OVERHEAD — INSURANCE

INSURANCE IS A COST LINE. MOST SUBS PUT IT IN THE WRONG PLACE.

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Insurance is one of the three biggest non-labor cost lines at most subcontractors — and the most commonly misplaced. Workers' comp belongs in the burdened labor rate by class code, not in overhead. General liability, priced on payroll or receipts, behaves like a variable job cost and should flow into the bid base. Equipment floaters belong in the per-machine cost basis. Auto splits between job and overhead by use. Lump it all into one overhead bucket and two things happen: your overhead rate looks bloated while your labor and equipment rates look artificially cheap — so you bid labor-heavy work too low and wonder why insurance-heavy years lose money. Then the premium audit arrives and trues-up payroll you never priced. The placement is the strategy.

YOU DON'T JUST PAY INSURANCE. YOU ALLOCATE IT — AND THE ALLOCATION DECIDES WHETHER YOUR BIDS TELL THE TRUTH.

BY JOSH LUEBKER Published: June 2026 Updated: June 2026

THE PLACEMENT MAP

WHERE EACH POLICY ACTUALLY BELONGS.

POLICY 01 — WORKERS' COMP: INTO THE LABOR BURDEN

Comp Is a Cost of an Hour Worked, Not a Cost of Having a Company

Workers' comp is priced per $100 of payroll by class code — it literally scales with labor hours, which makes it a labor cost wearing an insurance jacket. It belongs in the fully burdened labor rate, by class code: a concrete finisher at a 10%+ comp rate carries a very different burdened cost than office staff under 1%. Subs that park comp in overhead underprice every labor-heavy bid by the comp rate — which on field-heavy trades is the entire net margin.

POLICY 02 — GENERAL LIABILITY: INTO THE BID BASE

GL Scales With the Work, So Price It With the Work

GL premiums are computed on payroll or gross receipts — meaning every dollar of work you win carries a GL cost with it. The clean treatment: convert the annual premium to a rate (percent of labor or percent of revenue, matching how your policy is rated) and apply it in the bid build-up, with the policy minimum carried in overhead. A sub doing $5M at a 1.5% effective GL load who never bids it donates $75K a year to the GCs.

POLICY 03 — EQUIPMENT AND AUTO: INTO THE COST BASIS

The Floater Is Part of What the Machine Costs Per Day

Equipment floaters and inland marine premiums belong in each machine's cost basis — ownership duration, replacement cost, maintenance, insurance, registration — flowing into the daily and monthly rates jobs get charged. Auto splits by use: trucks serving jobs into job cost or equipment rates, office vehicles into overhead. A machine that looks cheap because its insurance lives in overhead is a machine getting deployed at a loss.

POLICY 04 — THE MOD AND THE AUDIT: MANAGE, DON'T ABSORB

Your EMR Is a Controllable Number With a Price Tag

The experience modification rate multiplies your comp premium directly — a 1.3 mod pays 30% more than a 1.0 for identical payroll, and the difference belongs in your burdened rates today, not discovered at renewal. Same with premium audits: GL and comp are billed on estimated payroll and trued-up after year-end, so a growth year produces a five-figure audit invoice for work already billed at the old rates. Forecast the true-up as a liability all year and price current rates into current bids — the audit should confirm your accrual, not ambush your cash.

THE OVERHEAD QUESTION

WHAT'S LEFT IN OVERHEAD — AND WHAT IT DOES THERE.

After proper allocation, what genuinely remains in overhead: policy minimums, office contents and cyber, umbrella coverage above the operating policies, professional liability where carried, and the office-use share of auto. That number is real overhead — it exists whether or not you build anything this month.

The payoff for getting the split right shows up in three places at once. Your overhead rate drops to its honest level, which makes your bids competitive where you were padding. Your labor and equipment rates rise to their honest level, which stops the silent losses on labor-heavy and iron-heavy work. And your insurance cost per trade and per machine becomes visible — which is the number you need when the renewal quote lands and the broker asks what changed. One allocation exercise, three pricing corrections.

BY TRADE

THE INSURANCE LOAD, TRADE BY TRADE.

Concrete & Structural

Among the highest comp class rates in commercial work — finishing, forming, and flatwork codes routinely run high single to double digits per $100 of payroll. On a labor-heavy concrete bid, comp alone can exceed the net margin, which is exactly why it has to live in the burdened rate and not the overhead bucket.

Civil & Equipment-Heavy

The floater and auto schedule is the story: 30 machines and a truck fleet carry an insurance load that belongs machine-by-machine in the cost basis. Civil subs that allocate it correctly discover which iron actually earns its keep — insurance included — and which has been subsidized by the overhead line.

Electrical & Specialty

Lower comp rates than the structural trades but heavier GL exposure on energized work, and GC-driven additional-insured and umbrella requirements that add real premium per contract. Those contract-driven costs are job costs — price them into the jobs that require them.

SWPPP & Multi-Site

Auto and equipment exposure spread across dozens of small sites, plus pollution liability where carried. Multi-site allocation matters double here: per-site costing without per-site insurance load shows phantom margins on the sites that drive the claims and the miles.

WHAT CHANGES WHEN THIS IS FIXED

WHAT CORRECT ALLOCATION CHANGES.

5% → 12%

The overhead correction that re-priced a company. A $4.9M concrete sub carried a 5% book overhead rate — partly because costs like insurance were scattered into the wrong buckets. The real number was closer to 12%. Correcting the rate structure, with every cost in its true home, was foundational to the same company netting $1.1M the following year.

30% → 17%

Overhead cut by managing what was actually in it. A $6.7M civil contractor's 30% overhead included costs that belonged in equipment and labor rates — and genuine bloat that only became visible once the allocation was honest. Cutting to 17% paid off a maxed $348K line in 60 days. You can't cut what you can't see, and misallocated insurance hides in both directions.

Quarterly

How often burdened rates get recalculated. Comp rates change at renewal, the mod changes annually, payroll mix shifts constantly. SPM recalculates burdened labor rates — comp included, by class code — quarterly, flowing straight into estimating. The audit true-up gets accrued monthly, so the year-end invoice confirms a number that's already on the books.

Frequently Asked Questions

Split it by how each policy is priced. Workers' comp is rated per $100 of payroll by class code — it goes in the burdened labor rate. General liability is rated on payroll or receipts — it goes in the bid build-up as a rate, with the policy minimum in overhead. Equipment floaters go in each machine's cost basis. Auto follows use: job trucks to jobs, office vehicles to overhead. What legitimately stays in overhead: minimums, umbrella, office contents, professional liability. The test for any policy: if the premium scales with work performed, it's a cost of the work and belongs priced into the work.

As an all-in load it commonly runs 3–8% of revenue for commercial subs, but the range is so driven by trade, class codes, mod, and state that the benchmark matters less than the structure. The numbers worth knowing cold: your comp rate per class code, your EMR and what it's costing above a 1.0, your effective GL rate on the basis your policy uses, and your per-machine insurance cost. With those four, you can price work correctly and have a real conversation at renewal. Without them, 'insurance is expensive' is all you've got — and it's not actionable.

That bill means payroll or receipts grew past the estimates your premiums were based on — billable growth you priced at stale rates. Three fixes: accrue the true-up monthly (estimate actual exposure versus policy estimates and book the difference as a liability, so the audit confirms rather than surprises), report material payroll growth to your broker mid-term so estimates get adjusted while you can still price for it, and put current real rates in current bids instead of last year's. The audit isn't a penalty. It's deferred billing for coverage you already used — the failure was not accruing for it.

Worth managing aggressively, yes. The mod is computed from your loss history on a formula that contains errors more often than you'd think — payroll misreported, claims left open with inflated reserves, claims that should have dropped off. An annual mod review (your broker should run one; independent reviewers exist for larger premiums) catches the clerical wins. The structural wins are operational: return-to-work programs, claims reported fast and managed closed, and safety practices that keep frequency down — frequency hurts the mod more than severity. A mod moving from 1.3 to 1.0 is a permanent double-digit cut to one of your biggest cost lines.

SPM isn't a broker and doesn't sell or place coverage — your broker keeps that. What SPM owns is the financial side: allocating every policy to its correct home so rates and overhead tell the truth, building comp by class code into burdened labor rates, carrying floaters in equipment cost bases, accruing audit true-ups monthly, and putting the renewal numbers on the table at the strategy meeting with enough clarity that you can actually negotiate. Most subs walk into renewal knowing only the total premium. SPM clients walk in knowing the cost per trade, per machine, and per dollar of work — which changes the conversation.