For construction companies and contractors in Michigan, having adequate insurance is crucial to protect your business from the many risks inherent in contracting work. As a contractor, you face diverse exposures ranging from third-party property damage and injury claims to employee injuries, cyber incidents, environmental mishaps, and more. Purchasing tailored insurance designed for your specific operations helps safeguard your company’s assets and future.
This comprehensive guide provides an in-depth look at typical contractor insurance costs in Michigan across common policies like general liability, workers’ compensation, surety bonds, commercial auto, equipment coverage and others. We’ll closely examine the key variables that influence your insurance premiums, offer detailed benchmark ranges for small, medium and large contractors based on revenue, payroll and other attributes, and suggest strategies to help you secure the most favorable rates.
Understanding typical insurance expenses in your state allows you to better evaluate policies appropriate for your contracting business. While your exact premiums depend on your unique risk characteristics, this data provides essential context to make informed insurance decisions for your company.
Michigan’s contracting industry demands comprehensive protection. Understanding liability policies for contractors helps guard against third-party claims. General contractor workers comp is crucial for employee safety. Explore our resources on contractor insurance considerations for a complete overview.
Key Factors Influencing Contractor Insurance Premiums
The cost of contractor insurance can vary widely based on these key factors:
Type of Work – Certain contracting trades like roofing, plumbing, electrical, demolition and excavation are seen as higher liability and workers’ compensation risks, thus have higher insurance rates. More hazardous work leads to increased premiums across policies.
Years in Business – Contractors who are new to the business often pay higher premiums until they establish a solid track record over several years. Insurance companies view extensive experience as an indicator of lower risk.
Annual Revenue – Larger contractors with more annual revenue have greater exposure potential and therefore higher premiums. Revenue is commonly used by insurers as a proxy for a business’s size and total risk.
Payroll Size – More employees on payroll increases premiums for workers’ compensation insurance. Rates directly rise as payroll and employee count increases.
Claims History – Too many past claims, especially severe and costly claims, will lead insurers to increase your premiums. Contractors with very clean claims histories typically get lower rates.
Safety Record – Contractors with strong safety programs, low OSHA violation frequency, and low employee injury rates can qualify for significant premium discounts. High incident rates lead to increased costs.
Policy Limits – Higher insurance limits mean more premiums, but lower limits may expose you to potentially devastating uncovered losses from larger claims.
Insurance Company – Rates can vary significantly among insurers based on financial strength, reputation, loss payout history, and competitiveness.
Risk Transfer – Transferring risk to subs via insurance/indemnity requirements helps lower a contractor’s premiums.
Deductibles – Choosing higher deductibles reduces premiums but increases your out-of-pocket costs for each claim.
Location – Insurance rates can vary by zip code and county based on localized risk factors like crime, lawsuits, injuries and cost of living.
Business Structure – Sole prop/independent contractor, partnership, LLC and corporations have different exposures.
Insurance Premium Benchmarking for Contractors
The table below provides typical insurance coverages alongside example premium ranges for small, medium and large contractors defined by annual revenue:
Contractor Size | Typical Revenue | Common Insurance Coverages | Estimated Annual Premium Range
| 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 |
Keep in mind your actual premiums can vary substantially based on your specific location, services, safety record, number of employees, payroll size, vehicles, projects, subcontractor relationships, and other risk characteristics. Working closely with experienced insurance advisors to secure tailored coverage with reputable carriers can help many contractors achieve more favorable rates.
Examining General Liability Insurance Costs
General liability, sometimes referred to as CGL, is insurance that covers third-party property damage and bodily injury claims arising from your contracting operations and completed work. It protects you when clients, vendors or other parties allege your business caused them harm.
Typical general liability premiums range from 1.5% to 5% of gross revenue for $1 million per occurrence limits and a $2 million aggregate limit. So a contractor with $1 million in revenue could expect to pay approximately $15,000 – $50,000 in yearly premiums for general liability insurance. However, rates vary significantly based on risk factors like
| Low | High | Average | |
| Electrician | |||
| – Small | $800 | $2,300 | $1,400 |
| – Medium | $2,800 | $5,200 | $3,800 |
| – Large | $5,600 | $11,000 | $7,400 |
| Plumber | |||
| – Small | $2,900 | $8,900 | $6,000 |
| – Medium | $14,600 | $21,900 | $15,700 |
| – Large | $28,900 | $53,300 | $35,700 |
| Painter | |||
| – Small | $1,100 | $3,200 | $1,900 |
| – Medium | $2,000 | $5,300 | $3,600 |
| – Large | $3,000 | $11,100 | $7,500 |
| Landscaper | |||
| – Small | $918 | $1,977 | $1,400 |
| – Medium | $3,011 | $5,071 | $3,700 |
| – Large | $5,727 | $9,574 | $7,400 |
| Handyman | |||
| – Small | $2,100 | $4,000 | $2,600 |
| – Medium | $6,700 | $10,050 | $7,400 |
| – Large | $12,300 | $18,900 | $15,400 |
| Carpenter | |||
| – Small | $1,900 | $4,700 | $2,800 |
| – Medium | $6,000 | $9,700 | $7,800 |
| – Large | $10,900 | $21,700 | $16,400 |
| General Contractor | |||
| – Medium | $3,400 | $11,000 | $6,000 |
| – Large | $6,800 | $15,500 | $9,900 |
| – XL | $17,100 | $36,300 | $23,100 |
:
– Type of work – Certain trades like roofing, plumbing, electrical and demolition are seen as higher liability risks with more frequent and severe claims. Premiums are higher as a result.
– Revenue size – More annual revenue means greater exposure potential and higher premiums. A $5 million contractor will pay more than a $1 million contractor, all else being equal.
– Claims history – Just one large liability claim can prompt increases in premiums. Too many frequent claims often mean coverage gets declined. Clean history yields lower rates.
– Years in business – New contractors pay more until they build a solid track record over 3-5+ years. Extensive experience signals lower risk to insurers.
– Safety record – Demonstrating strong safety protocols helps reduce liability premiums. High loss ratios lead to increased costs.
– Risk transfer – Requiring subs to carry adequate GL insurance and getting additional insured status on their policies reduces a contractor’s premiums.
– Policy limits – Higher liability coverage limits mean more premium, but inadequate limits could expose you to major uncovered losses.
– Deductibles – Choosing a higher deductible reduces premiums but increases your portion of each claim payout. Many elect $5k – $25k deductibles.
– Insurance company – Rates can vary significantly among insurers based on financial strength, reputation, and market competition.
Typical General Liability Premiums by Revenue
| Annual Revenue | Premium Range |
|---|---|
| $500,000 | $7,500 – $25,000 |
| $1,000,000 | $15,000 – $50,000 |
| $2,500,000 | $37,500 – $125,000 |
| $5,000,000 | $75,000 – $250,000 |
Analyzing Workers Compensation Insurance Costs
Workers’ compensation insurance covers employee injuries, medical treatment, lost wages, rehabilitation and other costs stemming from on-the-job accidents and illnesses. Premiums vary substantially based on risk classification, claims history, payroll size and other factors.
| Low | High | Average | |
| Electrician | |||
| – Small | $963 | $2,107 | $1,204 |
| – Medium | $2,710 | $5,961 | $3,613 |
| – Large | $4,215 | $9,333 | $6,021 |
| Plumber | |||
| – Small | $1,929 | $4,219 | $2,411 |
| – Medium | $5,424 | $11,933 | $7,232 |
| – Large | $8,437 | $18,683 | $12,053 |
| Painter | |||
| – Small | $1,699 | $3,716 | $2,123 |
| – Medium | $4,778 | $10,511 | $6,370 |
| – Large | $7,432 | $16,456 | $10,617 |
| Landscaper | |||
| – Small | $960 | $2,100 | $1,200 |
| – Medium | $2,700 | $5,940 | $3,600 |
| – Large | $4,200 | $9,300 | $6,000 |
| Handyman | |||
| – Small | $3,481 | $7,614 | $4,351 |
| – Medium | $9,789 | $21,536 | $13,052 |
| – Large | $15,228 | $33,719 | $21,754 |
| Carpenter | |||
| – Small | $2,945 | $6,442 | $3,681 |
| – Medium | $8,283 | $18,222 | $11,044 |
| – Large | $12,884 | $28,529 | $18,406 |
| General Contractor | |||
| – Medium | $10,442 | $22,843 | $13,053 |
| – Large | $16,316 | $35,896 | $21,755 |
| – XL | $30,457 | $67,441 | $43,510 |
Michigan’s base workers’ comp rates run around $1.65 per $100 of payroll across all contractor classes up to an annual cap. So at this hypothetical rate, a contractor with a $500,000 payroll can expect around $8,250 in yearly premium absent any credits/debits that alter the rate up/down. Actual rates depend on the contractor’s unique risk variables:
– Payroll – Higher payroll equals greater exposure and higher workers comp premiums. Payroll drives the bulk of premium costs.
– Risk class – The type of work performed is classified by risk level. High-risk work like roofing leads to more expensive policy rates than lower risk office work.
– Experience rating – Firms with fewer past claims get an ‘experience credit’ applied to premiums. Too many claims lead to an ‘experience debit’ increasing premiums.
– Industry trends – Rising losses industry-wide exert pressure on premium pricing. Safer industries see lower rates.
– Safety record – Contractors with strong safety programs and low mod ratios qualify for significant premium credits and dividends.
– Subcontractors – Using uninsured subs exposes contractors to higher premiums. Requiring subs to carry workers comp lowers a contractor’s risk and rates.
– Payroll verification – Accurate payroll audits prevent big surcharges at renewal. Underreporting payroll leads to costly adjustments.
– Medical clinics – Having approved occupational clinics for checkups/physical therapy helps control claim costs.
– Return-to-work – Modified duty programs enabling earlier return to work help lower claim severity and duration.
Typical Workers Comp Rates per $100 Payroll
| Base Rate | Premium Range |
|---|---|
| $1.65 | $1.50 – $2.25 |
Estimated Annual Premiums by Payroll Size
| Payroll | Est. Annual Premium |
|---|---|
| $200,000 | $3,000 – $4,500 |
| $500,000 | $7,500 – $11,250 |
| $1,000,000 | $15,000 – $22,500 |
| $2,500,000 | $37,500 – $56,250 |
Overview of Supplemental Contractor Insurance
Beyond general liability and workers’ compensation, most contractors need supplemental insurance policies to address other exposures:
Commercial Auto Insurance
Covers vehicles used for business purposes. Typical premiums range from $1,500 – $4,000 per vehicle depending on factors like driver safety, vehicle type, mileage, location and more.
Inland Marine (Tools & Equipment) Insurance
Protects tools, equipment, machinery and stock onsite and in transit. Typical premiums range from $2,500 – $10,000 for $100k to $500k in coverage. Deductibles are often $500-$2,500.
Surety Bonds
Required for many public projects and large contracts. Typical rates are 1-3% of the bond amount based on contractor qualifications like credit score, experience and financials.
Builders Risk Insurance
Covers construction projects while being built. Typical premiums range from 0.3% to 2%+ of the completed value depending on materials, site, exposures and other factors.
Cyber Liability Insurance
Responds to data breaches, hacking incidents and electronic theft. Typical premiums start around $1,000 – $3,000 annually for $500k – $1m limits.
Umbrella Liability Insurance
Provides additional liability limits above primary policies. Typical premiums range from $1,000 – $5,000+ annually per $1 million in additional coverage.
Professional Liability
Protects against errors, omissions or negligent work. Typically required for design/build contractors. Premiums start around $2,500 annually.
Pollution Liability
Covers third-party bodily injury and property damage from pollution releases. Typically required for environmental contractors. Premiums start around $3,000 annually.
Partnering with ContractorNerd.com
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