Having the right insurance coverage is crucial for construction companies in Minnesota looking to fully protect their business. As a contractor, your business faces diverse risks ranging from property damage and bodily injuries to lawsuits and cyber attacks that can severely impact your company’s finances and future if not properly insured against. Purchasing adequate, cost-effective contractor insurance tailored to your specific operations is key to fully safeguarding your assets and securing your business for the long-term.
This detailed guide will uncover typical insurance costs for contractors across Minnesota, providing you with an in-depth look at popular policies like general liability, workers’ compensation, surety bonds, equipment coverage, and more. We’ll closely examine the key variables that can influence your insurance premiums, provide comprehensive benchmarking data for small, medium and large contractors based on revenue and payroll, and suggest proven strategies utilized by leading Minnesota contractors to secure the most favorable insurance rates possible.
Gaining a thorough understanding of typical contractor insurance expenses in Minnesota allows you to more accurately evaluate policies and coverage levels that may be suitable for your business based on where you currently stand and your goals for growth in the future. While your exact insurance premiums will depend on your unique attributes and risk factors, this data offers extremely helpful context to inform smart insurance decisions that provide comprehensive protection without overspending.
Minnesota contractors should prioritize proper insurance coverage. A guide to contractor liability insurance cost can help with budgeting. Workers’ comp insurance for contractors is essential for legal compliance. Our guide on business insurance for contractors options provides valuable insights for comprehensive protection.
Key Factors That Influence Contractor Insurance Costs
There are a number of important factors that can significantly influence the insurance costs for construction contractors in Minnesota. Being aware of these key factors allows you to better manage the variables within your control to potentially minimize insurance expenses. Here are some of the most impactful factors:
– Type of Work – The specific type of contracting work being done (construction, plumbing, electrical, HVAC, etc.) can have a major impact on risk and therefore insurance rates. Certain trades like roofing and plumbing are viewed by insurers as higher-risk, which leads to increased insurance premiums. The more hazardous the work, the higher the insurance costs.
– Years in Business – The number of years the contracting business has been in operation also affects insurance premiums. Contractors who are new to the business often pay higher insurance rates until they have been around long enough to establish a solid track record. Insurance companies view experience as an indicator of lower risk.
– Claims History – The number and severity of prior claims made against the contracting business can drive up insurance costs. Too many past claims, especially ones that were costly, signal higher risk to insurers. This often results in significantly increased premiums. In severe cases, too many claims can even make a contractor uninsurable. A clean claims history helps lower rates.
– Coverage Limits – The levels of coverage selected for policies like general liability insurance and workers’ compensation directly impact costs. Higher liability limits or workers’ comp limits translate to higher premiums. Contractors must weigh the potential added protection of higher coverage against the additional cost.
– Number of Employees – Having more employees on the payroll increases the overall risk exposure associated with things like workers’ compensation claims. As the worker count rises, workers’ comp rates in particular will trend higher as a result.
– Safety Record – Contractors with poor safety records, past OSHA violations, or lack of formal safety programs and training pay higher insurance premiums due to increased claims risk. Proactively implementing robust safety protocols reduces risk, leading to lower insurance costs.
– Annual Revenue – Total annual revenue earned by the contracting business helps insurers gauge the overall size of the business, as well as the scale of risk. Contractors and construction firms with higher annual revenue volumes generally have to pay more for insurance coverage as they have greater overall exposure.
– Insurance Provider – Insurance rates can vary significantly between different insurance companies. This is due to factors like the insurer’s claims-handling reputation, financial strength rating, and whether they specialize in contractor insurance or not. Comparing quotes from multiple competing providers is wise.
When it comes to minimizing insurance costs, having strong risk management practices, excellent safety protocols, proper training and qualifications, and choosing appropriate types and limits of coverage based on the size of your business help significantly control expenses. Let’s look at typical contractor insurance in detail.
Small, Medium and Large Contractor Benchmarking in Minnesota
To provide helpful context around typical Minnesota contractor insurance policies and premiums based on business size, below are definitions and benchmarks for small, medium and large contractors. Please note these are rough guidelines – actual premiums can fluctuate significantly based on the specific location within Minnesota, services provided, safety record, number of employees and projects, revenue fluctuations, and other unique attributes. Contractors who work closely with specialists to secure tailored coverage from high quality insurance carriers, while implementing favorable terms and conditions, may achieve rates toward the lower end of the ranges provided below.
| 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 |
Typical General Liability Insurance Costs for Contractors in Minnesota
General liability insurance, sometimes referred to as CGL coverage, is an essential policy for contractors in Minnesota. It provides protection if a third party alleges their property was damaged or they suffered bodily injury as a result of the contractor’s work or operations.
| Low | High | Average | |
| Electrician | |||
| – Small | $1,000 | $2,500 | $1,500 |
| – Medium | $2,500 | $6,800 | $4,300 |
| – Large | $3,900 | $12,300 | $8,200 |
| Plumber | |||
| – Small | $3,500 | $11,000 | $8,100 |
| – Medium | $8,600 | $28,000 | $21,200 |
| – Large | $19,300 | $55,400 | $41,200 |
| Painter | |||
| – Small | $1,000 | $3,200 | $1,700 |
| – Medium | $1,600 | $6,700 | $4,600 |
| – Large | $2,200 | $12,400 | $8,800 |
| Landscaper | |||
| – Small | $783 | $1,745 | $1,100 |
| – Medium | $2,198 | $4,667 | $3,100 |
| – Large | $3,809 | $8,798 | $6,300 |
| Handyman | |||
| – Small | $2,300 | $4,025 | $2,700 |
| – Medium | $7,700 | $11,550 | $8,800 |
| – Large | $15,800 | $20,540 | $17,900 |
| Carpenter | |||
| – Small | $2,100 | $5,700 | $3,400 |
| – Medium | $7,000 | $10,500 | $8,700 |
| – Large | $12,700 | $21,000 | $17,800 |
| General Contractor | |||
| – Medium | $3,100 | $7,900 | $5,200 |
| – Large | $6,300 | $18,100 | $10,500 |
| – XL | $15,600 | $42,600 | $27,200 |
General liability insurance helps cover legal defense costs and any covered lawsuit damages awarded, up to the limits selected. Typical policy limits are $1 million per occurrence and $2 million aggregate. Higher limits may be recommended for larger contractors.
Based on these typical $1 million/$2 million limits, here are estimated general liability premium ranges contractors in Minnesota can expect to pay:
| Contractor Annual Revenue | Typical Yearly Premium Range |
|---|---|
| $150,000 | $1,500 – $7,500 |
| $500,000 | $5,000 – $25,000 |
| $1 million | $10,000 – $50,000 |
Premiums generally range from 1% to 5%+ of annual revenue, but may go higher or lower depending on the class of work and risk factors like location. As you can see, typical premiums cover a wide range. Understanding what impacts costs allows you to make adjustments to potentially lower your rates.
Key Factors That Influence General Liability Insurance Costs
There are several important factors that affect general liability insurance costs for contractors:
– Class of Work – Certain contracting classes like roofing, plumbing, electrical, and HVAC are viewed as higher-risk by insurers, leading to increased general liability premiums. The more hazardous the work, the more expensive the general liability coverage typically is.
– Annual Sales Revenue – As a general rule, contractors with higher total annual revenue will pay more for general liability insurance since they have greater overall risk exposure. Insurers use annual sales/revenue as an indicator of a business’s size and scale of operations.
– Claims History – Contractors with past general liability claims made against them will almost always see their premiums increased, especially if the claims were costly. Too many past claims can even make a contractor uninsurable. Maintaining a clean claims history helps lower rates.
– Years in Business – Contractors who are new to the business tend to pay higher general liability premiums until they have been in business long enough to establish a solid track record over time. Insurers equate experience with lower risk.
– Risk Transfer – Contractors who take proactive steps to transfer or reduce risk, like requiring subcontractors to carry adequate insurance and provide certificates of insurance, mandating performance bonds, etc. are rewarded with lower premiums.
– Policy Limits – When it comes to general liability insurance, choosing higher policy limits translates to higher premiums, but lower limits can leave the contractor exposed. Contractors must evaluate their level of risk to determine suitable limits.
– Deductibles – Choosing a higher deductible, which is the out-of-pocket amount the contractor pays on a claim before insurance kicks in, can significantly reduce premiums. This however increases risk.
– Insurance Provider – Rates can vary amongst insurance companies based on things like their financial strength, reputation for claims handling, and level of competition in the market. A stable insurer known for fair premiums can potentially lower costs.
By controlling risk through safety, experience, training, project selectivity and transfer of risk to subcontractors, general liability costs can be minimized. Now let’s look at workers’ compensation insurance.
Typical Workers Compensation Insurance Costs for Contractors in Minnesota
Workers’ compensation insurance covers injuries and illnesses sustained by employees that occur on the job. For contractors, premiums can range significantly based on payroll, risk factors, and state laws. Minnesota ranks in the middle of U.S. states for workers’ comp costs.
| Low | High | Average | |
| Electrician | |||
| – Small | $2,134 | $4,668 | $2,668 |
| – Medium | $6,002 | $13,204 | $8,003 |
| – Large | $9,336 | $20,674 | $13,338 |
| Plumber | |||
| – Small | $2,769 | $6,057 | $3,461 |
| – Medium | $7,787 | $17,132 | $10,383 |
| – Large | $12,114 | $26,823 | $17,305 |
| Painter | |||
| – Small | $2,969 | $6,494 | $3,711 |
| – Medium | $8,349 | $18,368 | $11,132 |
| – Large | $12,987 | $28,758 | $18,554 |
| Landscaper | |||
| – Small | $1,664 | $3,640 | $2,080 |
| – Medium | $4,680 | $10,296 | $6,240 |
| – Large | $7,280 | $16,120 | $10,400 |
| Handyman | |||
| – Small | $4,548 | $9,950 | $5,685 |
| – Medium | $12,792 | $28,143 | $17,056 |
| – Large | $19,899 | $44,062 | $28,427 |
| Carpenter | |||
| – Small | $5,285 | $11,562 | $6,607 |
| – Medium | $14,865 | $32,703 | $19,820 |
| – Large | $23,123 | $51,202 | $33,033 |
| General Contractor | |||
| – Medium | $13,644 | $29,846 | $17,055 |
| – Large | $21,319 | $46,901 | $28,425 |
| – XL | $39,795 | $88,118 | $56,850 |
Typical workers’ comp premium ranges for contractors in Minnesota:
| Number of Employees | Annual Payroll | Typical Yearly Premium Range |
|---|---|---|
| 1 | $50,000 | $2,000 – $10,000 |
| 3 | $150,000 | $5,000 – $25,000 |
| 5 | $250,000 | $7,500 – $50,000 |
Note these premium ranges are estimates only, and can be higher or lower depending on your trade, location within Minnesota, exact payroll, safety programs, claims history, use of subcontractors, and other factors as outlined below.
Key Factors That Influence Workers’ Comp Insurance Costs
There are many variables that determine workers’ compensation insurance costs for contractors in Minnesota:
– Payroll Amount – The total annual payroll and number of employees directly factor into workers’ comp premium calculations. The higher the payroll, the higher the premiums.
– Job Classification – The specific type of work performed by employees is assigned a risk classification code, with higher risk work like roofing and plumbing carrying higher premium rates than lower risk office type work.
– Experience Rating – Contractors are graded on their past loss history. Those with fewer claims and lower cost claims get an ‘experience credit’ applied to their premium. Too many past claims lead to an ‘experience debit’, increasing premiums.
– Industry Trends – Workers’ compensation premium rates for the construction industry as a whole also influence costs. Rates rise across the board if industry-wide loss trends increase.
– Safety Record – Contractors with strong, proactive safety programs and low injury rates can qualify for significant premium discounts by becoming ‘safety certified’. However, poor safety can lead to dramatically increased premiums.
– Use of Subcontractors – Contractors using uninsured subcontractors will pay higher premiums, as they take on that worker exposure. Requiring subs to carry their own workers’ comp coverage lowers a contractor’s risk and premiums.
– State Laws – Each state has different laws governing things like benefits, exclusions, rate-setting regulations, and premium discounts. More strict laws and high benefits increase workers’ comp costs.
– Policy Deductible Programs – As with general liability, choosing a higher deductible reduces workers’ comp premiums since the contractor takes on more risk, but deductibles should not be too high.
– Insurance Company – The reputation, financial strength, and pricing of the insurance carrier all impact overall premiums. Stable insurers with fair rates can potentially lower costs.
Now that we have a strong handle on the major insurance coverages like general liability and workers’ compensation, let’s take a quick look at some common supplemental contractor insurance policies:
Additional Insurance Coverages & Typical Premiums
Beyond general liability and workers’ comp, most Minnesota contractors require several additional policies:
Commercial Auto Insurance
– Covers vehicles used for business purposes
– Typical limits: $1M per occurrence
– Typical premium range: $1,500 – $4,000 annually per vehicle
Inland Marine Insurance (Tools & Equipment)
– Covers tools, equipment, machinery onsite and in transit
– Typical limits: $10K – $50K
– Typical premium range: $1,500 – $5,000+ annually
Surety Bonds
– Required for public works and some projects
– Cost is based on 1-3% of total bond amount, depending on credit
Business Property Insurance
– Protects offices, warehouses, work sites (optional)
– Typical limits: $500K – $1M
– Typical premium range: $2,000 – $20,000+ annually
Cyber Liability Insurance
– Responds to data breaches, network security incidents
– Typical limits: $1M
– Typical premium range: $1,000 – $5,000 annually
Umbrella Liability Insurance
– Provides additional limits above other policies
– Typical additional limits: $1M – $5M
– Typical premium range: $1,000 – $2,000+ per $1M
Partnering with a Specialized Contractor Insurance Agency
Understanding typical coverages and costs as we’ve outlined here is an excellent first step to making smart insurance decisions for your contracting business. However, securing tailored coverage at competitive rates requires contractor insurance expertise.
That’s where working with an agency that specializes in contractor insurance can be invaluable. Specialized agencies have established relationships with top insurance carriers, and understand how to fine tune policies and programs to maximize protection and cost-efficiency based on your trade, size, experience, safety record, and other unique factors.
ContractorNerd.com is one such agency renowned for partnering with contractors to strategically manage risk and insurance costs. Their experienced team can provide no obligation guidance and policy review to identify potential gaps or coverage mismatches. Get a quick no-hassle quote today to evaluate potential savings while protecting your business the right way. Don’t leave things to chance or settle for generic, one-size-fits-all insurance packages. Partner with specialists to secure your company’s future.