The 8 Top Business Insurance Options for Contractors 

Business insurance for contractors is one of those things. 

You know it does you good. It protects your financial health. It’s a must-have for doing what you do safely and, in some cases, legally. 

But at the end of the day, it’s an expense—one that may or may not pay off. 

To help you find your way through the maze of insurance options, we’ve put together this comprehensive guide. Let’s unravel the jargon, pull apart the fine print, and get clear on the best-fit solution for your business. 

First, we’ll unpack why you need insurance in the first place and why choosing the right product is so important. 

Then, it’s on to our business insurance buying guide. This gives you the top factors to think about before you sign the dotted line. 

We’ll share eight business insurance options worth your consideration. We’ll look at the pros and cons of each too. 

Finally, we’ll wrap up with our top takeaway tips. Use these to make insurance a business asset, not a meaningless expense. 

We’ve got a lot to cover, so let’s get started now. 

The Importance of Choosing the Right Business Insurance for Contractors 

Working as a contractor comes with risks. You face them day in and day out. They’re unavoidable, and should the worst-case scenario play out, you need a safety net. 

Business insurance for contractors is exactly that. It protects your business from unexpected problems—some of which can cost you big time. 

Here are just three of the advantages of choosing the right insurance for your company: 

You Protect Your Financial Health 

What would happen to your finances should an accident occur on the job? What if you damaged property? Or your work vehicle was stolen? 

These aren’t great situations to think about, but they are possible. They’re also potentially expensive to fix. 

If you have the right insurance product, however, it’s the insurer—and not your business—that pays. 

You can cover related expenses without compromising your financial health. This can truly be the difference between staying in business and closing shop for good. 

You benefit from: 

• Minimal financial loss 

• Covered legal costs 

• A steady cash flow and healthy savings 

You Build and Maintain Trust with Clients 

More than 9 in 10 business executives agree that building trust lifts their bottom line. But according to PwC’s Trust Survey: 

“Trust in many institutions is declining, which is why it’s at a premium in business.” 

You can use your trustworthy reputation as a competitive differentiator. But first, you need the right insurance to prove to your customers that you are professional and reliable. 

When you’re insured, clients can rest easy knowing you are prepared for anything. What’s more, they know that their financial interests will be protected should something go wrong. 

You benefit from: 

• Greater peace of mind 

• Improved credibility 

• A competitive edge that wins you more contracts 

Be Compliant with Laws and Contracts 

You might be required by state or federal law to have certain types of insurance. Without it, you might be fined for operating. You could even lose your license. 

In addition, some clients want you to have insurance before they sign a contract. No insurance means no job—it’s that simple. 

In contrast, if you have the right insurance coverage, you stay compliant. You have the policies needed to chase those big business opportunities when they come up. 

You benefit from: 

• Compliant operations, which avoid legal issues 

• Opportunities to take on high-value contracts 

• Potentially higher revenue 

Buying Guide for Business Insurance for Contractors 

Choosing the right insurance is a lot like selecting the best tools for the job. It’s got to fit your needs and perform its function. It also has to meet your budget. 

With so many options out there, it’s only natural to feel overwhelmed. But with a clear plan and armed with knowledge, you can make a smart decision that protects your future. 

Here are some of the must-consider elements when buying business insurance for contractors: 

Type of Work You Perform 

What type of work do you do? Are you a roofer or an electrician? Are you a plumber? 

The insurance you buy should match your job. For example, say you often work at heights. You’ll need coverage for potential falls. 

Level of Risk Involved 

How risky is your work? For example, a painter might not need the same level of coverage as a demolition worker. 

Thinking about your day-to-day exposure to risk helps you align your coverage with your needs. You can pay for the exact coverage you need and avoid overspending. 

Specific Coverages You Need 

Are there any specifics you need covered by your insurance? 

For most contractors, general liability insurance is a no-brainer. It’s the coverage that protects you financially when accidents or damage happen on the job. 

But it’s just a starting point. You might need additional insurance too. For example, if you have employees, you will need workers’ compensation insurance. 

Policy Limits and Deductibles 

How much are you able to pay should something go wrong? This question will help you determine the right policy limits and deductibles. 

• Policy limits are the maximum amount your insurance will pay out. 

• Deductibles are what you pay out of pocket before insurance kicks in. 

How do these impact your policy? 

• Higher limits offer more protection but come with higher premiums. 

• A higher deductible can lower your premium, but you’ll pay more if something goes wrong. 

You’ll want to strike a balance between the two. At the same time, you’ll need to consider your insurance budget and make sure the policy fits. 

Experience and Claims History 

Have you ever made an insurance claim before? This can impact your payments. 

On the one hand, say you’ve been operating for 10 years and have never made a claim. From the insurer’s perspective, you are low risk. This can help you qualify for lower premiums. 

On the other hand, imagine you’ve been running your business for just 12 months. Already, you’ve made three claims. The insurer might see you as a higher risk. This means your rates might be higher. 

Insurance Provider Reputation 

Is the provider reliable? Do they have a good reputation? Look for an insurer that’s trusted and has lots of positive reviews. 

In addition, some providers specialize in business insurance for contractors like you. This can help you gain access to coverage for niche or industry-specific costs. 

Customer Service and Support 

Is customer support fast and helpful? 

When something goes wrong, you want your insurance provider to be there for you. You don’t want to talk to 10 different people and explain and re-explain what happened. 

Making a claim shouldn’t be a headache, so check that your insurer is easy to contact and responds fast. 

Cost of Premiums 

How much can you afford to spend on insurance? 

Yes, it’s an expense. But it’s also an investment. You need to find the middle ground between cost and coverage. 

To do this, compare providers. Look beyond premiums too. Choose a solution that meets your needs. Paying a little more now might save you a truckload further down the line. 

Flexibility of Coverage 

Do you plan to grow your business in the future? 

For example, you might start out as a handyman. A few years on, you could decide to train as an electrician and provide electrical services. Your insurance should adapt along with you. 

Look for policies that allow you to adjust your coverage as your business changes. 

The 8 Top Business Insurance Options for Contractors 

The time has come to select one or more insurance options for your business. So what should you be looking for? 

To help you with your search, we’ve put together a list of the top eight solutions. Each one of these meets the following criteria: 

• Offers a range of coverage options, so you can find a product that meets your specific needs and budget 

• Helps you stay within budget thanks to affordable premiums 

• Is available from reputable insurers with quick and reliable claims processing 

• Can be scaled up or down as your business grows, changes, and evolves over the years 

With these key features in mind, let’s get right into our list. 

Option 1: General Liability Insurance 

Most contractors need general liability insurance. 

This coverage protects you against what’s called third-party claims. This means it covers your costs should someone—whether a client or member of the public—be injured. 

It also protects against property damage and helps you pay for legal counsel. 

Benefits include: 

• It covers injuries and property damage. While not a weekly thing, these situations do happen. 

• It helps you pay for legal defense and settlements should a client or someone else sue you. 

Potential cons include: 

• You don’t get coverage for damage caused by faulty work. 

• You’re not covered for expenses related to employee injuries. You’ll need workers’ compensation insurance for that—there’s more on this to come. 

• If you work in a high-risk industry, your premiums might be high too. 

Option 2: Workers’ Compensation Insurance 

Do you employ staff? You’ll need workers’ compensation insurance. 

These policies cover medical expenses and lost wages if an employee gets injured or sick due to work. 

For example, if one of your workers gets injured while installing a roof, this insurance helps pay for their medical treatment. It also replaces a portion of their lost wages while they recover. 

Benefits include: 

• You’re covered for both medical expenses and lost wages. 

• It protects you from potential lawsuits related to injuries on the job. 

• You maintain compliance. If you have employees, most states require you to have workers’ comp. 

Potential cons include: 

• It can be expensive for high-risk jobs. 

• If you’ve made claims in the past, it can get expensive. 

• It might not cover injuries to independent contractors or subcontractors. Always double-check your policy. 

Option 3: Commercial Auto Insurance 

Commercial auto insurance is a must if you use vehicles for your contracting business. It covers accidents and damages involving your work vehicles. 

Say you or an employee gets into an accident while driving to a job site. This insurance covers the damages to the vehicle and any property involved. 

Benefits include: 

• It covers repair costs for work vehicles damaged in accidents. 

• It gives you liability coverage if you or your employees cause damage or injury while driving. 

• You will likely be covered for theft or vandalism of work vehicles. 

Potential cons include: 

• Expect higher premiums if you have multiple vehicles or long driving distances. 

• It may not cover tools or materials stolen from the vehicle unless you add specific coverage. 

• It’s not always included in general business insurance packages. You might need separate policies. 

Option 4: Professional Liability Insurance 

Professional liability insurance is the same as errors and omissions (E&O) insurance. 

It’s a good choice if you offer specialized services or advice. It covers you if a client says your work caused them financial harm. They might claim you made an error or omission or were negligent. 

Imagine you design the plumbing system in a new build. It breaks down, and the homeowners are forced to make a costly repair. They might come to you. 

This insurance would cover the legal costs and potential damages. 

Benefits include: 

• It protects you against claims that your work was faulty or advice incorrect. 

• You’re covered for legal fees and any settlements reached. 

• It’s a wise option if you offer design or consulting services. 

Potential cons include: 

• You’re not covered for any intentional omissions or misconduct. 

• If you operate in a higher-risk field like engineering, you might pay higher premiums. 

• Policies can vary, and some situations might not be covered. 

Option 5: Inland Marine Insurance 

Don’t let the name fool you—this type of insurance has nothing to do with the water. 

Instead, it covers tools, equipment, materials, and other job-related gear in transit or stored temporarily at a job site. 

If you are someone who often moves valuable equipment or machinery from place to place, this might be a good option. It’s also a smart investment if you often have tools stolen from your job sites. 

Benefits include: 

• Your tools are protected when being transported and stored. 

• It covers a huge range of tools and equipment. This includes everything from hand tools to heavy machinery. 

• You can customize your policy to cover specific high-value items. 

Potential cons include: 

• You might need documentation that proves ownership to make a claim. 

• Your premiums can add up fast if you have quite a few valuable items. 

Option 6: Business Owner’s Policy (BOP) 

BOP is a kind of all-in-one insurance solution. It combines a few different types of coverage into one policy. Usually, it includes: 

• General liability insurance 

• Property insurance 

• Business interruption insurance 

Benefits include: 

• You get comprehensive coverage without taking out multiple policies. 

• It’s typically cheaper than buying each policy separately. 

• It’s easier to manage and budget for. 

Potential cons include: 

• It’s not very flexible if you have unique business needs. 

• It generally has limits on the value of property covered. This means you might need additional policies anyway. 

• It’s best for small and medium-sized businesses. If you have big growth plans, it might not be future proof. 

Option 7: Builder’s Risk Insurance 

Builder’s risk insurance covers buildings under construction. It also protects the materials and equipment kept on-site. 

It’s a must-have if you are involved in larger-scale construction and renovation projects. If something like a fire or weather event should damage the partially completed structure, the insurance can help you rebuild. 

Benefits include: 

• It protects you against risks like fire, theft, weather-related damage, and even vandalism. 

• You can tweak your policy so it aligns with specific project or job site needs. 

Potential cons include: 

• Coverage ends once the project is done. 

• It doesn’t cover accidents involving workers. 

• Your premium might vary based on the scope, location, and duration of the project. 

Option 8: Equipment Breakdown Insurance 

Equipment breakdown insurance—also called boiler and machinery insurance—covers the cost of repairing or replacing equipment. 

If you rely on expensive machinery or equipment to serve your clients, this could be a good extra policy to have. 

Benefits include: 

• It covers both repairs and full replacements. 

• You can potentially avoid downtime by getting equipment back up and running fast. 

• Your policy might include coverage for lost income if the breakdown disrupts your business. 

Potential cons include: 

• It doesn’t cover damage due to normal wear and tear or external factors. 

• You might need to show proof that you regularly maintain your equipment.