Insurance Guide for General Contractors
Managing large home improvement and remodeling projects, a general contractor can quickly run into liability issues without the right business insurance policy.
If you are a general contractor and own your own business, you alone are responsible for making your clients happy. That means keeping employees productive so that the contract is on schedule, which isn’t always easy. Whether a worker is injured on the job due to an accident or an owner is unhappy with the quality of work, with construction projects, so much can — and will — go wrong.
Commercial business insurance protects your general contracting business assets and investments against the many uncertainties general contractors face throughout the course of a project and beyond.
Types of insurance for general contractors
Commercial General Liability (CGL) — Much like the foundation of a house, this policy is the base coverage that connects to all the other types of coverages that together comprise your general contractor insurance portfolio. It provides coverage in the following ways:
- Premises. Protects you from a third party who alleges bodily harm, injury, or property damage on job site or related sites.
- Products and services. Protects you from liability claims that arise after the project has been completed.
- Independent contractors. Protects you from liability arising from subcontractors or suppliers.
Professional Liability — Also called Errors and Omissions (E&O) coverage, this type of policy provides protection if an employee makes a mistake that negatively impacts your customer, who then turns around and sues you. When choosing a Professional Liability policy, you will want to identify which liability exposures are most applicable to the environments in which you work.
Commercial Auto Insurance — Commercial auto insurance protects the vehicles you use for business reasons in the event of an accident. Policies should be written to cover all vehicles subject to exposure, not just those owned by you.
Excess Liability — Intended to offset catastrophic losses, this type of insurance extends the coverage included in your basic policies, such as General Commercial Liability, to provide protection beyond the stated limits. Keep in mind, excess liability can only be applied to one underlying policy; for example, if you have General Commercial Liability insurance, you can’t use your excess liability coverage for any other policy.
Umbrella Insurance — Like Excess Liability, Umbrella policies provide extended coverage to supplement your basic policies. Unlike excess liability, umbrella can be applied to multipole underlying liability.
Bond insurance — A Surety Bond guarantees your clients of project completion within the terms of the contract. For instance, if you as the general contractor cannot complete the project due to cash flow problems or otherwise, the Surety may replace you.
Worker’s Comp Insurance — Worker’s Comp covers the medical bills and related expenses, such as lost wages or disability, should your employees sustain an injury on the job.
Inland Marine — This type of policy will cover your equipment and tools when you are traveling between project sites. It also covers property in the control of another person while in transit or at another site. Items include materials, supplies, and tools that are used in projects on a longer-term basis.
Builder’s Risk — This type of policy overlaps somewhat with Inland Marine insurance, but it is not the same. Builder’s risk protects a project from accidents during the time the project is being completed and includes supplies, equipment, and materials from incidents such as natural disasters, fire or theft.
Tips for finding the right insurance policy
- Since the construction industry is complex, working with an agent that specializes in this industry can optimize your success of being covered in all areas of risk.
- Understand the difference between Occurrence v. Claims Made insurance. With an Occurrence policy, an “occurrence” is covered even if the claim is brought years down the line. This is not the case with a Claims Made policy.
- If you buy a policy from an insurer with less than a “B” rating, there is a risk the company will go out of business.
- Pay attention to exclusions! Make sure you understand what the policy exclusions are and that they are properly documented.