The real cost of insuring an electrical contractor business

What to take away

This article gives general electrical-contracting business information. It is not individualized insurance, code, licensing, permit, tax or legal advice. Rates vary by province, state, carrier and classification, so confirm current figures with a licensed broker and your provincial or state regulator.

The lines that make up the bill

An electrical contractor does not buy one policy. It buys five or six, and each is rated on a different unit. Carriers that write this class include The Hartford, Travelers, Philadelphia Insurance Companies, Erie Insurance and Cincinnati Insurance. Next Insurance quotes small shops online.

General liability covers third-party bodily injury and property damage away from your premises. A residential service shop with two crews typically pays $1,200 to $4,000 a year. Add commercial work, fire alarm or work above 600 volts and the same shop can see $8,000 to $25,000.

Online carriers such as Next Insurance and Hiscox quote one-crew shops directly, often between $600 and $1,800 a year, with energized work excluded until you answer voltage questions. The Hartford and Travelers write larger programs through brokers.

Workers' compensation is rated per $100 of payroll against a class code. NCCI publishes the code used in most states, commonly 5190 for electrical wiring. Rates typically fall between $2.50 and $8 per $100 of field payroll. A journeyperson earning $60,000 adds roughly $1,500 to $4,800 a year.

In Ohio, Washington, North Dakota and Wyoming you buy workers' comp from the state fund, not a private carrier. California's State Compensation Insurance Fund and Texas Mutual compete with private insurers. Employers, a W.R. Berkley company, and biBERK sell coverage to small contractors directly.

Commercial auto covers the vans and the cable puller trailer. It is rated on vehicle value, radius of operation and driver records. Two vans typically cost $2,000 to $6,000 a year, and one at-fault claim commonly adds 20% to 40% at renewal.

Progressive Commercial, Nationwide and The Hartford write most small fleets. Telematics from Samsara or Verizon Connect, typically $25 to $45 per vehicle per month, builds a mileage and braking record that can offset part of a surcharge.

Tools and equipment is an inland marine floater covering what sits in the van overnight. Premium often runs 1% to 3% of scheduled value, so $40,000 of tools costs about $400 to $1,200 a year. Schedule the expensive items by name.

A FLIR E8-XT thermal camera runs about $3,000 to $4,000, and a Fluke 1587 FC insulation multimeter about $700 to $900. A Milwaukee M18 FORCE LOGIC crimper is $1,800 to $2,500 tool only, and a Greenlee 855 Smart Bender $6,000 to $10,000.

Completed operations covers failures after you leave the site. It matters most on service work and on anything with a warranty tail. General contractors often require two ISO endorsements: CG 20 10 for ongoing work and CG 20 37 for completed operations.

Umbrella sits above the rest. A $2 million limit is common; $5 million is often required to bid institutional work. A $1 million umbrella typically costs $500 to $1,200 a year for a small contractor, and a $5 million limit $1,500 to $4,000.

Ranges are illustrative. The checkable figure is your own payroll and your own loss runs. The National Association of Insurance Commissioners publishes state rate and complaint data you can compare against a quote.

What the insurer actually asks

Every application comes back to the same questions, and the answers move the premium more than anything else. Start with payroll by classification, split between field and office. Then voltage class, and whether you work energized.

Service mix follows: the share of new build against service and maintenance. So does subcontractor use, and whether you collect a certificate from each one. Most brokers collect the detail on an ACORD 125 application, with payroll on an ACORD 130.

Carriers want three to five years of loss runs. Then the safety program, which is where the OSHA material earns its keep.

Occupational Safety and Health Administration: Electrical Contractors Industry names shock, electrocution and musculoskeletal injury among this trade's hazards. It also lists slips, falls and vehicle incidents, and links the standards behind them. A carrier reads that list as a loss forecast.

Occupational Safety and Health Administration: Control of Hazardous Energy (Lockout/Tagout) requires covered employers to establish and use energy-control procedures. Documented procedures are one of the few underwriting credits an electrical contractor can produce on demand.

For work in occupied buildings, the U.S. Department of Justice: ADA Guide for Small Businesses covers barrier removal and accessible routes. Accessibility claims are a general liability exposure, and they arrive as customer complaints rather than injuries.

Where the cost lines sit in the workflow

Insurance touches four points in an electrical job: permit, de-energization, inspection and warranty. Each one has a cost behavior.

Permit. The permit is filed before work starts. An insurer wants the license number and the authority having jurisdiction on file. Filing with the wrong authority stops a job mid-rough-in. Fees in most markets run $75 to $300 for a residential rough-in, and $300 to $1,500 for a commercial service upgrade.

De-energization. Lockout procedures, PPE selection and arc-flash boundaries are set by CSA Z462, NFPA 70E, OSHA and the equipment manufacturer, not by this article. Your broker will ask whether the procedure is written and who verifies it.

Inspection. A failed rough-in adds a return trip, a re-inspection fee and a delay to every trade behind you. Re-inspection fees typically run $50 to $200 in most markets. The delay is the strain that shows up on the next month's P&L.

Warranty. Completed-operations coverage answers callbacks on your own work. Track callback rate per job, because it is the number your carrier will ask for at renewal. A rising rate shows up as a surcharge or a restricted quote.

Reopen the file when these change

A policy written for a two-van residential shop does not cover a crew trenching to a commercial pad. Tell the broker when any of these changes occur:

The same applies to your electrical contractor business plan, which should carry the insurance lines as fixed monthly costs rather than annual figures divided at year end.

Common questions

Why is workers' compensation so much larger than general liability?

It is rated per $100 of payroll against a class code for electricians, so it grows with every hire. At $5 per $100, a $500,000 field payroll carries $25,000 a year in premium. General liability is rated mostly on revenue and class, so it moves more slowly.

Do I need completed-operations coverage if I only do service work?

Yes. Service work generates the most callbacks, and a callback on your own installation is exactly what completed operations answers. Check whether your general liability already includes it before buying a separate policy.

What do insurers want that a new contractor usually lacks?

Three to five years of loss runs. Without them, carriers price conservatively or decline. A documented safety program and clean OSHA logs are the substitute a new shop can offer. Some online carriers, among them Next Insurance, quote new contractors with no loss history.

How often should I re-shop the policy?

At every renewal, and immediately after any change in voltage class, service mix or vehicle count. Re-shopping is not the same as switching; the comparison itself tells you whether your current rate still fits the work you do.

What does coverage cost all in for a year?

A two-van residential shop with $150,000 of field payroll typically pays $9,000 to $25,000 across all lines. A commercial contractor with $600,000 of payroll and high-voltage work often pays $50,000 to $95,000. Workers' compensation is 40% to 60% of the total.