General liability insurance is an essential coverage for contractors to protect their business. This type of insurance covers property damage, bodily injury, and personal injury claims from clients and other third parties. Having adequate general liability limits ensures contractors have protection in case of the unexpected.
This article will provide an in-depth overview of general liability insurance designed specifically for contractors, helping business owners understand coverage options, policy costs, exclusions, and how to find the best provider. With the right general liability insurance, contractors gain invaluable peace of mind knowing they have financial security if faced with a claim.
The Purpose and Importance of General Liability Insurance
General liability insurance protects contractors in case they are faced with costly litigation due to client or third party bodily injury, property damage, personal injury or advertising injury that occurs because of their work or operations. Lawsuits from on-the-job accidents or damage to client property can be financially devastating without insurance. The right general liability policy covers legal defense costs, settlements and judgments up to the specified limit amount.
This protects the contractor’s assets and business viability if a major claim occurs. Staying in business after a serious incident requires having adequate coverage limits before issues arise. General liability insurance brings peace of mind and allows contractors to focus on daily operations rather than worry about potential legal action.
What Does General Liability Insurance Cover?
There are several important coverage areas that make up a contractor general liability insurance policy. Understanding what risks general liability covers guides business owners toward policies that meet their needs. The main coverage areas include:
Bodily Injury Coverage – Protects against claims if a third party suffers bodily injury, sickness, or death because of contractor operations or completed work. Includes coverage for medical expenses.
Property Damage Coverage – Covers claims for property damage to third party property arising from contractor work, either on-site or from completed operations. Includes loss of property use expenses.
Personal and Advertising Injury Coverage – Covers financial injury from libel, slander, defamation, false advertising or copyright infringement in advertising materials.
Products/Completed Operations – Covers liability for damage or injury after a job is completed for a set time frame, often one to two years depending on the policy. Crucial coverage area for contractors.
Medical Expenses – Pays medical costs for others injured because of contractor operations. Typically a small limit, often only $5,000.
Knowing what general liability insurance covers allows contractors to choose adequate limits and supplemental coverages tailored for construction risks. Speak with an agent to ensure complete protection.
How Much General Liability Coverage is Needed?
The amount of general liability coverage needed varies widely depending on the size of a contractor’s business, number of employees, the type of construction trade, and revenue generated. Larger contractors and those doing hazardous work like electrical require higher policy limits. Most small contractors need at least $1 million in coverage, while policies of up to $2 million, $5 million or beyond are necessary for larger companies. Factors determining ideal coverage limits include:
- State contractor license bonding requirements
- Contract and project size – larger projects warrant bigger limits
- Subcontractor insurance requirements
- Number of employees on payroll
- Company annual sales
Asset value protection needs
Since lawsuits in the construction industry can exceed $1 million, smaller contractors still need significant coverage. Determine ideal coverage levels through a contractor insurance agent’s risk assessment. Securing adequate general liability limits prevents paying out-of-pocket if faced with a substantial claim.
General Liability Policy Premiums and Costs
General liability insurance premiums for contractors span a wide range but are typically calculated based on relevant risk factors like location, trades performed, years in business and annual revenue. Contractor premiums often range from about $600 per year up to $15,000 or more annually for larger policies. Average GL premiums fall around $1,800 per year for small to mid-sized contractors. However, many elements determine costs:
| Elements | Costs |
|---|---|
| Revenue | The higher the annual sales, the greater the premiums. |
| Business longevity | New businesses often pay higher premiums. |
| Number of employees | More staff means higher premiums. |
| Work performed | Dangerous trades like roofing cost more. |
| State/region | Insurance costs more in high claim areas. |
| coverage limits | More coverage increases premium pricing. |
| Deductible level selected | Lower deductibles carry higher premiums. |
Request quotes from multiple reputable providers. Compare coverage, limits and pricing to find the best value general liability policy for your contracting business.
Key General Liability Exclusions
While general liability insurance covers a wide range of third-party bodily injury and property damage claims, some important exclusions apply. Understanding exclusions helps avoid unexpected gaps in coverage following an incident. Key liabilities often excluded:
Professional Liability – Errors and omissions from professional services, like inaccurate designs or measurements.
Employee Injuries – On-the-job worker injuries fall under workers compensation insurance.
Construction Defects – Faulty workmanship requiring repairs. Ensuring proper building methods prevents defects.
Intentional Damage – Property damage or injuries deliberately caused will not be covered.
Normal Wear and Tear – Gradual structural deterioration or damage from ordinary use isn’t covered.
Prior Damage – Liability claims involving damages occurring before policy inception won’t be covered.
Contractual Liability – Legal responsibility assumed under a contract beyond what the insured would have without the agreement.
Knowing the fine print helps steer clear of denial of claims after accidents. For complete protection, partner with an insurance agent experienced in contractor exclusions. Supplemental policies can cover some excluded liabilities as well like professional liability.
Choosing the Best General Liability Insurance Provider
Navigating general liability insurers that focus on the construction trades makes finding the right policy simpler. Key considerations when choosing an insurance provider include:
- Industry experience – Select a carrier knowledgeable about contractor risks.
- Coverage options – Look for flexible general liability plus excess and supplemental policies.
- Reputation for claims – Pick a financially stable insurer known for fair claim payments.
- Risk management – Choose a carrier offering contractor safety resources.
- Premium stability – Find an insurer with stable rates.
Ask colleagues who they insure with and why. Thoroughly research carriers you’re considering. Comparing multiple providers ensures getting optimal coverage at the best premium cost.
Getting Business Owner’s Policies for Contractors
While general liability coverage protects against third-party claims, Business owner’s policies (BOPs) bundle GL together with other essential policies like commercial property insurance and business interruption coverage. BOPs conveniently combine four core coverages:
General liability insurance
- Property insurance
- Business interruption insurance
- Commercial auto coverage
BOPs significantly reduce time spent managing policies and typically cost less than buying coverage individually. They’re ideal for small or mid-sized contractors needing streamlined insurance. When considering BOP policies, go with insurers catering to the construction trades that bundle GL protection with robust supplemental coverages meeting contractors’ unique risks.
Supplemental and Umbrella Liability Policies
Though quality GL forms the foundation of contractor insurance programs, supplemental policies fill liability gaps. Common add-ons include:
- Professional liability – Covers financial harm from design errors.
- Commercial auto liability insurance – Protects against vehicle accident claims.
- Inland marine insurance – Covers contractor tools and equipment on and off job sites.
- Builders risk insurance – Protects construction projects against property damage.
- Pollution liability insurance – Covers claims alleging environmental contamination during projects.
Umbrella insurance also adds vital extra liability limits protecting assets if underlying policies like GL reach limits after claims. Umbrella insurance activates when primary coverage hits caps. Savvy contractors layer multiple excess umbrella policies over their GL for further protection from financial ruin after incidents.
Conclusion
General liability insurance represents a fundamental policy for contractors looking to secure financial protection for their business. It shields companies from expensive third party claims that could sink companies without adequate coverage. However, navigating contractors insurance remains confusing. Following this guide to understanding GL insurance for contractors makes buying the right policy more accessible. Ensure your assets stay protected and operations continue uninterrupted by investing in customized general liability coverage designed for construction industry risks. Consult an experienced insurance specialist to discuss coverage needs and request quotes matching your business. Prioritize securing adequate GL coverage to gain invaluable peace of mind.
