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What Is Contractors’ Insurance? 


If you are a contractor looking for ways to manage your business risk, read on to learn about contractors’ insurance.

Contractor’s Insurance

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Are you a contractor looking for strategies to manage your business risk? Do you wish to cover your liabilities and business losses via an insurance policy? Well, “contractors’ insurance” is one policy that helps you achieve your business goals with minimal risk. This article covers everything about contractors’ insurance, so keep reading.  

What Is a Contractor’s Insurance in Simple Language?  

A life insurance policy gives death benefits upon your demise to your family members. A mortgage insurance policy takes care of your outstanding mortgage debt.  

In a remarkably similar fashion, a contractor’s insurance policy aims to protect you from all the unexpected financial losses incurred during your contractor business. A bodily injury or property damage, the insurance policy covers many business accidents and events.  

Typically, a contractor’s insurance is available in two different versions, which are:  

1. General Liability Contractor’s Insurance Policy  

This policy covers all the business events occur on a typical construction site, such as theft of tools, damages to your client’s assets, onsite injuries sustained by your workers, etc.  

For such unexpected events, this policy covers you and reimburses you for all the financial losses sustained.  

2. Professional Liability Contractor’s Insurance Policy  

Being a contractor is a tricky job, as more or less, it involves artistry, perfection, and finesse. There are several instances when the client is not satisfied with your performance and wants you to re-work.  

In such cases, this policy compensates you for either:  

  • Doing the work again as per the requirements of your client   


  • Defending your business  

Apart from the above policies, several other products, like Builder’s Risk Insurance, Tools & Equipment Insurance, aim to cover discrete events and losses.  

Why Should Contractors Prefer to Get a Contractor’s Insurance?  

Contractors Prefer to Get A Contractor’s Insurance
Source: Unsplash

It is a fact that the construction sector is unsure. You do not know what tragedy is going to happen next. No matter how efficiently you manage your workers, construction vehicles, equipment, they will meet onsite accidents.  

Thus, by having a contractor’s insurance, you buy peace of mind and saving several dollars, which otherwise could incur in managing an unfortunate event or situation.  

Let us understand the need to get a contractor’s insurance through a story.  

Noah Crawford is working as a small contractor in the housing market of the Greater Toronto Area.  

A month back, one of his painters met with an onsite accident.  

While painting the ceiling of a room, his painter just tripped off the ladder and fell hard. It led to several injuries, with two fractures in his right leg and three in his spinal cord.  

Although they immediately admitted him to a nearby hospital. Noah was required to foot a medical bill for a whopping $50,000 out of his pocket, as he did not have a contractor’s insurance.  

If Noah had a relevant insurance policy, he could have saved the medical expenses spent on the treatment of his construction worker.  

Noah missed the trick by not buying a contractor’s insurance policy and was required to even withdraw over $30,000 from his line of credit account, further adding the interest cost to his ignorance.  

There are many risks associated with the construction sector and just the tripping of an employee or worker. Let us have a look at the common scenarios where having a contractor’s insurance could come in handy: 

Scenarios Description of the Event 
Scenario I  1. You got a big contract to transform a traditional kitchen into a modular kitchen.  
2. While installing the kitchen cabinets, one of your workers accidentally damaged the refrigerator.  
3. The repair costs amounted to $15,000  
Scenario II 1. You have a few goods transport vehicles you used to ferry construction tools from one site to another  
2. One fine morning, one of your drivers met with an accident causing:  Physical damage to the car, Medical injuries to the car driver, Loss of sophisticated tools  
3. You are required to bear:  Medical bill of your driver, Repair costs of the car, Replacement cost of the tools  
4. The total costs turned out to be $80,000 
Scenario III 1. You got an interview call from a big construction agency that has recently started an affordable housing project.  
2. You were one of the three final contractors shortlisted for the project. 
3. You lost the contract as you did not have a contractor’s insurance policy. 
4. Several project managers, planners, and other executives prefer to hire those contractors who can produce proof of contractor’s insurance.  

It is clear from the above facts that having a contractor’s insurance holds a lot of relevance. It manages business risks besides protecting you from unexpected financial losses.  

Is A Contractor’s Insurance Policy Expensive?  

Cost of contractor’s insurance policy
Source: Unsplash

It is pertinent to note that “construction” is the second largest industry in Ontario and employs over 425,000 people (about half the population of Montana) besides contributing heavily to the Ontarian economy.  

Thus, “Construction” is a developed sector. Several large, medium, and small contractor agencies differ in size, turnover, and the number of projects held or executed.  

Depending on the size of your construction agency, you can opt for different contractor insurance policies offering insurance covers.  

On average, in Ontario:  

  • A $2million general liability contractor’s insurance policy is available at:  
    • An annual premium ranging between $650 to $750 and
    • A monthly premium of $55 to 65  
  • A $5million general liability contractor’s insurance policy is available at:  
    • A monthly premium of $120 and
    • An annual premium of around $1,50  

Wrapping It Up  

Insurance policies protect you from an uncertain future and all possible unexpected financial losses. But this protection certainly comes at a cost as premiums.  

Hence, you can do the math and make a final decision, which will depend upon your business, the type of work performed, your risk appetite, and, of course, your perception.

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