What Insurance Do Contractors Need in Michigan? And What It Costs

If you are a contractor in Michigan, whether you are building homes, remodeling kitchens, or running a small trade business, having the right insurance is not optional. It is essential.

The challenge is that most contractors are not exactly sure what they need, what is required, or how much it should cost. And with insurance rates changing over the last few years, it can feel even more confusing.

This guide breaks down exactly what coverage Michigan contractors need, what it typically costs, and how to make sure you are properly protected.

The Core Insurance Coverages Every Contractor Needs

1. General Liability Insurance

This is the foundation of any contractor insurance program.

It protects your business if:

  • You cause property damage at a job site
  • A client or third party gets injured
  • You are sued for negligence

Example: You are remodeling a kitchen and accidentally damage a water line, causing flooding. General liability covers the damage and legal costs.

Typical Cost in Michigan:

  • Small contractors: $500 to $1,500 per year
  • Larger or higher risk trades: $1,500 to $5,000+

What affects the price:

  • Type of work, roofing and excavation cost more
  • Annual revenue
  • Claims history
  • Subcontractor usage

2. Workers Compensation Insurance

If you have employees in Michigan, this is required by law.

It covers:

  • Medical bills for work related injuries
  • Lost wages
  • Rehabilitation costs

Example: An employee falls from a ladder on a job site. Workers comp pays for their medical treatment and a portion of their lost income.

Typical Cost:

  • Usually based on payroll
  • Rough range: $5 to $25 per $100 of payroll depending on trade

Higher risk trades like roofing or framing will be on the higher end.

3. Commercial Auto Insurance

If you use vehicles for your business, even just one truck, you need commercial auto coverage.

It covers:

  • Accidents while driving for work
  • Damage to your vehicle
  • Liability if you injure someone else

Important note: Your personal auto policy will not cover business use in most cases.

Typical Cost:

  • $1,200 to $3,500 per vehicle per year depending on coverages selected

Depends on:

  • Driving records
  • Type of vehicle
  • Radius of travel

4. Tools and Equipment Coverage

Contractors rely on tools, and they are often expensive.

This coverage protects:

  • Theft
  • Damage
  • Loss on job sites or in transit

Example: Your trailer full of tools is stolen overnight. This policy helps replace them quickly so you can keep working.

Typical Cost:

  • $150 to $600 per year depending on value

5. Builders Risk Insurance

If you are building or renovating structures, this is critical.

It covers:

  • Damage to a building under construction
  • Fire, vandalism, theft, weather related damage

Example: A partially completed home is damaged by a windstorm. Builders risk helps cover the loss.

Typical Cost:

  • Around 1 to 4 percent of the total construction cost

Optional but Important Coverages

Umbrella Insurance

Adds an extra layer of protection over your liability policies.

Recommended for all contractors who want to protect their business and assets. We seem them more commonly for contractors working on:

  • Larger projects
  • Multiple projects
  • High value homes
  • Commercial jobs

Professional Liability Insurance

Important if you:

  • Design projects
  • Provide consulting
  • Make recommendations that clients rely on

What Insurance Is Required in Michigan?

In Michigan, contractors are typically required to carry:

  • Workers compensation if they have employees
  • Commercial auto if vehicles are used for business

General liability is not always legally required, but in reality:

  • Most clients require it
  • Most general contractors require proof of it
  • You cannot win serious jobs without it

How Much Does Contractor Insurance Cost in Michigan?

What Drives Your Insurance Cost Up or Down?

Your trade: Roofing, excavation, and framing are higher risk than painting or finish carpentry.

Your claims history

More claims means higher premiums.

Subcontractor usage – the more you sub out the less control over the jobsite you have and the more claims that tend to happen.

Uninsured subcontractors significantly increase your risk and cost as their liability will shift to you and your coverage.

Revenue size

Higher revenue means more activity therefore more exposure.

How Contractors Can Lower Their Insurance Costs

Here are a few practical ways to reduce your premiums:

  • Maintain a clean claims history
  • Use written contracts with subcontractors
  • Require certificates of insurance from subs
  • Bundle policies with one carrier
  • Review your coverage annually

Final Thoughts

The right insurance program does more than just protect you, it helps you win better jobs, build trust with clients, and grow your business with confidence.

If you are not sure whether your current coverage is right, or if you have never had your policies reviewed, it is worth taking a closer look.

If you are a contractor in Northern Michigan and want a clear, no pressure review of your coverage, we are happy to help.

Cardinal Insurance Group       Trusted Guidance. Personalized Service Written by Linda M. Fisher, AAI, CIC, CPRIA, CPRM, LIC, LUTCF – Agency Founder & Owner

Learn More About Us