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What Factors Influence Contractor Insurance Cost?

Aug 03, 2022

Business insurance

What Factors Influence Contractor Insurance Cost?

As an independent contractor, you may face unique daily risks and challenges on the work site, from third-party injuries to work-related accident liabilities and lawsuits. This is where you must consider buying a contractor insurance policy. It helps you stay protected against unfortunate incidents while keeping your operations afloat. However, how much you are going to pay for the insurance matters. Also, there is no one set price for contractor insurance, as it varies depending on several factors. Read more to find out.

The contractor insurance cost varies according to:

  • Your Employer-Demanded Policies

    The insurance cost depends on the policies or coverages your employer requires you to carry. For example, some employers require contractors to have a general liability policy worth $1,000,000. In such circumstances, the insurance cost is approximately $300-800 per year.

    Some other employers may require general liability, workers’ compensation, errors and omission, and commercial auto coverages, each with a limit of $1,000,000. In this case, you may pay $8000-$20000 depending on your job-specific risk exposures.

    However, on average, the contractor insurance costs perhaps $500 for those involved in an office role and $1200 for those working on a construction job or on-site project.

  • The Type of Your Work

    The coverages you may require depending on your work, and the cost varies accordingly. For example, a general liability policy for an independent contractor doing graphic design costs around $300-$500 because basic coverages may be enough for them.

    However, a general liability policy for an independent contractor performing welding services on oil pipelines may cost $1500-$2500 because they may require additional endorsements, such as tools and equipment coverage (to cover the loss and damage to their welding equipment) and professional liability coverage (covers claims arising from negligent acts and mistakes committed while performing work).

  • Capped Owner Payroll Limits

    Capped owner payroll limits can help you save on your contractor insurance. Generally, insurance companies calculate the independent contractor insurance cost in two ways: payroll amount and gross sales.

    While liability policies use either method, workers’ compensation coverage will always consider the total payroll amount to calculate the cost. If you are the only employee and pay $1 00,000, try to cap your payroll amount as low as possible, say $19,000 in this case.

    Capping your payroll to a minimum amount you receive will help you save on your premiums. However, each insurance provider and the state has various guidelines concerning capping payroll amounts. Therefore, discuss with your provider to ensure whether minimizing the payroll amount can help save money and act accordingly.

Get the Contractor Insurance You Need at Fuller Insurance Agency

Whether you are a plumbing contractor, handyman, or construction contractor working on large construction projects or small residential upgrades, we have covered you at Fuller Insurance Agency. Contact our insurance professionals today to learn more about our contractor insurance or if you need assistance choosing the right policy for your needs.

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