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Andre Said:

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

We Answered:

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.