What Does a General Contractor’s Insurance Policy Cover?
As a general contractor or owner of a construction business, contractor insurance can cover you if a lawsuit is brought against your business due to injury or damage that is caused either by your business’s operations or one of your employees. General liability insurance for contractors also covers any legal fees or settlement costs, even if you’re not found liable for damages. Furthermore, providing proof of general contractor insurance is often required for many projects, especially those contracted under state or local mandates.
The coverage areas typically represented in an independent contractor insurance policy include:
- Client and third-party injury coverage protects against any injury that occurs at a work site, whether to a client or an employee.
- Property damage protection covers damage or loss of customer property due to your operations or they are unable to use their property.
- Product claims coverage protects your business if equipment installed by your business is damaged in the process.
- Reputational injury protection covers your business if a competitor claims you damaged their reputation through advertising, for example.
- Copyright protection covers you should a competitor claim that your product or design infringes on their own copyright.
- Completed products coverage protects you if there are significant problems with your construction or installation.
A Closer Look at Completed Products Coverage
Completed products coverage protects you and your business against a wide range of risks by covering damages or loss due to your construction or installation. Say for instance, that there’s a problem with your installation of an air conditioning unit that resulted in damage to your customer’s utility closet. In this case, you are responsible for all legal and settlement fees if the client sues for damages, as well as repair costs and other financial losses associated with the damage.
Workers’ Compensation for Contractors and Subcontractors
The vast majority of states require some type of workers’ compensation coverage for contractors and subcontractors. If you are the owner of a construction business that employs multiple subcontractors, it’s important to ensure that each one has workers’ comp coverage in place, whether on their own or through you as their employer.
Commercial vs Residential Contractor Insurance
Depending on the size of your contracting business, certain projects can take over a year to complete and require multiple subcontractors. In such cases, contractors will often purchase commercial liability insurance to cover all of the project’s subcontractors. This means bids from subcontractors may come in lower since their general liability insurance cost for contractors is covered. This type of contractor insurance is commonly purchased for large projects such as a football stadium or school building.
For contractors who do residential construction, installations, and remodels, residential contractor insurance coverage will vary, depending on the number of subcontractors, as well as the value and size of the project. Coverage will also vary based on whether the project is a single home or a small development project.
Limitations of General Contractor’s Insurance
Although contractor’s insurance provides protection for a myriad of risks, it comes with limitations per occurrence and for aggregated values. Limitations must also be set for medical expenses for workers injured on the job, as well as for damage to property that is under construction.
What Does Contractor’s Insurance Cost?
As with any type of insurance coverage, costs for contractor’s insurance will vary based on different factors, including perceived risks of your industry or market. Specialized trades and roofing contractors, for example, would have a higher perceived risk. Simply put, the cost of your contractor liability insurance is directly related to the costs of the job, with coverage protection averaging 2 to 3 times higher than the project’s budget. Contractor insurance is generally more expensive than insurance for other industries and occupations.
General contractor insurance requirements are a vital safety net that your business shouldn’t be without. Your clients will know how to check if a contractor is licensed and insured, so it’s vital to have your certificate of insurance for contractors in place at all times.