages. In addition, the general contractor and project owner must be included as additional insureds on all subcontractors’ policies. The specific terms of the additional insured status may play a significant role in who pays for a loss.
Completed operations exposures are high due to the injury and property damage that can result from improper interpretation of building plans, use of materials that do not meet the quality standards required by design specifications, inadequate construction techniques, or lax supervision of the acts of subcontractors. Hazards increase in the absence of proper record keeping of work orders and change orders, as well as quality control inspections and signed approval of the finished work by the customer.
Workers compensation exposures vary based on the size and nature of the job. When an executive supervisor is only reviewing and giving oversight, the exposure is clerical with some jobsite inspection. However, if actual construction work is done or supervisors remain at job sites continuously, the exposures increase to those encountered by each type of worker on the project. Control of the jobsite is the responsibility of the general contractor, who may be held responsible for any injuries of subcontractors on the job. Verification that every subcontractor carries adequate workers compensation coverage is important.
Surety bond exposures arise from the clients’ requirement that the general contractor obtain financial guarantees for the completion of projects and payment of labor and supplies. Inability of the contractor to qualify for these bonds due to their prior experience and financial condition may indicate a moral hazard.
Property exposures at the general contractor’s own location are usually limited to that of an office. Ignition sources include electrical wiring, heating, and air conditioning systems. If the general contractor is a paper contractor, there will be no yard storage of building materials or equipment since there are no operations other than paperwork. If the general contractor is involved in framework or masonry, lumber or bricks may be stored on site, increasing the exposure to fire, inclement weather, vandalism, and theft.
Crime exposure is from employee dishonesty. Background checks should be conducted prior to hiring any employee. All orders, billing, and disbursements must be handled as separate duties and annual external audits conducted.
Inland marine exposures may include accounts receivable if the contractor bills customers for services, builders’ risk, contractors’ equipment, goods in transit, installation floater, and valuable papers and records for project plans, clients’, subcontractors’, and suppliers’ information. Builders’ Risk is an important coverage for many building contractors. Besides obtaining coverage for themselves, they may need to coordinate their subcontractors’ coverages and terms so limits are adequate for the overall project.
Subcontractors generally have their own equipment with independent coverage. The general contractor may arrange for the lease of larger equipment, such as cranes, for subcontractors to use, either with or without operators. The contractual agreements between the general contractor and the rental firms determine who is responsible for any damage to the rented equipment. If the general contractor performs tasks at the job site, equipment may be subject to water hazards, overturns, drop, and fall from heights, or being struck by other vehicles. Materials and equipment left at job sites may be subject to theft and vandalism loss unless proper controls are in place. Copies of building plans should be kept at an offsite location for easier restoration.
Commercial auto exposures may be limited to private passenger only if executive supervisors simply travel from site to site. If the general contractor is also handling part of the construction, workers, equipment, and supplies may be transported to and from job sites. Vehicles may have special modifications or built-in equipment such as lifts and hoists. Large materials such as air conditioners may be awkward and require special handling and tie-down procedures. Shifting of loads could result in overturn.
If vehicles are provided to employees, there should be written procedures regarding personal use by employees and their family members. All drivers must have appropriate licenses and acceptable MVRs. Vehicles must be maintained and the records kept in a central location.
Insurance Classification Of General Contractors
Insurers classify general contractors using several coding systems. You can wind up paying more for your insurance if your contracting business is not properly classified. Below are the three most commonly used coding systems for general contractors insurance coverage:
- ISO General Liability Codes: 91580, 91582, 91583, 91584, 98502
- NAICS CODES: 236117 New Housing For-Sale Builders | 236116 New Multifamily Housing Construction (except For-Sale Builders) | 236115 New Single-Family Housing Construction (except For-Sale Builders), 236118 Residential Remodelers | 236220 Commercial and Institutional Building Construction, 236210 Industrial Building Construction
- SIC CODES: 1521 General Contractors – Single Family Homes | 1522 General Contractors-Residential Buildings, Other Than Single-Family | 1541 General Contractors-Industrial Buildings and Warehouses | 1542 General Contractors-Nonresidential Buildings, Other Than Industrial
- Suggested Workers Compensation Codes: 5606, 5403
SIC Code 1521 - General Contractors-Single-Family Houses
Here is the official OSHA SIC code description for General Contractors-Single-Family Houses:
General contractors primarily engaged in construction (including new work, additions, alterations, remodeling, and repair) of single-family houses.
- Building alterations, single-family-general contractors
- Building construction, single-family-general contractors
- Custom builders, single-family houses-general contractors
- Designing and erecting combined: single-family houses-general con-
- Home improvements, single-family-general contractors
- House construction, single-family-general contractors
- House: shell erection, single-family-general contractors
- Mobile home repair, on site-general contractors
- Modular housing, single-family (assembled on site)-general
- One-family house construction-general contractors
- Prefabricated single-family houses erection-general contractors
- Premanufactured housing, single-family (assembled on site)-general
- Remodeling buildings, single-family-general contractors
- Renovating buildings, single-family-general contractors
- Repairing buildings, single-family-general contractors
- Residential construction, single-family-general contractors
- Rowhouse (single family) construction-general contractors
- Townhouse construction-general contractors
General Contractors-Residential Buildings, Other Than Single-Family
Here is the official OSHA SIC code description for General Contractors-Residential Buildings, Other Than Single-Family:
SIC Code 1522 – General contractors primarily engaged in construction (including new work, additions, alterations, remodeling, and repair) of residential buildings other than single-family houses.
- Apartment building construction-general contractors
- Building alterations, residential: except single-family-general
- Building construction, residential: except single-family-general
- Custom builders, residential: except single-family-general contractors
- Designing and erecting, combined: residential, except single-family-
- Dormitory construction-general contractors
- Home improvements, residential: except single-family-general
- Hotel construction-general contractors
- Motel construction-general contractors
- Prefabricated building erection, residential: except
- Remodeling buildings, residential: except single-family-general
- Renovating buildings, residential: except single-family-general
- Repairing buildings, residential: except single-family-general
- Residential construction, except single-family-general contractors
SIC Code 1541 - General Contractors-Industrial Buildings and Warehouses
Here is the official OSHA SIC code description for General Contractors-Industrial Buildings and Warehouses:
General contractors primarily engaged in the construction (including new work, additions, alterations, remodeling, and repair) of industrial buildings and warehouses, such as aluminum plants, automobile assembly plants, pharmaceutical manufacturing plants, and commercial warehouses.
- Aluminum plant construction-general contractors
- Building alterations, industrial and warehouse-general contractors
- Building components manufacturing plant construction-general
- Building construction, industrial and warehouse-general contractors
- Clean room construction-general contractors
- Cold storage plant construction-general contractors
- Commercial warehouse construction-general contractors
- Custom builders, industrial and warehouse-general contractors
- Designing and erecting, combined: industrial-general contractors
- Drycleaning plant construction-general contractors
- Factory construction-general contractors
- Food products manufacturing or packing plant construction-general
- Grain elevator construction-general contractors
- Industrial building construction-general contractors
- Industrial plant construction-general contractors
- Paper pulp mill construction-general contractors
- Pharmaceutical manufacturing plant construction-general contractors
- Prefabricated building erection, industrial-general contractors
- Remodeling buildings, industrial and warehouse-general contractors
- Renovating buildings, industrial and warehouse-general contractors
- Repairing buildings, industrial and warehouse-general contractors
- Truck and automobile assembly plant construction-general contractors
- Warehouse construction-general contractors
SIC Code 1542 - General Contractors-Nonresidential Buildings, Other than Industrial Buildings and Warehouses
Here is the official OSHA SIC code description for General Contractors-Nonresidential Buildings, Other than Industrial Buildings and Warehouses:
General contractors primarily engaged in the construction (including new work, additions, alterations, remodeling, and repair) of nonresidential buildings, other than industrial buildings and warehouses. Included are nonresidential buildings, such as commercial, institutional, religious, and amusement and recreational buildings.
- Administration building construction-general contractors
- Auditorium construction-general contractors
- Bank building construction-general contractors
- Building alterations, nonresidential: except industrial and
- Building construction, nonresidential: except industrial and
- Church, synagogue, and related building construction-general
- Civic center construction-general contractors
- Commercial building construction-general contractors
- Custom builders, nonresidential except industrial and
- Designing and erecting, combined commercial-general contractors
- Dome construction-general contractors
- Farm building construction, except residential-general contractors
- Fire station construction-general contractors
- Garage construction-general contractors
- Hospital construction-general contractors
- Institutional building construction nonresidential-general contractors
- Mausoleum construction-general contractors
- Museum construction-general contractors
- Office building construction-general contractors
- Passenger and freight terminal building construction-general
- Post office construction-general contractors
- Prefabricated building erection, nonresidential except industrial and
- Remodeling buildings, nonresidential except industrial and
- Renovating buildings, nonresidential except industrial and
- Repairing buildings, nonresidential except industrial and
- Restaurant construction-general contractors
- School building construction-general contractors
- Service station construction-general contractors
- Shopping center construction-general contractors
- Silo construction, agricultural-general contractors
- Stadium construction-general contractors
- Store construction-general contractors
Minimum recommended GC coverage: Business Personal Property, Employee Dishonesty, Surety Bonds, Accounts Receivable, Builders’ Risk, Computers, Valuable Papers and Records, General Liability, Employee Benefits Liability, Umbrella Liability, Business Automobile Liability and Physical Damage, Hired and Non-owned Auto Liability and Workers Compensation.
Other GC coverages to consider: Building, Business Income with Extra Expense, Earthquake, Flood, Leasehold Interest, Real Property Legal Liability, Contractors’ Equipment, Goods in Transit, Installation Floater, Cyber liability, Employment Practices Liability, Environmental Impairment Liability, Stop Gap Liability and Unmanned Aerial Vehicles (UAV) (Drones).
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SIC Code 1521 - General Contractors-Single-Family Houses
Here is the official OSHA SIC code description for General Contractors-Single-Family Houses:
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