How Much Does General Liability Insurance for Contractors Cost?

How Much Does General Liability Insurance for Contractors Cost?

When you’re a contractor, general liability insurance is one of the most important policies you can have. It protects your business if someone is injured or property is damaged because of your work. But one of the biggest questions contractors have is: How much does general liability insurance cost?

The answer depends on several factors. Let’s break them down.

1. Payroll

Insurance companies use payroll as one of the primary measures of business size and risk. A contractor with more employees usually faces higher exposure, which translates to higher premiums. Smaller operations with lower payroll often benefit from more affordable rates.

2. Subcontractor Costs

Hiring subcontractors adds another layer of risk for insurance companies to consider. If your subcontractors are performing higher-risk work, your premiums may increase. How much you spend on subcontractors is an important factor during underwriting—and during audits.

3. Claims History

Your past is a strong indicator of future risk. Contractors with a history of frequent or large claims usually face higher premiums. On the other hand, a clean claims record signals good safety practices and can help keep costs down.

4. Coverage Limits

Coverage limits directly affect cost. Most contractors start with $1 million per occurrence and $2 million aggregate limits. Some carriers offer higher options, such as $2 million/$4 million. Higher limits mean more protection, but also higher premiums. The goal is to balance adequate coverage with affordability.

5. Type of Work

Not all contracting work carries the same level of risk. Roofing, electrical, and plumbing are generally considered higher risk than painting or landscaping. Each trade is rated differently, and working with an insurer familiar with your industry can help you secure better rates.

6. Policy Audits

Contractors’ general liability policies are often audited. At the end of the policy term, the insurer reviews your actual payroll and subcontractor costs. If your business grew, you might owe more. If activity slowed, you might get a refund or credit.

Typical Cost Range

For smaller contractors with limited payroll and subcontractor expenses, premiums may start at just a few hundred dollars per month. Larger contractors with more employees and subcontractors can see costs rise into the thousands monthly.

The best way to know your cost is to work with an insurance professional who understands contractor risks and can match you with the right insurer.

Final Thoughts

General liability insurance is not one-size-fits-all. Your premium depends on the size of your business, type of work, claims history, and the coverage limits you choose. Understanding these factors helps you make smarter decisions and budget effectively for your insurance needs.