Workers’ Comp for Contractors: 11 Tips to Know Before You Buy

1. Stick to your Core Trade to avoid higher rates

Dabbling in work outside your specialty? It could cost you. Insurance companies classify contractors based on their primary trade, and stepping outside it can increase your rate.

If you try to do everything, you’ll get classified as a handyman or a remodeler. Your rate can jump from $4 to $11 per $100 of payroll.

Smart contractors focus on what they do best. If you get requests for unrelated work, refer it out and prioritize your expertise. Your wallet will thank you. Additionally, staying within your core trade helps streamline operations and reduce unnecessary risks, keeping your business efficient.

2. Only Hire Insured Subcontractors and require they provide COIs 

Hiring subcontractors is common, but  be sure to verify that they have their own workers comp coverage. If your subs don’t have workers' comp coverage, the liability (and cost) falls on you.

Don’t assume your subs are covered. Ask for a COI—because if they’re not, you’re the one paying.

Tracking and keeping up with Certificates of Insurance (COIs) is an important administrative task. It's the kind of thing that large companies sometimes hire third-party vendors to manage because it requires careful attention. If you're a general contractor, you'll likely handle this task in-house, but it's important and needs to be consistently maintained. 

Keeping an updated COI database helps you stay organized, avoid audit surprises, and prevent unexpected costs.

3. Uninsured Subcontractors must be covered by your Policy

Sometimes, you’ll hire subcontractors who don’t carry insurance. When this happens, you must add them to your policy.

If you hire uninsured subs, you need to include them in your policy. It’s going to cost you, but it's necessary to protect yourself.

To minimize risks, prioritize hiring insured contractors whenever possible. When you can’t, be prepared to adjust your policy to stay compliant. Discuss potential additional costs with your insurance provider upfront to avoid surprises.

It’s worth considering the long-term benefits of working with insured subcontractors exclusively. While the upfront costs might seem higher, the savings from fewer claims, smoother audits, and better relationships with insurance providers often outweigh the initial expense.

Kickstand Tip: The 70/30 Rule for Subcontractors

There’s always a balancing act when it comes to hiring subcontractors. On one hand, insurance companies prefer businesses with mostly W-2 employees. On the other hand, contractors often need to sub out work to stay efficient.

The sweet spot? Most insurance companies want to see at least 70% of payroll going to W-2 employees, with no more than 30% subbed out—whether those subs are insured or not. 

Some carriers might allow a higher percentage of subcontracted work—50%, 65%, or even 70%—but those cases are exceptions, not the rule. Keeping subs under that 30% threshold makes things smoother with your insurer and helps control your costs.

4. Be extra careful when working at Heights

Falls are one of the most common and expensive workers' comp claims.

If you're working above 15 feet, you need to be very careful with safety. Hold meetings, check in regularly, and make sure everyone knows why safety matters. If you're focused on safety, accidents can be prevented.

Contractors who manage risk well don’t cut corners on safety. Safety protocols not only protect your team but also help control your insurance costs. For jobs requiring elevated work, consider fall arrest systems, scaffolding inspections, and detailed safety checklists to further minimize risks. Investing in ongoing safety education for your employees can also reduce accidents.

For contractors frequently working at heights, partnering with third-party safety consultants can be invaluable. These professionals can audit your worksites, provide fresh insights into potential hazards, and help develop enhanced safety plans tailored to your projects.

Kickstand Tip: 

Some states offer credits for having a written safety program. If you don’t have one, now’s the time.

5. Make sure your team wears proper PPE

Personal protective equipment (PPE) isn’t just a requirement—it’s a lifesaver. Whether it’s hard hats, gloves, or fall protection gear, enforcing PPE use on every job is a must.

PPE is critical. If you don’t wear it, you're not just risking injury—you’re also risking higher claims costs.

Invest in quality PPE and ensure it’s being used consistently. Regular training sessions can help reinforce its importance. Additionally, hold periodic inspections to ensure that PPE is functional and compliant with safety regulations. For specialized jobs, ensure your team is equipped with task-specific PPE, such as flame-resistant clothing or noise-canceling ear protection.

Consider creating a culture of accountability regarding PPE usage. Encourage team members to remind each other about PPE requirements and reward those who consistently prioritize safety.

6. Understand your ExMod (Experience Modification Rate)

Your ExMod directly affects your premiums. A higher ExMod means you’re paying more.

**Your ExMod tells the insurance company how well you manage risk. If your ExMod’s high, you’ll pay more. Keep accidents low, and you’ll see lower premiums.

To lower your ExMod, focus on reducing workplace incidents and maintaining a clean safety record. It’s one of the most effective ways to save money on workers’ comp. Conduct annual risk assessments and track claim trends to identify areas for improvement. Establishing a culture of safety, where employees are encouraged to report hazards, can also help.

Tracking your ExMod over time gives you valuable insights into your business’s safety performance. Use these metrics to set realistic safety goals and celebrate milestones, such as six months or a year without workplace incidents. 

Kickstand Note: 

ExMods aren’t set by your insurance company. They’re calculated by the NCCI or state rating bureaus based on your claims history.

7. Be clear about your services online

Insurance companies often review your online presence during the underwriting process - facebook, websites, instagram. Listing unrelated services, even unintentionally, can lead to misclassification and higher rates, and even declinations. 

If you're online saying you do things outside your scope, you're asking for higher rates. If you’re referring that work to others, say that, and get a referral fee instead of doing it yourself.

Your digital image matters because underwriters often research your company online to assess your operations and risk levels. If there are inconsistencies between what you advertise and what you actually do, it can cause issues. 

From our files: 

One contractor wrote on his social media that he was capable of doing "cabinets and more". This created alarm bells for the underwriters. He explained that he refers business to contractors to perform other work that kitchens might need. If you are referring people to subcontractors or rely on them in any way, this is something you need to be clear about. 

To avoid issues, update your website and social media regularly to reflect your current operations. 

Highlight your certifications, training, and your crew in the right gear. If you’re posting job site photos, make sure your team is wearing hard hats and proper PPE. A few small tweaks—like updating images and reinforcing safety messaging—can make a big difference in how insurance companies view your business and what you pay for coverage.

8. Separate different jobs for accurate classification

Not all jobs carry the same risk. Keeping detailed payroll records for each type of work ensures accurate classification—and fairer premiums.

It’s critical to keep perfect records. If you're doing cabinetry and installing countertops, keep separate payroll records for each. It’ll save you a lot of headaches when it’s time for audits.

Accurate records not only make audits easier but also prevent overcharges on your policy. Use digital tools or software to categorize tasks efficiently and avoid manual errors. Detailed records also provide clarity in case of disputes during audits.

From Our Files:  

A pest control company that also did interior remodeling was overpaying $24,000 per year due to misclassified payroll. By properly splitting their payroll, their premium dropped to $10,170—a 57% savings! Read the full case study here. ‍

9. Consider a Blanket Waiver of Subrogation

Adding a blanket waiver of subrogation to your policy can protect you when working with larger contractors.

A blanket waiver of subrogation is a smart move, especially if you’re working for a general contractor. It’s not expensive to add it to your policy and it can protect you.

Ask your insurance provider if this option is right for your business. These waivers are particularly valuable in contracts with general contractors or municipal projects where they may be required. 

Being proactive with these waivers can streamline contract negotiations, as many larger contractors expect them as standard practice. It’s a small investment that can lead to better partnerships and more project opportunities.

10. Know your Employer Liability Limits

Employer’s liability insurance is Part II of a workers' comp policy. It provides financial protection when an employee sues over a work-related injury or illness. While workers' comp covers medical expenses and lost wages, employer’s liability handles claims by an employee when you're sued for more money than what workers comp pays - .

Start with $1 million in employers’ liability coverage. It’s the standard, and if you're working with large contractors, they’ll expect it from you.

The good news? It doesn’t add much to your premium—it’s a very small percentage of the overall cost, but it provides an extra layer of protection that’s well worth it.

11. Prevent surprise audits by knowing your payroll

Audits are part of the workers' comp process, but you can avoid surprises by reviewing your policy regularly. Make sure your payroll projections are accurate and adjust them if needed.

No audit should surprise you. Check your payroll figures that you projected every quarter and compare it to your actually paying. If your payroll is off, either adjust your projections or set aside some cash. That way, you won’t get hit with a huge audit bill.

Keeping your payroll projections on track and making sure your classification codes are accurate will prevent higher premiums after an audit. Periodic reviews also give you the chance to address any discrepancies early. Engage with your insurance provider to clarify any confusing elements of your policy.

Pro tip:

Consider hiring a workers’ comp specialist to review your classifications annually. Their expertise can uncover savings opportunities or misclassifications that might otherwise go unnoticed.

Protect your Business with smart Workers' Comp Choices

Getting workers’ comp right isn’t just about compliance—it’s about protecting your profits. Smart contractors manage their policies proactively, ensuring they’re not overpaying or taking unnecessary risks.

At Kickstand Insurance, we specialize in contractor insurance. Need a second look at your policy? Get an instant online quote today and find the right coverage for your business.