Price it in two parts. Charge the coverage you already carry as a percentage of the contract value, then add anything this contract makes you buy as a flat amount. For many trades that totals roughly 1 to 4 percent of contract value, illustrative, and more for roofing and demolition. Who this is for: contractors who want the bid to carry the insurance the contract requires, not their margin.
The short version
- Two parts: what you already carry, as a percentage of the job, plus what this job makes you add, as a flat amount.
- Illustrative total for many trades: roughly 1 to 4 percent of contract value. Roofing and demolition run higher.
- Workers comp is priced on payroll, so estimate the job's payroll before anything else.
- Your year-end bill follows your real payroll and sales. This job adds to it even if your premium looks fixed.
- Ask your broker for the numbers before bid day. That review is free.
What insurance costs does a job actually add?
Your premium may look like one fixed number a year. It is not. General liability and workers comp are priced on payroll or sales, so more work means a bigger bill at the premium audit, the insurance company's year-end check of your payroll and sales. A contract can also make you buy coverage you do not carry.
| Cost | How the insurance company prices it | How to put it in the bid |
|---|---|---|
| General liability | A rate on your payroll or your gross sales, set by trade | A percentage of contract value |
| Workers comp | A rate per $100 of payroll for your class code (the job category your payroll is rated under), times your experience mod (a multiplier based on your claims history) | Job payroll times your rate |
| Umbrella | A flat yearly price for a second layer of coverage above your other liability policies | Flat if bought for this job, or spread across the year's jobs |
| Endorsements and one job policies | A flat charge per change added to your policy, often nothing with blanket wording, or a flat price for something like pollution coverage on one job | Flat amount |
| Bonds | A percentage of the contract, set by a surety company on your credit and financials | Its own line. Bonds are not insurance. |
How do I estimate the numbers for my bid?
- Estimate the job's payroll. Crew size, weeks on site, wages. Everything else keys off it.
- Apply your workers comp rate. Your policy shows a rate per $100 of payroll for each class code. Multiply, then apply your mod. See how class codes work.
- Apply your general liability rate. Ask your broker for it as a percentage of sales or payroll. Many small contractors land between 0.5 and 2 percent, illustrative and driven by trade.
- Add the flat items. Every policy change, umbrella increase, or project policy the contract forces. Your broker prices these from the insurance section.
- Mark it up. Insurance is a cost like lumber. Apply your normal overhead and profit.
- Sanity check. If the total is far outside 1 to 4 percent, something is missing or double counted.
Step 4 is the one bidders forget. See what meeting a contract's insurance requirements costs.
What does the math look like on a real bid?
Illustrative only. Your rates depend on your trade, payroll, state, and claims history.
| Item on a $400,000 drywall job | Basis | Illustrative cost |
|---|---|---|
| Workers comp | $130,000 job payroll at $6.00 per $100, mod 1.00 | $7,800 |
| General liability | 1.0 percent of contract value | $4,000 |
| Naming your customer on your policy, and your insurer agreeing not to chase them for money it paid (two changes to your policy) | Two flat charges | $300 |
| Per project aggregate (your yearly limit resets for this job) | Flat | $600 |
| Umbrella increase from $1,000,000 to $2,000,000 | Yearly cost, all charged to this job | $1,200 |
| Total before markup | 3.5 percent of contract value | $13,900 |
Notice that $11,800 of the $13,900 is coverage the contractor already carries. Most bidders assume that part is already paid for. It is not. The audit compares the payroll and sales you estimated at the start of the year to what you really ran, and bills you for the difference. If this job was not in that estimate, its payroll lands on the year end bill whether the bid priced it or not. Read how the premium audit works.
Should insurance be its own line or part of overhead?
Track it separately inside your estimate no matter how the bid form looks. Then follow the form. Most private bids are a lump sum with the insurance inside. Some public forms have an "insurance and bonds" line.
If the bid documents say the owner is providing a wrap-up (one insurance program the owner or general contractor buys for everyone on the project), you take your own cost for that job out of the bid. Most wrap-ups cover general liability and workers comp at that site, and sometimes an umbrella, so the deduction usually covers both. The documents say exactly what to deduct. Price it now and buy it when you win: see do I need to buy the insurance before I win the bid.
What this looks like in real life
Illustrative example. It is typical of what we see and is not a promise of how any specific situation would be handled.
The setup: A drywall subcontractor in New Jersey with twelve employees bids a $400,000 apartment job at a 6 percent margin, about $24,000. He prices labor and material carefully and treats insurance as "already paid."
What went wrong: He wins. The contract requires a $2,000,000 umbrella and a per project aggregate he does not carry. Ten months later the audit picks up the job's $130,000 of payroll, which was never in his estimate for the year.
What it cost: Illustrative figures: $1,800 for the umbrella and the per project change, plus a $7,200 audit bill for the payroll above his estimate. About $9,000 of unpriced cost, a third of his planned profit.
The fix: Fifteen minutes with the broker before bid day would have produced a $13,000 insurance line. Marked up and included, the owner would have paid it instead of his margin.
Frequently asked questions
Q: How do I include insurance costs in my construction bid?
Price the policies you already carry as a percentage of the contract value, add anything this contract makes you buy as a flat amount, then mark the total up. For many trades that is roughly 1 to 4 percent, illustrative.
Q: Should I list insurance as a separate line in my bid?
Track it separately in your own estimate every time. On the bid form, follow the form. Lump sum bids fold it in, and some public forms have an insurance and bonds line.
Q: Do I include workers comp in my bid?
Yes. Workers comp is priced per $100 of payroll, so every job adds to your bill at the year-end audit. Estimate the job's payroll, multiply by your rate, and put it in.
Q: How do I price an umbrella I only need for one job?
If this is the only job that needs it, charge the full year's cost to the bid. If other jobs need it too, spread the cost across them.
Q: Are bond costs part of the insurance costs?
No. A bid, performance, or payment bond comes from a surety company, based on your credit and financials, and it is priced as a percentage of the contract. Show it on its own line.
Q: What if the owner provides the insurance for the whole project?
That is a wrap-up, one insurance program bought for everyone on the job. The documents tell you to remove your own general liability and workers comp cost for that job. Your auto policy usually stays with you, and your own policies still cover your off site work.
How Morrow helps
Morrow is a licensed independent commercial insurance brokerage that works with contractors and trades every day. Pricing the insurance line of a bid, item by item and before the bid is due, is something we do for contractor clients every week.
- Free contract review. Send us the contract or bid documents and we mark up the insurance section in plain English, whether or not you buy anything from us.
- Free, instant certificates. Clients issue their own certificates of insurance online in about a minute, any hour, any day, at no charge.
- Markets you cannot reach online. One application, shopped across many insurance companies for general liability, workers comp, auto, umbrella, and pollution coverage.
One more thing. This article is general information and is not legal advice or a statement of coverage. Your contract and your policy wording control in every case. Requirements vary by customer, by state, and by insurance company, so have a licensed advisor review your own contract and your own policy before relying on any of it.
Last updated: Reviewed by the Morrow commercial lines team. Last updated September 2026.