Under-insured is the most expensive mistake a contractor can make. One lawsuit, one employee injury, or one vehicle accident without proper coverage can bankrupt your business.

Required Insurance

General Liability ($1,500-3,000/year)

Covers damage to customer property, bodily injury to third parties, and lawsuits. Minimum $1M per occurrence, $2M aggregate. Commercial customers often require $2M-5M.

Workers Compensation

Required in almost every state once you hire your first employee. Covers employee injuries on the job. Rates vary by trade and state - HVAC and electrical typically pay 3-7% of payroll.

Commercial Auto ($1,200-3,000/year per vehicle)

Personal auto policies don't cover work use. Your personal insurance will deny any claim that happens while you're driving for business.

Recommended Insurance

Umbrella/Excess Liability ($500-1,500/year)

Adds $1M-5M in additional coverage on top of your GL and auto policies. Relatively cheap for the protection it provides.

Tools and Equipment ($200-800/year)

Covers theft or damage to your tools and equipment. Your general liability policy doesn't cover your own property.

Professional Liability/Errors and Omissions ($500-2,000/year)

Covers claims related to faulty workmanship or professional advice. Important for contractors who provide design services or engineering recommendations.

Cyber Liability ($500-1,500/year)

If you store customer data (credit cards, addresses, personal information), cyber insurance covers data breach liability.

How to Save on Insurance

1. Bundle policies with one carrier for multi-policy discounts (15-25%)

2. Maintain a clean claims history - each claim raises your premiums

3. Implement safety programs - documented safety training can reduce workers comp rates 5-15%

4. Install GPS fleet tracking - many insurers offer 5-15% discounts for tracked vehicles

5. Review annually - shop your insurance every 2-3 years to ensure competitive pricing

Review your insurance coverage

Get Started

Common Mistakes

  • Letting coverage lapse (even one day creates uninsured exposure)
  • Using personal vehicle insurance for work trucks
  • Not updating coverage as you add employees or vehicles
  • Skipping umbrella coverage to save $500/year
  • Not requiring certificates of insurance from subcontractors

Worked Example: Insurance Cost vs Risk

5-tech HVAC company. Annual insurance costs: GL ($2,500), workers comp (5% of $350K payroll = $17,500), commercial auto × 5 ($10,000), umbrella $2M ($1,000), tools ($500). Total: $31,500/year. Without insurance: one employee back injury (average workers comp claim: $40,000). One customer property damage claim ($15,000-50,000). One vehicle accident ($25,000-100,000). Any single uninsured incident costs more than 1-3 years of premiums. Insurance is the cheapest protection you'll ever buy.

What Not to Do

  • Don't let any policy lapse. Even one day without coverage creates exposure. If an accident happens during a lapse, you're personally liable for everything. Set up auto-pay on all policies.
  • Don't use personal auto insurance for work vehicles. Personal policies exclude commercial use. If your tech causes an accident in a work van, your personal insurer will deny the claim. Commercial auto is mandatory.
  • Don't skip umbrella coverage to save $500/year. A $2M umbrella policy costs $1,000-1,500/year. One lawsuit that exceeds your GL limits costs $50,000-500,000. The math is obvious.
  • Don't forget to update coverage as you grow. Adding employees without updating workers comp, or adding vehicles without updating auto coverage, creates gaps that insurers will exploit to deny claims.

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