Michigan Contractor Insurance

Two Michigan Licensing Claims That Are No Longer True

The Homeowner Construction Lien Recovery Fund no longer exists. Michigan abolished it in 2010 after the fund ran out of money, yet some sites published this year still list a Recovery Fund assessment among Michigan licensing costs. There is no such contribution to budget for, and no fund standing behind a homeowner's claim against you.

There is no $100,000 general liability minimum under MCL 339.2412. That figure circulates with that citation attached, and the citation gives the game away. Section 339.2412 is the statute barring unlicensed builders from suing for compensation. It says nothing about insurance limits.

Both errors point the same direction, which is that Michigan asks less of you at the licensing counter than most states and more of you in the contract. Plan around the contract.

What the Contract Requires

Four items decide whether your paperwork clears a general contractor's review.

• A certificate of insurance (COI). A one page summary, usually an ACORD form, showing coverage was in force when issued. It is not the policy.
• Additional insured status. An endorsement extending part of your liability coverage to the general contractor or owner for claims arising out of your work. Whether it survives closeout depends on the form, so completed operations wording deserves a close read.
• Primary and noncontributory. Language saying your policy responds first without asking the other carrier to contribute.
• Waiver of subrogation. Your insurer gives up its right to pursue the general contractor for what it paid.

Each is a separate endorsement that must be requested, issued, and priced. Some carriers include them at bind, others decline particular combinations on residential work.

What Michigan Contractor Insurance Costs

Contractor general liability is generally rated per $1,000 of gross receipts or payroll, with the class code setting the rate. That mechanism sits behind every quote you receive.

As an illustration, a painting contractor rated at $10 per $1,000 of receipts, running $400,000 in annual receipts, sees a base premium near $4,000 before credits, debits, minimum premiums, and endorsement charges. Change the class code and the rate can double or halve. This shows the arithmetic and is not a quote.

The ranges below reflect what we commonly place for Michigan contractors with modest receipts and clean loss history.

Two Michigan factors matter. Winter is one: ice damming, freeze losses, and a compressed building season concentrate both claims and receipts into fewer months, which affects how carriers view seasonal payroll swings. Commercial auto is the other. Michigan's no-fault system makes auto coverage work differently here than in neighboring states, and it is worth reviewing your vehicle schedule and limits rather than rolling last year's forward.

Then there is the audit. Most general liability policies are audited after the term, and receipts above projection generate a bill. Subcontracted cost is the trap: with no certificate for a sub you paid, auditors commonly rate that spend at your own class code. Collect certificates before the first payment, and see verifying subcontractor insurance and how a general liability audit works.

Michigan Contractor Insurance by Trade

Class code drives eligibility as much as price, and exclusions differ more by trade than most owners expect.

• Remodeling contractors and framing contractors
• Roofing and siding contractors, the hardest placements in the state
• Electricians, plumbers, and HVAC contractors, each separately licensed
• Insulation contractors and concrete contractors
• Painting contractors and drywall contractors
• Landscapers and handyman operations working under the $600 threshold

Before assuming a scope is covered, check common GL exclusions by trade.