HELP! Can some one explain to me Contractor's Insurance?

Question

This is for a commercial/residential Painter, maybe 1 employee and he is just starting out. I think he just needs it for liability purposes. One agent was talking about it was based on payroll of 1000. She said need to put down 25% down and and 9 payments remain on the balance. She spoke so fast that we couldn't understand it. Can someone explain how Contractor's insurance works? Would help out a whole lot.

Thanks.

Answer 1

it's so if the contractor burns your house down...in a nutshell

Answer 2

Most commerical insurance is based on payroll.  When it is, owners are normally rated at $17,800 per yer.  If the rate (and I'm making this us so don't count on it) is $50 per thousand of payroll, the liability cost would be $890.  ($50 x 17.8)

Employees are rated at actual payroll.  So if he had 1 employee who made $25,000 per year, the cost to add that employee would be $50 x 25 or $1,250.

As far as how much insurance is needed--if your state has requirements then they must be met for him to do work there.  If not, I would recommend a minimum of $500,000.

In our example, if he didn't have any employees and didn't add any other coverage such as property coverage for his tools, etc. the total premium would be $850 so he would have to put 25%  ($212.50) down and then the rest would be divided into 9 payments.