Commercial insurance for contractors — what agents need to know

Contractor insurance is one of the most complex segments in commercial lines. The risks vary enormously by trade, scope of work, and whether the contractor uses subcontractors — and underwriters scrutinize contractor submissions more closely than almost any other class. Here's what agents need to gather and what underwriters are looking for.

What coverages do contractors typically need?

• General liability (GL) — the foundation of any contractor insurance program. Covers bodily injury and property damage caused to third parties during operations or after a job is completed.
• Workers compensation — required by law in most states for any business with employees. Covers medical costs and lost wages for employees injured on the job.
• Commercial auto — required if the contractor owns or operates vehicles for work. Personal auto policies explicitly exclude business use for most trades.
• Inland marine / tools and equipment — covers owned tools and equipment against theft, damage, and loss. Often overlooked but critical for contractors with significant tool investment.
• Commercial umbrella — excess liability above GL and auto limits. Most general contractors and their subcontractors are required by contract to carry a $2M+ umbrella.
• Builders risk — covers a structure under construction against fire, theft, vandalism, and weather damage. Required on most new construction projects.

How contractor GL is rated

Unlike retail or office businesses (which are primarily rated on revenue), contractor GL is rated on a combination of factors:

• Gross receipts / revenue — total revenue including labor and materials billed to customers
• Payroll — wages paid to employees, used to calculate the operations exposure
• Subcontractor costs — amounts paid to subcontractors. Most carriers rate uninsured subcontractor cost similarly to employee payroll — and require certificates of insurance to prove subs carry their own coverage.
• Type of work — roofing, demolition, and work on high-rise structures carry significantly higher rates than painting or landscaping
• New construction vs. renovation split — new construction typically carries higher rates than renovation work because the completed operations exposure is higher

What underwriters flag on contractor submissions

Carrier underwriters look for specific risk factors that can cause a decline, a referral, or a significant surcharge:

• Work at height — any work above 15 feet, on rooftops, or involving scaffolding is rated separately and may require additional information
• Demolition — most standard markets exclude or heavily restrict demolition work; specialty markets are usually required
• Asbestos, lead, or mold — environmental exclusions apply in standard policies; contractors working with hazardous materials need pollution coverage
• Unlicensed work — contractors who pull permits inconsistently are viewed as a higher risk; some carriers require confirmation of active license numbers
• Uninsured subcontractors — if a contractor uses subs who don't carry their own GL and WC, the contractor's carrier may treat that cost as additional exposure at audit
• Prior GL claims — especially completed operations claims (injuries or damage discovered after the work is done), which are common in construction

The subcontractor certificate trap

One of the most common problems in contractor GL is the subcontractor insurance requirement. Most GL policies include an endorsement that excludes coverage for work performed by subcontractors who don't carry their own GL and workers comp. If your client uses subs without getting certificates of insurance from them, they may have a significant uninsured gap.

At audit time, carriers will ask for the total amount paid to subcontractors and whether certificates were collected. Uninsured subcontractor costs are often rerated at a higher rate — sometimes doubling the premium for that portion of the work.

The best practice is to collect certificates from every subcontractor before work begins and to specify minimum insurance requirements in all subcontracts.

What information to gather for a contractor submission

To get an accurate quote with minimal back-and-forth, collect the following upfront:

• Contractor license number(s) and issuing state(s)
• Annual gross receipts broken down by residential vs. commercial work
• New construction vs. renovation/repair percentage split
• Total payroll by employee classification (what each employee actually does)
• Annual cost paid to subcontractors and whether they carry their own insurance
• Whether any work involves heights above 15 feet, roofing, or demolition
• Whether the contractor works with hazardous materials
• Loss runs for the past 3–5 years

Get complete contractor submissions automatically

AgencyAssist collects every underwriting detail — license numbers, subcontractor costs, scope of work — through a single client intake link.