HVAC contractors face unique insurance requirements that demand both general liability (GL) and workers’ compensation (WC) coverage. These two distinct policies work together to protect your business: GL shields you from third-party property damage and bodily injury claims, while WC covers employee injuries sustained during heating, ventilation, and air conditioning work. 

Our comprehensive analysis of over 800 HVAC contractor insurance quotes from leading insurers reveals significant variations in premiums based on location, business size, and risk factors. General Liability premiums for HVAC contractors typically range from 1.3% to 2.6% of annual revenue, with national averages showing (based on a blend of GL codes 95647 and 95648):

  • Small operations ($150K revenue): $3,140 average GL premium
  • Mid-size contractors ($500K revenue): $9,390 average GL premium
  • Established companies ($1M revenue): $18,760 average GL premium

Strategic shopping can potentially reduce GL premiums by 38% to 73% when moving from average market rates to the low end of the range. The greatest potential savings appear at the $150,000 revenue level, where the most favorable rates drop to $860 annually—a 73% potential reduction from the national average for contractors who qualify for the best rates.

Workers’ Compensation rates under class code 5537 (Heating, Ventilation, Air-Conditioning and Refrigeration Systems) average $3.14 per $100 of payroll nationally, though state-specific rates fluctuate dramatically from $2.24 to $5.14 per $100.

Real-World Cost Impact

Consider a typical $500,000 revenue HVAC business with three technicians earning $50,000 annually:

  • GL Premium: $9,390 (1.88% of revenue) at national average rates
  • WC Premium: $4,710 ($150,000 payroll × $3.14/$100)
  • Total Insurance Cost: $14,100 annually
  • Maximum Potential Combined Savings: $6,590 through strategic shopping (potential GL savings of $3,580 if qualifying for low-end rates plus WC classification optimization)

Six Major Cost Drivers

1. Classification Codes (Affects both GL and WC differently)

  • GL codes 95647 (no LPG equipment) vs 95648 (all categories) create moderate premium variance
  • WC code 5537 encompasses installation, service, and repair—misclassification into code 3724 (refrigeration only) impacts rates

2. Years of Experience (Primarily GL impact)

  • New contractors face substantially higher GL premiums
  • Experience modifier remains neutral for WC until three years of claims history accumulate

3. Subcontractor Usage (Both GL and WC)

  • GL premiums increase incrementally for every 10% of subcontracted work
  • WC audits require certificates of insurance from all subs or you’ll pay their presumed payroll

4. Revenue vs Payroll (Different metrics)

  • GL premiums scale with gross revenue regardless of profit margins
  • WC costs track total payroll, making labor-intensive operations more expensive to insure

5. Claims History (Varying impacts)

  • Single GL claim can spike premiums significantly for three years
  • WC experience modifier compounds annually—a 1.25 mod means a substantial premium increase

6. Geographic Factors (Distinct mechanisms)

  • GL varies by state tort environment and jury award trends
  • WC follows state-mandated rates and benefit structures

Specialization Rate Analysis – General Liability

You’re absolutely right – I overcomplicated it. Let me correct that:

Understanding HVAC Classification Codes: 95647 vs 95648

Class Code 95647: HVAC Without LPG Equipment

This classification is for HVAC contractors who do not work on liquefied petroleum gas (LPG) equipment. The key distinction is simply the absence of LPG exposure – these contractors can work on both residential and commercial HVAC systems, as long as they don’t touch LPG equipment.

Why This Code Offers Better General Liability Rates:

  • No LPG Risk – Eliminating work on propane/LPG systems removes the risk of gas leaks, explosions, and fire claims
  • Reduced Hazard Profile – LPG equipment carries inherently higher liability due to combustible fuel exposure
  • Simpler Risk Assessment – Insurance carriers view non-LPG HVAC work as more predictable and controllable

Class Code 95648: HVAC Including LPG Equipment

This classification covers HVAC contractors who work on all types of systems, including those powered by liquefied petroleum gas. This is the broader classification that doesn’t exclude any equipment type.

Why This Code Faces Higher General Liability Costs:

  • LPG Exposure – Working with propane and other liquefied petroleum gases introduces explosion, fire, and asphyxiation risks
  • Gas Leak Liability – Improper installation or service of LPG equipment can lead to catastrophic property damage and bodily injury claims
  • Regulatory Compliance – LPG work involves strict safety regulations; violations can trigger additional liability
  • Broader Risk Pool – Insurers must price for worst-case scenarios involving combustible fuel incidents

The core difference is straightforward: 95647 excludes LPG work for better rates, while 95648 includes it and pays higher premiums for that additional exposure.

Workers’ Compensation Note: These contractors fall under WC code 5537, with rates reflecting standard HVAC installation and service work minus the additional hazards of handling combustible gas equipment.

Note: The national GL premium table represents a blend of class codes 95647 and 95648, reflecting the mixed operations typical of most HVAC contractors. Specialists focusing exclusively on one area may see variations from these blended rates.

Geographic Cost Variations

50-State Interactive Heat Maps – General Liability & Workers Comp Analysis

HVAC Insurance Cost Metrics by State

Explore insurance costs and savings opportunities across the United States

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Click on a state to view insurance metrics

The four heat maps above provide instant visual insight into HVAC insurance costs across all 50 states:

1. GL Premium Ranges - Visualize how general liability costs as a percentage of revenue vary nationwide, from as low as 0.3% in competitive markets like North Carolina and Georgia to over 6.9% in high-cost states like New York. Darker shades indicate higher premium ranges, helping you benchmark your current HVAC insurance costs against regional averages.

2. GL Savings Opportunities - Discover potential premium reductions available through strategic shopping, showing the difference between average and low-end market rates. These range from 14.9% in saturated markets like North Dakota to over 64.1% in states with significant carrier competition like Michigan. This map reveals where HVAC contractors who qualify for favorable rates can achieve the greatest potential savings from shopping efforts, with particular opportunities in the Southeast and Midwest regions.

3. Carrier Competition Levels - Understand market dynamics affecting your negotiating power. States with higher competition percentiles (80-100%) including Tennessee, Alabama, and South Carolina offer more carrier options and aggressive pricing for HVAC risks, while lower percentiles in states like New York and Alaska indicate limited options requiring specialized broker relationships.

4. WC Rates per $100 Payroll - Compare workers' compensation costs for Code 5537 (HVAC installation, service and repair) across all states, from Arkansas's nation-leading $2.24 to California's $5.14. This dramatic 129% variation significantly impacts total labor costs and competitive positioning for HVAC contractors operating across state lines or considering expansion.

Understanding coverage options is as important as cost analysis. Explore comprehensive HVAC insurance solutions to ensure you’re properly protected while managing expenses.

Workers' Compensation Rate Analysis

HVAC contractors operating under WC class code 5537 encounter dramatic rate disparities across states. The primary code covers installation, service, and repair of HVAC systems including connected refrigeration. Some states apply a secondary code 3724 for standalone refrigeration work, though rates typically align closely.

Comprehensive State-by-State WC Rates

The workers' compensation landscape for HVAC contractors reveals striking regional patterns. Mountain and Southern states generally offer the most favorable rates, while coastal and industrial states command premium pricing.

Five Lowest WC Rate States (per $100 payroll):

  1. Arkansas: $2.24 - Competitive market with reformed workers' comp system
  2. Indiana: $2.31 - Low medical costs drive affordable rates
  3. Virginia: $2.38 - Stable claims environment maintains consistent pricing
  4. Michigan: $2.45 - Recent reforms reduced overall system costs
  5. Texas: $2.52 - Optional WC system creates price competition

Mid-Range WC Markets ($2.60-$3.50 per $100):

  • North Carolina: $2.61 - Managed care provisions control costs
  • Tennessee: $2.73 - Administrative efficiencies benefit contractors
  • Oklahoma: $2.84 - Recent reforms shifting market downward
  • Georgia: $2.96 - Atlanta growth attracts carrier competition
  • Arizona: $3.12 - Desert climate reduces weather-related injuries
  • Florida: $3.28 - Improving from historically high rates
  • Ohio: $3.35 - State fund provides competitive baseline

Five Highest WC Rate States (per $100 payroll):

  1. California: $5.14 - High medical costs and lengthy claim durations
  2. New York: $4.87 - Metropolitan exposure and generous benefits
  3. Illinois: $4.65 - Chicago-area rates skew state average upward
  4. Connecticut: $4.42 - Expensive healthcare drives premium costs
  5. New Jersey: $4.28 - Dense population and litigation frequency

Secondary refrigeration code 3724 shows similar geographic patterns with California reaching $4.95 per $100 while Arkansas drops to $2.11.

Regional WC Trends and Factors

Southeast Region - Generally favorable rates ($2.24-$3.28) driven by business-friendly reforms, managed care adoption, and competitive state funds where applicable. HVAC contractors benefit from year-round work reducing seasonal injury spikes.

Northeast Corridor - Highest rates nationally ($3.85-$4.87) reflecting dense populations, union prevalence, generous benefit structures, and extended claim durations. HVAC contractors face additional challenges from winter weather conditions and aging infrastructure work.

Mountain West - Moderate rates ($2.75-$3.45) with variations based on state fund presence and population density. Lower cost of living partially offsets workers' comp expenses for HVAC businesses.

Pacific Coast - Bifurcated market with California's nation-leading rates ($5.14) contrasting sharply with Oregon ($3.21) and Washington ($3.38). HVAC contractors often adjust service areas to avoid California's premium burden.

Combined Insurance Cost Analysis

Understanding the interplay between GL and WC costs reveals total insurance burden patterns that impact HVAC contractor profitability and competitive positioning. Interactive heat maps available online reveal GL premium clusters, but examining combined GL and WC costs provides the clearest picture for total insurance spend.

State Insurance Cost Categories

Low-Cost Insurance States (Combined GL + WC below national average): These states offer HVAC contractors the most favorable total insurance environment, combining competitive GL markets with reasonable WC rates:

  • North Carolina: 0.3-1.8% GL range + $2.61 WC rate
  • Tennessee: 0.3-1.7% GL range + $2.73 WC rate
  • Michigan: 0.3-1.4% GL range + $2.45 WC rate
  • Georgia: 0.3-1.6% GL range + $2.96 WC rate
  • Oklahoma: 0.3-1.5% GL range + $2.84 WC rate

Moderate-Cost Insurance States (One high, one low component): These states present mixed opportunities where strategic focus on the expensive component yields best results:

  • California: Moderate GL (0.7-1.7%) but crushing WC ($5.14)
  • Texas: Competitive WC ($2.52) with moderate GL (0.6-1.9%)
  • Florida: Variable GL (0.6-2.6%) with improving WC ($3.28)
  • Washington: Low GL floor (0.3%) but wide range (up to 2.1%) + moderate WC ($3.38)

High-Cost Insurance States (Both GL and WC above average): HVAC contractors in these states face dual pressure requiring aggressive management of both insurance lines:

  • New York: 1.8-6.9% GL range + $4.87 WC rate
  • New Jersey: 0.9-3.3% GL range + $4.28 WC rate
  • Louisiana: 0.6-3.7% GL range + $3.92 WC rate
  • Connecticut: 0.3-2.3% GL range + $4.42 WC rate

Top 5 Most Affordable Combined Insurance States

1. North Carolina

  • GL average for $150K revenue: $1,050
  • GL potential savings: 56.3% (difference between average and low-end rates)
  • WC rate (5537): $2.61 per $100
  • WC rate (3724): $2.48 per $100
  • Robust carrier competition drives GL rates down while moderate WC costs reflect balanced regulatory environment

2. Tennessee

  • GL average for $150K revenue: $1,275
  • GL potential savings: 51.9% (difference between average and low-end rates)
  • WC rate (5537): $2.73 per $100
  • WC rate (3724): $2.59 per $100
  • Business-friendly insurance regulations combined with multiple carrier options create favorable pricing

3. Michigan

  • GL average for $150K revenue: $1,050
  • GL potential savings: 64.1% (difference between average and low-end rates)
  • WC rate (5537): $2.45 per $100
  • WC rate (3724): $2.38 per $100
  • Recent WC reforms slashed rates while competitive GL market offers substantial potential savings for qualified contractors

4. Oklahoma

  • GL average for $150K revenue: $1,125
  • GL potential savings: 42.3% (difference between average and low-end rates)
  • WC rate (5537): $2.84 per $100
  • WC rate (3724): $2.71 per $100
  • Administrative efficiency in WC system pairs with aggressive GL carrier competition

5. Georgia

  • GL average for $150K revenue: $1,425
  • GL potential savings: 41.9% (difference between average and low-end rates)
  • WC rate (5537): $2.96 per $100
  • WC rate (3724): $2.82 per $100
  • Atlanta's construction boom attracts carriers, increasing competition despite urban exposures

Top 5 Most Expensive Combined Insurance States

1. New York

  • GL average for $150K revenue: $5,175
  • GL potential savings: 29.5% (difference between average and low-end rates)
  • WC rate (5537): $4.87 per $100
  • WC rate (3724): $4.73 per $100
  • Litigation-friendly environment inflates both GL and WC costs despite moderate potential savings for those who shop aggressively

2. California

  • GL average for $150K revenue: $1,800
  • GL potential savings: 30.2% (difference between average and low-end rates)
  • WC rate (5537): $5.14 per $100
  • WC rate (3724): $4.95 per $100
  • While GL remains manageable, nation-leading WC rates devastate total insurance costs

3. Louisiana

  • GL average for $150K revenue: $3,300
  • GL potential savings: 47.4% (difference between average and low-end rates)
  • WC rate (5537): $3.92 per $100
  • WC rate (3724): $3.78 per $100
  • Hurricane exposure and aggressive legal environment drive both coverage types higher

4. New Jersey

  • GL average for $150K revenue: $3,150
  • GL potential savings: 29.6% (difference between average and low-end rates)
  • WC rate (5537): $4.28 per $100
  • WC rate (3724): $4.15 per $100
  • Dense population and high medical costs impact both insurance lines significantly

5. Kentucky

  • GL average for $150K revenue: $2,700
  • GL potential savings: 30.1% (difference between average and low-end rates)
  • WC rate (5537): $3.84 per $100
  • WC rate (3724): $3.71 per $100
  • Coal country's injury rates influence statewide WC pricing while GL reflects rural claim patterns

Note how even expensive states offer meaningful potential GL savings through strategic shopping—Louisiana's 47.4% potential reduction demonstrates that competitive quotes can benefit contractors who qualify for favorable rates regardless of location.

Coverage Components - General Liability

Understanding GL Limit Structures

HVAC contractors must balance adequate protection against premium costs when selecting GL limits. The construction industry standard of $1M/$2M (per occurrence/aggregate) satisfies most commercial contracts, but understanding options helps optimize coverage.

$500K/$1M Limits

  • Suitable for residential-only contractors with limited commercial exposure
  • Moderate to significant premium reduction versus standard limits
  • May restrict access to larger commercial projects requiring higher limits
  • Consider only if subcontracting commercial work to properly insured partners

$1M/$2M Limits

  • Industry standard meeting 90% of contract requirements
  • Provides $1 million per incident, $2 million annual maximum
  • Products/completed operations typically shares the aggregate limit
  • Sweet spot balancing protection and affordability for most HVAC contractors

$2M/$4M Limits

  • Required for institutional work (hospitals, schools, government)
  • Modest to moderate premium increase over standard limits
  • Add per project aggregate to prevent single claim exhaustion
  • Essential for commercial contractors pursuing high-value projects

Deductible Strategy Impact

$0 Deductible

  • First-dollar coverage eliminates out-of-pocket claim costs
  • Premium baseline for comparison
  • Appropriate for contractors with limited cash reserves
  • Carriers may require higher minimum premiums

$2,000 Deductible

  • Minor to modest premium reduction from zero deductible
  • Manageable retention for most established contractors
  • Filters nuisance claims that impact future premiums
  • Calculate break-even at one claim every 8-10 years

Specialized HVAC Endorsements

Faulty Workmanship Coverage (Professional Liability/E&O as GL endorsement)

  • Low-limit coverage ($25,000-$100,000) addressing installation errors
  • Minor to modest annual premium addition
  • Covers cost to correct work, not resulting damage (that's standard GL)
  • Critical for protecting against callbacks and warranty claims
  • Particularly valuable for complex commercial installations

Tools & Equipment Coverage (GL endorsement or separate inland marine)

  • Protects specialized HVAC tools from theft and damage
  • $10,000 coverage typically adds minor to modest amount to GL premium
  • Covers equipment at job sites, in transit, and storage
  • Includes rented and leased equipment with proper scheduling
  • Consider separate inland marine policy for equipment exceeding $25,000

Environmental Liability (Refrigerant Release)

  • Covers cleanup costs from accidental refrigerant discharge
  • $100,000 sublimit adds modest to moderate annual premium
  • Increasingly important with EPA enforcement actions
  • Standard GL excludes pollution—this endorsement fills the gap
  • Mandatory for contractors handling R-22 or ammonia systems

Installation Floater

  • Protects equipment and materials awaiting installation
  • Coverage follows from supplier delivery through project completion
  • Premium based on annual installation values (typically minor percentage)
  • Includes equipment damage during crane operations
  • Critical for commercial projects with expensive rooftop units

Five Most Important GL Coverage Priorities for HVAC Contractors

  1. Adequate Limits - Ensure coverage is sufficiently high enough to protect against claims during and after job completion, including water damage from faulty installations
  2. Products Coverage - Essential protection when equipment you installed fails and causes property damage
  3. Blanket Additional Insured - Automatic coverage for customers and general contractors without individual endorsements
  4. Waiver of Subrogation - Prevents your carrier from pursuing claims against customers, maintaining critical business relationships
  5. Primary and Non-Contributory - Ensures your coverage responds first without requiring customer's insurance participation

Cost-Saving Strategies

Strategic Shopping Timeline

General Liability Renewal Strategy

  • Begin shopping 60 days before renewal for maximum carrier options
  • Submit applications to 5-7 carriers specializing in HVAC risks
  • Compare not just premiums but coverage terms and exclusions
  • Time market entry during October-December when carriers have budget

Workers' Compensation Optimization

  • Shop WC separately from GL unless package provides meaningful discount
  • Request quotes 45 days prior to renewal for complete underwriting
  • Consider state fund options where available as baseline comparison
  • Evaluate deductible programs if cash flow supports retained losses

WC-Specific Cost Reduction Tactics

Classification Optimization Properly segregating payroll between classifications yields immediate savings. Example: HVAC company with $400,000 total payroll:

  • Shop mechanics: $50,000 under code 5537 at $3.14 = $1,570
  • Clerical staff: $50,000 under code 8810 at $0.37 = $185
  • Sales staff: $40,000 under code 8742 at $0.52 = $208
  • Improper classification (all under 5537): $3.14 × $140,000/100 = $4,396
  • Proper classification saves: $2,433 annually (substantial reduction on segregated payroll)

Payroll Segregation Documentation

  • Maintain detailed time logs showing actual duties performed
  • Create clear job descriptions distinguishing field and office work
  • Track sales representatives' office versus field time percentages
  • Document clerical employees who never enter work areas
  • Photograph workspace separations supporting classification splits

Experience Modification Management

  • Implement return-to-work programs reducing claim duration
  • Contest questionable claims before they impact mod calculation
  • Focus safety efforts on frequency—three small claims hurt more than one large
  • Consider deductible programs to control claims under mod threshold
  • Review mod worksheets annually for errors affecting 3-year rolling calculation

Premium Audit Preparation

  • Organize payroll records by classification before audit
  • Exclude overtime premium pay (regular rate counts, premium doesn't)
  • Document excluded owner/officer payroll with board resolutions
  • Provide subcontractor certificates immediately to avoid assumed payroll
  • Track and exclude employee benefits not subject to WC premium

Additional Cost Control Methods

Safety Program Implementation

  • Formal safety programs earn modest to moderate premium credits in many states
  • Weekly toolbox talks document ongoing training efforts
  • Written HVAC-specific safety manual demonstrates commitment
  • Drug testing programs may qualify for additional discounts
  • OSHA 10-hour certification for all technicians shows professionalism

Certificate Management

  • Require certificates from every subcontractor before work begins
  • Verify GL limits meet your requirements to avoid gap exposure
  • Confirm WC coverage to prevent audit surprises
  • Track expiration dates to maintain continuous coverage proof
  • Use certificate tracking software for systematic compliance

Claims Management

  • Report claims immediately—delays increase costs and suspicion
  • Investigate every incident thoroughly with photos and statements
  • Maintain relationships with occupational clinics for prompt treatment
  • Challenge questionable claims before settlement
  • Track claims frequency by job type to identify problem areas

Technology Integration

  • GPS tracking documents actual time at job sites for WC splits
  • Digital timekeeping eliminates payroll classification disputes
  • Safety apps provide real-time hazard reporting and correction
  • Inventory management reduces equipment floater premiums
  • Customer management systems track completed ops exposure

Financial Strategies

  • Pay-as-you-go WC programs improve cash flow for growing companies
  • Annual payment saves minor amount versus monthly installments
  • Group programs through trade associations may offer dividends
  • Consider captive programs only when premiums exceed $100,000
  • Evaluate retrospective rating for predictable low-loss operations

Methodology Note

This analysis synthesizes data from 1,100+ HVAC contractor general liability insurance quotes collected across all 50 states from leading admitted carriers. The GL dataset represents actual market quotes for contractors with 2+ years operating history and clean three-year loss runs. Premium ranges reflect varying risk profiles including subcontractor usage, project types, and coverage limits.

Workers' compensation rates derive from current NCCI base rates and state-specific filings for class code 5537, representing standard HVAC installation, service, and repair operations. The $3.14 national average reflects weighted calculations based on state market share and contractor populations.

Standardized assumptions include $1M/$2M GL limits, $0 deductibles, and 1.0 experience modifiers for WC calculations. Potential savings percentages represent the difference between average market rates and the low end of the premium range available to contractors who qualify for the most favorable rates through optimal risk characteristics, clean loss history, and strategic carrier selection. These figures illustrate maximum potential reductions rather than guaranteed savings, as individual results vary based on specific business characteristics and underwriting criteria. All percentages reflect actual market dynamics rather than theoretical minimums, providing realistic benchmarking for insurance buyers.

State-specific variations account for regulatory environments, claim frequencies, and competitive dynamics unique to each jurisdiction. Market competition percentiles indicate relative carrier participation, with higher percentiles suggesting more options and competitive pricing potential.