For construction companies in Arizona, having the right insurance is crucial for protecting your business. As a contractor, you face diverse risks ranging from property damage and employee injuries to lawsuits and cyber attacks. Purchasing adequate, cost-effective insurance tailored to your operations can safeguard your assets and future.
This comprehensive guide will uncover typical insurance costs for Arizona contractors across popular policies like general liability, workers’ compensation, bonds, equipment coverage, and more. We’ll explore the key variables impacting your premiums, provide benchmarking data for small, medium and large contractors, and suggest strategies to secure favorable rates.
Arizona’s construction industry demands robust protection. Contractor general liability insurance is essential for operating legally. Exploring workers’ compensation coverage for contractors is equally important. For a full spectrum of general contractor insurance solutions, consult our expert resources.
Why Understanding Contractor Insurance Costs Matters
Gaining clarity on typical contractor insurance expenses in Arizona allows you to accurately evaluate policies suitable for your business. While your exact premiums depend on your unique attributes and risk profile, having this benchmarking data offers extremely helpful context to inform smart insurance decisions.
You can leverage the typical cost ranges we provide to compare against quotes you receive. This helps you determine if the numbers are within an expected range for a company of your size and characteristics, or if they seem unusually high or low.
Knowing approximate costs also assists with budgeting. You can plug in the mid-range premium estimates during your planning to develop proformas and financial projections. This enables you to account for insurance expenses in your operational costs.
Most importantly, understanding factors that influence costs allows you to intentionally minimize risk to lower your premiums. Safety programs, strong contracts, experience, specialty training, and prudent policy limits let you reduce insurance costs through proactive risk management.
While each construction firm is unique, this guide provides a roadmap of what to expect and how to plan for adequate and cost-efficient contractor insurance in Arizona.
Key Factors Influencing Insurance Costs for Contractors
Here are some of the core factors that impact insurance premiums for contractors:
Type of Work – The type of contracting work being done (construction, plumbing, electrical, roofing, etc.) affects risk profiles and therefore insurance rates. High-risk trades like roofing and electrical typically have higher premiums than lower-risk trades like simple home remodeling or painting. Work deemed more hazardous leads to higher general liability and workers’ compensation insurance costs.
Experience – Contractors who are brand new to the business often pay higher premiums until they establish a track record over several years. Insurance companies view experience as an indicator of lower claims frequency and therefore lower risk. Once a contracting business demonstrates longevity and quality work, carriers are often willing to reduce pricing.
Claims History – Prior claims made against a contractor will often result in notably increased premiums, especially if the claims were large or frequent. Too many claims or large losses can even make a contractor uninsurable altogether. Maintaining a clean claims history helps lower insurance rates over time as it builds trust with carriers.
Coverage Limits – Higher levels of coverage mean greater risk transferred to the insurance company. Therefore, policies with greater limits for general liability, workers’ compensation, etc. result in higher premiums. Contractors must weigh the cost versus the amount of protection desired when selecting limits.
Number of Employees – Having more employees on payroll increases the overall risk exposure for workers’ compensation claims, workplace incidents, employment lawsuits and more. Rates will trend higher as small contractors grow their employee count.
Business Size – On the other hand, larger contracting firms achieve economies of scale and often get lower rates based on broader risk distribution. Once reaching mid-size levels, premium costs per employee or sales dollar diminish compared to very small outfits.
Safety Record – A history of OSHA violations, lack of safety training, and frequent minor onsite incidents can indicate inadequate safety investment by a contractor. This raises concerns for insurers, resulting in significantly higher premiums. Proactive safety programs reduce risk.
Insurance Provider – Rates can vary widely between insurance companies, based on an insurer’s financial strength, service reputation, expertise, and competitiveness. It often pays for contractors to shop around between trusted providers.
Policy Deductibles – Choosing higher deductibles (the amount you pay out-of-pocket on an insurance claim before coverage kicks in) can notably reduce premiums. It increases your share of risk but lowers the insurer’s costs.
Subcontractor Practices – Contractors using uninsured subs will shoulder more risk and pay higher premiums unless subs carry their own General Liability and Workers’ Comp. Requiring and confirming subcontractor insurance lowers a contractor’s risk profile.
State Laws – Insurance regulations, required benefits, disclosures, and allowable rating factors differ by state. Arizona laws directly impact workers’ compensation and contractor insurance costs.
With attentive risk management across these variables, contractors can control premium expenses while still properly protecting their business. Now let’s explore typical contractor insurance costs in Arizona.
Small, Medium, Large Contractor Benchmarking
The table below displays insurance coverages typically carried by contractors of different sizes in Arizona. This helps provide a general benchmark to understand how your costs compare.
Keep in mind, premiums always depend on your unique attributes like trade, location, safety initiatives, losses, district class rates, and more. Through the right insurance advisor, contractors can often achieve pricing below the averages and toward the lower end of the ranges provided for their revenue tier.
| Criteria | Small Contractor | Medium Contractor | Large Contractor | XL Contractor |
| Revenue | $150K | $500K | $1M | $2.5M |
| Employees | 1 | 3 | 5 | 10 |
| Autos | 1 | 2 | 3 | 5 |
| Worth of Tools | $5K | $10K | $25K | $50K |
| General Liability | Yes | Yes | Yes | Yes |
| Workers’ Comp | Yes | Yes | Yes | Yes |
| Commercial Auto | Yes | Yes | Yes | Yes |
| Inland Marine | Yes | Yes | Yes | Yes |
| Umbrella | No | No | Yes | Yes |
Next, let’s explore typical premium ranges for the major contractor policies in more detail…
General Liability Insurance Costs in Arizona
General Liability, often called CGL, protects your business if a third party alleges property damage or bodily injury caused by your construction operations, completed work, or your employees. It covers legal defense expenses and settlements or awards.
| Low | High | Average | |
| Electrician | |||
| – Small | $900 | $2,300 | $1,300 |
| – Medium | $3,300 | $4,950 | $3,700 |
| – Large | $6,800 | $9,300 | $7,700 |
| Plumber | |||
| – Small | $3,200 | $12,600 | $7,400 |
| – Medium | $16,300 | $25,600 | $20,200 |
| – Large | $28,000 | $59,700 | $43,000 |
| Painter | |||
| – Small | $1,000 | $4,200 | $1,800 |
| – Medium | $3,100 | $6,100 | $4,400 |
| – Large | $5,200 | $12,900 | $8,400 |
| Landscaper | |||
| – Small | $502 | $2,071 | $1,100 |
| – Medium | $1,045 | $3,842 | $2,800 |
| – Large | $2,191 | $6,996 | $5,000 |
| Handyman | |||
| – Small | $1,300 | $3,500 | $2,400 |
| – Medium | $4,200 | $8,700 | $6,900 |
| – Large | $9,000 | $18,400 | $14,700 |
| Carpenter | |||
| – Small | $1,400 | $5,700 | $3,100 |
| – Medium | $4,400 | $12,300 | $8,900 |
| – Large | $9,400 | $27,800 | $19,400 |
| General Contractor | |||
| – Medium | $4,200 | $12,900 | $7,000 |
| – Large | $8,400 | $18,500 | $11,600 |
| – XL | $21,000 | $43,500 | $27,300 |
Typical policy limits for contractors are $1 million per occurrence and $2 million aggregate. For this level of protection, you can expect Arizona premiums in the following ranges based on contractor revenue:
| Revenue | Premium Range |
|---|---|
| $150,000 | $1,500 – $7,500 |
| $500,000 | $5,000 – $25,000 |
| $1,000,000 | $10,000 – $50,000 |
| $2,500,000 | $25,000 – $125,000 |
General liability premiums for contractors commonly range from 1.0% to 5.0%+ of revenue, scaling up with income. Numerous variables beyond just dollar volume impact contractors’ rates:
Trade Type – The specific work performed matters. For example, roofing contractors see some of the highest premiums due to the exposures of working at heights, hot materials like tar, and the severity of potential fall injuries. Typical roofing liability rates could reach $15,000 for a $500k contractor.
Claims History – If past liability claims were filed against your business, premiums will likely be on the higher end for your income bracket. Too many severe claims can make qualifying for coverage difficult. If your history is clean, you can achieve lower rates.
Risk Transfer – Requiring subcontractors to carry General Liability and Workers’ Comp and collecting proof of insurance helps transfer risk off your shoulders. Rates improve as a result.
Policy Limits – GL rates are based on the level of protection provided. Higher per occurrence and aggregate limits mean greater potential financial exposure for the insurer, leading to increased premiums.
Deductibles – Like car insurance, choosing a higher deductible amount reduces premiums substantially. A $5,000 deductible could reduce costs 25% or more over a $1,000 deductible.
Years Experience – Newer contractors generally have less favorable loss histories to base pricing on, so newer contractors will fall in the upper ranges of the premium costs for their revenue level. Once establishing a track record over 3 to 5 years, contractors become better risks.
Company Reputation – Contractors need strong insurer partners. Premiums can vary based on the financial strength, reputation, expertise, and regional competitiveness of your insurance company. An experienced agent leverages the markets.
Proper Certifications, safety processes, and risk management help contractors substantially control premiums while still securing necessary protection. Now let’s examine a critical companion policy – workers’ compensation.
Workers Compensation Insurance Costs in Arizona
Workers’ compensation insurance covers medical expenses, lost wages, rehabilitation services and death benefits to employees who suffer job-related illnesses or injuries.
| Low | High | Average | |
| Electrician | |||
| – Small | $1,009 | $2,206 | $1,261 |
| – Medium | $2,836 | $6,240 | $3,782 |
| – Large | $4,412 | $9,770 | $6,303 |
| Plumber | |||
| – Small | $1,298 | $2,840 | $1,623 |
| – Medium | $3,651 | $8,032 | $4,868 |
| – Large | $5,679 | $12,575 | $8,113 |
| Painter | |||
| – Small | $1,598 | $3,496 | $1,998 |
| – Medium | $4,495 | $9,888 | $5,993 |
| – Large | $6,992 | $15,482 | $9,988 |
| Landscaper | |||
| – Small | $968 | $2,118 | $1,210 |
| – Medium | $2,723 | $5,990 | $3,630 |
| – Large | $4,235 | $9,378 | $6,050 |
| Handyman | |||
| – Small | $3,713 | $8,122 | $4,641 |
| – Medium | $10,443 | $22,975 | $13,924 |
| – Large | $16,245 | $35,971 | $23,207 |
| Carpenter | |||
| – Small | $2,623 | $5,738 | $3,279 |
| – Medium | $7,377 | $16,230 | $9,836 |
| – Large | $11,475 | $25,410 | $16,394 |
| General Contractor | |||
| – Medium | $11,138 | $24,365 | $13,923 |
| – Large | $17,404 | $38,288 | $23,205 |
| – XL | $32,487 | $71,936 | $46,410 |
WC is mandatory for most employers in Arizona. Contractors with even one employee (including part-time and temporary workers) need a policy. Common limits to carry are $1 million each for bodily injury by accident and bodily injury by disease.
Unlike other policies, workers’ compensation premiums are calculated individually business-by-business based on employee classifications, experience rating, and loss history. Still, the table below provides a helpful benchmark for Arizona:
| Payroll | Premium Rate | Premium Range |
|---|---|---|
| $50,000 | 2.5% – 10% | $1,250 – $5,000 |
| $250,000 | 2.0% – 8% | $5,000 – $20,000 |
| $500,000 | 1.5% – 6% | $7,500 – $30,000 |
| $1,000,000 | 1.0% – 4% | $10,000 – $40,000 |
The premium rate is multiplied by gross payroll to determine costs. Rates depend heavily on your risk class – the type of work your employees perform. For example, roofing carries some of the highest rates at over 10% of payroll. Landscaping is around 3% to 6%. Office employees are just 0.5%.
Your experience rating (E-Mod) is also factored in, based on past loss history. The more costly your prior claims, the higher your E-Mod and premiums. Loss-free contractors can earn the best rates.
A few other variables that influence workers’ compensation premiums:
– Tighter state benefit laws mean higher required premiums
– Larger deductible options reduce premiums but increase out-of-pocket costs
– Safety initiatives may qualify you for premium credits
– Employee leasing services can ease administrative burdens but add fees
While premiums are dictated by state law, having an experienced insurance advisor maximizes opportunities for legal savings. Now let’s examine some popular supplemental coverages.
Additional Insurance Coverages and Typical Premiums
Beyond general liability and workers’ compensation, most contractors need supplemental policies:
Commercial Auto Insurance
Covers vehicles used for business purposes. Typical premiums range from $1,000 – $3,000 per vehicle. Limits often purchased are $1 million combined bodily injury/property damage. Factors affecting premiums include driver safety, vehicle type, mileage, and more.
Inland Marine (Tools) Insurance
Protects equipment and tools onsite and in transit. Typical premiums range from $1,000 – $3,000 annually for contractors with $10,000 to $25,000 in covered equipment. Having clearly documented equipment lists aids proper valuation.
Surety Bonds
Required for public works and many projects. Bid bonds guarantee job bids. Performance bonds protect against non-completion. Payment bonds ensure subcontractors and suppliers are paid if the contractor defaults. Typical premiums range from 1% to 3% of the bond amount based on business credit and financials.
Builders Risk Insurance
Covers construction projects and properties while under construction. Protects against storm damage, theft, vandalism, and more. Typical premiums might range from $1,500 to $7,500 annually per project, depending on size.
Commercial Property Insurance
Safeguards permanent office, warehouse, or shop premises. Typical premiums range from $1,000 – $10,000 annually depending on property value, location, and coverage options selected.
Cyber/Data Breach Insurance
Responds to network security breaches, cyber extortion threats, hacked websites, electronic data theft, and more. Premiums typically range from $500 to $2,000 annually depending on revenue.
Employment Practices Liability
Covers defense costs if sued by employees for discrimination, wrongful termination, harassment etc. Typical premiums range from $2,000 to $5,000 annually. Strict HR practices are key to controlling rates.
Business Income Insurance
Reimburses lost income and extra expenses if disaster shuts down your office or damages a job site. Premiums vary based on revenue and coverage amount selected.
Umbrella Liability Insurance
Provides extra liability limits above your primary policies. Typical contractors carry $1 million to $5 million in additional protection. Annual premiums for $1 million are commonly $750 to $1,500.
The optimal insurance portfolio minimizes gaps while tailoring coverage to match the contractor’s unique risk profile and budget constraints.
Leverage Contractor Insurance Specialists
Are you looking to protect your contracting business with adequate, affordable insurance? Partnering with an experienced commercial insurance advisor makes a critical difference.
Unlike personal insurance, business policies require a broker with specialized contractor expertise across the spectrum of risks your company faces. They understand how to plan for your risks before problems occur.
The right insurance agent guides you in:
– Determining necessary coverages based on your unique operations.
– Structuring optimal policy limits to meet your risk management goals.
– Accessing trusted carriers with competitive contractor rates.
– Confirming any exclusions that could leave you exposed.
– Reviewing mandatory state requirements.
– Identifying potential premium credits and savings opportunities.
– Ensuring compliance with certificates of insurance and other evidence requirements.
– Assisting with claims to advocate on your behalf.
In essence, they become an extension of your risk management team to protect what you’ve built.
Partner with ContractorNerd.com and Save
Are you ready to get strategic about protecting your contracting business in Arizona? ContractorNerd.com has you covered.
With over 25 years of dedicated contractor insurance expertise, we offer:
Specialized Experience – Our independent brokers focus exclusively on contractor risks, coverage, and claims. We become your trusted insurance advisors.
Top Carrier Access – Our carrier partnerships allow us to provide contractors choice among quality insurance options so you can customize coverage that fits your budget and objectives.
Cost Savings – We help contractors maximize savings by packaging policies, exploring credits and discounts, optimizing limits and deductibles, and more.
Don’t leave your business unprotected or overpay for insurance. ContractorNerd.com simplifies insurance so you can focus on your business.
Get matched with a specialist broker for a free consultation and insurance review by simply filling out our form. Let’s make sure you’ve got the coverage you need at a fair price.