The average uninsured construction claim costs $48,000. The average GL lawsuit against a contractor costs $75,000 to defend — before any judgment. Workers' compensation claims in construction average $38,000 per lost-time injury.
Most contractors buy the minimum required to get licensed and win bids, then find out too late the minimum wasn't enough.
|
Policy |
Protects Against |
Required By |
|
General Liability (GL) |
Third-party bodily injury, property damage, completed operations |
State licensing, most contracts |
|
Workers' Compensation |
Employee injury and illness on the job |
State law (if you have employees) |
|
Builder's Risk |
Damage to the project under construction |
Commercial contracts, lenders |
|
Commercial Auto |
Vehicle accidents in company vehicles |
State law; any owned vehicle |
|
Professional Liability / E&O |
Claims from design errors or professional advice |
Design-build contractors |
|
Umbrella / Excess Liability |
Coverage above GL and auto limits |
Large commercial projects |
Covers third-party claims for bodily injury, property damage, and completed operations.
What GL does NOT cover: Employee injuries (workers' comp) | Your own tools (inland marine) | Design errors (E&O) | Auto accidents (commercial auto) | Pollution/mold (separate endorsements)
Coverage limits:
|
Term |
Meaning |
|
Per-occurrence limit |
Max paid per single claim |
|
General aggregate |
Max paid for all claims in policy year |
|
Products/completed operations aggregate |
Max for post-completion claims |
Standard: $1M/$2M/$2M. Most commercial owners require $2M/$4M.
Annual GL premium benchmarks:
|
Business Size |
Annual Premium |
|
Solo contractor |
$500–$1,200 |
|
Small GC (2–5 employees) |
$2,000–$6,000 |
|
Mid-size GC (6–20 employees) |
$6,000–$18,000 |
|
Specialty trade (electrical, plumbing) |
$3,000–$10,000 |
|
Roofing contractor |
$8,000–$25,000 |
Critical policy features:
Covers medical expenses, lost wages, and rehab for employees injured on the job. Required in most states from employee #1.
Rates are based on payroll and trade classification:
|
Trade |
Rate per $100 of Payroll |
|
Carpentry — residential |
$8–$15 |
|
Electrical |
$4–$8 |
|
Plumbing |
$5–$10 |
|
Roofing |
$25–$45 |
|
Concrete / masonry |
$8–$16 |
|
Painting — exterior |
$8–$14 |
|
General laborer |
$10–$18 |
A roofer earning $60,000/year = $15,000–$27,000 in annual workers' comp premium alone.
Experience Modification Rate (EMR): Multiplier based on claims history. EMR 0.75 = 25% discount. EMR 1.25 = 25% surcharge. Many commercial GCs require EMR below 1.0 to bid. A bad claims year follows you for 3 years.
The 1099 trap: Misclassifying employees as independent contractors to avoid workers' comp can result in back premiums, penalties, and personal liability for injuries. Apply the IRS 20-factor test before classifying anyone as 1099.
Covers the project itself during construction — fire, wind, theft, vandalism.
What it does NOT cover: Your tools and equipment | Employee theft | Earthquake/flood | Faulty workmanship
Cost: Typically 1–4% of completed project value, prorated for construction period.
Example: $500K project at 2%, 8-month build = $6,667
Key terms:
Personal auto policies explicitly exclude business use. Any vehicle used for business needs a commercial policy.
Annual premium benchmarks:
|
Vehicle |
Annual Premium |
|
Pickup / work van |
$1,200–$2,500 |
|
Heavy duty truck (F-350+) |
$1,800–$3,500 |
|
Trailer |
$300–$600 |
Hired and Non-Owned Auto (HNOA): Covers employees driving personal vehicles on business. Add as a GL endorsement for $200–$500/year. If your crew drives their own trucks to the job site, you need this.
Covers claims from professional errors, omissions, or negligent advice — even without physical injury or property damage.
Who needs it: Design-build contractors | Project managers | Green building contractors who guarantee performance | Home inspectors
Cost: $1,000–$5,000/year for small contractors. $5,000–$20,000+ for design-build firms.
E&O is claims-made. When the policy lapses, you lose protection for past work. Buy tail coverage if you stop doing design-build.
Pays above your GL and auto limits when a single claim exceeds them.
Example: $3.5M judgment. GL pays $1M. Umbrella pays $2.5M. Without umbrella — you pay $2.5M personally.
Cost: $500–$1,500/year for $1M umbrella — highest value purchase per premium dollar in construction insurance.
|
Coverage |
What It Covers |
Annual Cost |
|
Inland marine |
Your tools and equipment — anywhere |
$500–$2,000 |
|
Contractor's pollution liability |
Fuel spills, mold, dust migration |
$1,000–$5,000 |
|
Surety bonds (performance/payment) |
Project completion guarantees for public/commercial work |
1–3% of bond amount |
[SVG chart: Insurance as % of revenue — Solo 1.5–2.5% | Small GC 2–4% | Electrical/plumbing 3–5% | Mid-size GC 3–6% | Concrete/masonry 4–7% | Roofing 8–15% | Design-build 4–8%]
Budget insurance as a line item in overhead — not a surprise cost. Most GCs allocate 3–6% of revenue. Roofing: 8–15%. If you're not tracking this, your markup isn't covering the real cost.
[SVG table: Personal auto on job site → no coverage → add HNOA | Tools stolen → GL doesn't cover your property → inland marine | Claims-made E&O lapsed → past work unprotected → buy tail coverage | Sub injury (no WC) → GC may be liable as statutory employer → require sub WC certs | No completed operations coverage → post-job claims denied → occurrence policy | Pollution exclusion → spills/mold claims denied → contractor pollution liability]
Minimum viable (any contractor with employees):
Strongly recommended:
Situational:
Relevant Article:2026 Guide to Construction Software for General Contractors