How Much Does Construction Insurance Cost?

Construction companies and contractors contend with a variety of costs that can be difficult to control, from ever-changing local labor rates to the cost of the fuels that power their job site equipment and vehicles. Construction company insurance cost represents a significant line item for most companies, and owners or managers want to ensure that what they are paying for coverage represents a fair cost for reducing their risks.

Because of the many factors that influence construction company insurance costs, it is impossible to provide an overall estimate of those costs. Owners of two similar companies performing excavation may have vastly different excavation insurance costs because their companies and needs are dissimilar. One may specialize in difficult, high-price jobs, while the other has a small operation. The risks each face are also very different, and the policy cost reflects that.

What Determines Construction Insurance Costs?

Many factors enter into determining, for example, general liability insurance cost for contractors. The reason for that is simple: there is so much variability when it comes to computing the cost of contractors' insurance. In fact, the very same contractor may get very different quotes for two projects with nearly identical budgets. That’s because there’s no magic formula for calculating the cost of construction insurance. The premium for every policy reflects who you are and what you do.

Your Business’s Risks

Every business involves some degree of risk. For your business, it might be climate-related as you lose more workdays in the face of extreme weather events. It might be that circumstances have you more leveraged right now than you want. Or it could be how well the business can keep going if something happens to you.

Material cost volatility is another factor carriers are watching closely. When tariffs or supply chain disruptions drive up the cost of materials like steel and lumber, the value of a project in progress can shift mid-build, and could affect the cost of rebuilding after a loss. Carriers factor that into how they price coverage.

Cybersecurity is also becoming part of the conversation. Construction companies increasingly rely on connected job site technology, cloud-based project management platforms, and electronic payment systems. That makes them a growing target for ransomware and fraud, and carriers want to understand how you're managing that exposure.

Insurance carriers pay close attention to the way your business is structured and how it operates because well-run businesses typically have fewer claims.

The Types of Construction Your Company Performs

How much does contractors’ insurance cost? Those who decide are experts in all aspects of construction. They understand what you do well enough to recognize risks you might never consider. The cost of building insurance reflects both the physical risk your employees face every day and the financial risk associated with your specialty. How much does builder’s risk insurance cost? It’s all about the risks you face and how you manage those risks.

They’ll examine data like your OSHA recordables. If the numbers confirm your assertion that safety is priority number one, rest assured you’ll have a lower general contractor insurance cost for your next policy.

What is Covered in a Construction Insurance Policy?

Just as the uniqueness of each business is key to determining general contractors insurance cost, so, too, is the coverage of each business unique. No two construction businesses have the exact same coverage, nor do they pay the same contractor insurance cost. (The same thing applies to the cost of insurance for self-employed contractors.) However, every construction business should, at the very least, have the following types of coverage as part of their construction business insurance cost.

General Liability

General contractor liability insurance cost—true of all types of construction liability insurance cost—provides financial protection in the event someone is physically injured on your property, or if damage to their property occurs while they’re on yours.

For example, if a client wants to tour a project site, then trips over a misplaced broom and calls his personal injury lawyer, your general liability kicks in. The same would occur if an operator dumps a load of gravel right on top of that same client’s new car.

General contractor liability insurance cost, like other types of liability insurance, provides financial protection against these accidents, mishaps and mistakes construction companies might face in the normal course of business. The more you do to reduce the chances of those things happening—such as embracing a strong safety culture—the less contractors’ liability insurance cost you will pay.

Workers’ Compensation

One thing liability policies don’t cover is the costs associated with workers becoming injured on the job or sick because of something in the workplace. That’s why businesses are expected to pay for workers’ compensation insurance. It covers the costs of medical bills and lost wages due to a work-related injury or illness.

One positive about the cost of workers’ compensation insurance is that you can have a significant effect on the policy cost. A key factor in determining the cost of workers’ comp policies is your company’s history of claims over the past three years. By taking steps such as emphasizing safety, businesses see their claims decrease, so the cost of their worker’s comp policy will be significantly lower the following year.

The cost of workers' compensation coverage also depends largely on the nature of the work being performed.

Cyber Liability Insurance

Cyber liability insurance helps companies respond to and recover from the financial impacts of cyber-related events, including data breaches, ransomware attacks, email compromise, and malware. Construction companies are increasingly reliant on cloud-based project management tools, electronic payments, and connected job site technology, making this coverage more relevant to the industry than many contractors realize.

Other Construction Insurance Coverages

Depending upon your situation and the nature of your projects and locations, your insurance broker may also recommend additional coverages. Contractors can purchase a separate tools and equipment insurance policy to fund the cost of replacing or repairing anything that’s damaged, lost or stolen from the site. You may need commercial property insurance if you lease property, own a building or operate from a home office.

Related Reading: Types of Construction Insurance

Exclusions

Every type of insurance policy has exclusions, which are losses that aren’t covered by the policy. It’s critically important to become familiar with those exclusions. If you’re not sure what specific terms mean, or if you have a concern about a particular risk, contact your broker.

Trust Your Broker’s Expertise

Generally, the best way to find the coverage you need at the best cost is to work with an insurance broker who has expertise with insurance for construction companies. Experienced brokers have a solid understanding of the nature of risks associated with construction projects and can make sure your interests are protected.

That matters more now than it did a few years ago. Different coverage lines are moving in different directions. Workers' comp may be holding steady or declining while other coverage costs continue to climb. A broker with deep construction experience knows how to navigate that uneven landscape and structure your program around it.

Learn More

Hylant’s dedicated construction team works with contractors, construction companies, CMs, and project owners to address all aspects of their insurance, including the use of different types of insurance to provide protection during the construction process. Contact Hylant today to discuss all your construction insurance needs.

Related Reading: General Liability Insurance for Contractors

The above information does not constitute advice. Always contact your insurance broker or trusted advisor for insurance-related questions.