General Contractor Insurance: Essential Business Protection

According to the Associated General Contractors of America, "The construction sector employs more than 680,000 employers with over 7 million workers. Your profession creates nearly $1.3 trillion worth of structures annually." According to the U.S. Census Bureau, as of January 2020, $1.3 billion is invested in construction—both public and private—in a single month. The most effective way to safeguard your particular business—and maintain that revenue flowing—is to secure appropriate business insurance policies.

When you're a general contractor, it's crucial to safeguard your business and staff with proper insurance protection. General contractor coverage can help protect your business from expensive legal claims and financial losses resulting from accidents or unexpected events. In this guide, we'll examine the fundamentals of general contractor insurance, including who requires it, what it protects, and its costs. Whether you're an experienced contractor or new to the industry, this guide will give you the knowledge needed to make informed decisions about your insurance requirements.

Are Contractors Required to Have Insurance?

The requirements for contractor coverage can differ depending on location and work type being conducted. Generally, contractors aren't always legally mandated to carry insurance, but many clients or contracts might require it as a business condition. Additionally, certain coverage types, such as workers' compensation coverage, might be required by law in some states or jurisdictions. It's crucial for contractors to understand the insurance requirements for their particular business and work environment to ensure adequate protection and compliance with any legal or contractual obligations.

What is General Contractor Liability Insurance?

General Contractor Insurance is an insurance policy type created to shield general contractors and their businesses from financial losses and legal responsibilities. It typically protects against various risks connected with the construction sector, including property damage, bodily injury, and third-party claims resulting from construction-related accidents or incidents. Based on the policy, it might also provide protection for issues like construction defects, errors or omissions, and equipment or tool theft. General contractor coverage is frequently mandated by law or contract, and it can help provide confidence to contractors and their clients by ensuring protection during unexpected events or accidents.

Every general contractor has assets requiring protection and faces liabilities while conducting business. When you're supervising a project and problems arise—you're usually held responsible. You must understand the importance of obtaining a policy to protect yourself and your business. This is where General Liability Insurance becomes important.

General Liability Insurance is fundamental coverage that protects you during injury or damage to third parties. It's a requirement from most entities when entering contracts. In summary, contractors general liability coverage typically includes:

Third-party bodily injury: When a passerby gets hurt on your job site, a general liability policy can pay their medical expenses (including ongoing medical payments).

Property damage: When one of your construction workers accidentally harms a neighboring structure, general liability can pay repair expenses.

Personal and advertising injury: This policy section covers things like libel, slander, or copyright infringement accusations.

You should consult a licensed insurance professional to discuss policy options available to protect your business. Make it a priority and collaborate with your agent to create a comprehensive insurance package that suits your business while addressing affordability and cost-saving options.

Who Needs General Contractor Insurance?

General contractor coverage is typically required by individuals or businesses working in the construction sector as general contractors. This can include builders, remodelers, and other professionals who supervise construction projects and hire subcontractors for various tasks. General contractor coverage is also important for those working with heavy machinery, operating vehicles, or handling dangerous materials, as these activities can create significant risks to both workers and others on job sites. Additionally, general contractor coverage might be required by clients, government agencies, or contracts to ensure contractors are financially protected during accidents or unexpected incidents.

What is Covered Under a General Contractor Policy?

The protection provided under a general contractor insurance policy can differ depending on the insurer and specific policy. However, a typical general contractor policy might include these coverage types:

Business Property Insurance

This coverage is important when you have a physical location and/or office and store equipment there. General contracting involves more than building: It's organizing contracts and plans, client information, and maintaining records. Using property coverage to protect your data and off-site equipment is equally important as securing your tools, inventory, and vehicles.

Workers' Compensation

Workers compensation provides health benefits to your employees for work-related accidents. When you're a small business with employees, you need familiarity with your state's laws regarding workers' compensation—many require businesses to obtain it. This policy can help pay an employee's medical bills and lost income when injured at work. It can also protect your business from lawsuits when injuries occur. Familiarize yourself with your state's laws to understand your obligations and risks.

Commercial Auto Insurance

As a small business owner and general contractor, you likely use vehicles to transport yourself and your tools to worksites. This creates risk exposure, especially when involved in accidents or vehicle theft. Commercial auto protection can help repair property damage to your vehicle and other property plus personal and third-party injuries. Ensuring your vehicle has commercial auto insurance coverage is another factor to consider for business protection.

Builder's Risk Insurance Coverage

Builder's risk coverage can be defined as protection that safeguards a person's or organization's insurable interest in materials, fixtures, and/or equipment used in building construction or renovation should those items suffer physical loss or damage from covered losses.

Professional Liability Insurance

Professional liability coverage (sometimes called contractors' errors and omissions insurance) protects against personal injury related to professional services you provide. It usually helps shield your business from accusations of professional errors, negligence, incomplete or defective work, etc. When you have this coverage, your insurance carrier can provide legal representation and cover related attorney fees. We suggest bundling general liability with professional liability protection.

Inland Marine Insurance

Inland Marine Insurance is a floater policy type available through your insurance carrier. It's often called "Contractors Tools and Equipment Insurance." It provides protection for equipment transported to and from worksites. It also covers equipment stored at job locations. This is usually excluded from personal auto policies and commercial auto policies unless equipment is permanently attached to vehicles.

It's important to note that protection provided under general contractor policies can vary, so it's essential to review policies carefully and understand what is and isn't covered. Additionally, certain coverage types might be legally or contractually required, so contractors should ensure compliance with any mandatory insurance requirements.

Other Factors a Contracting Business Must Consider

Did you know you're required to secure some insurance for bidding on government contracts? That can include:

Construction Bond/Surety Bonds

A Surety Bond is a legally binding contract—between a surety, principle, and the obligee—that guarantees the contracting work type to be completed correctly and within the agreed-upon timeframe. The 'surety' is the insurance carrier backing the bond. The 'principle' typically refers to the contractor, with the 'obligee' being the agency requiring the surety bond.

Liability Insurance Certificate

Many clients request liability insurance certificates from contractors as project bidding requirements. Insurance certificates summarize tremendous amounts of information on single sheets for certificate requesters. Certificates should also include your "additional insured" list. Ask your licensed insurance carrier for current copies of your liability insurance certificates.

How Much Does General Liability Insurance Cost?

General contractor insurance costs can vary significantly depending on several factors, including the contractor's business size and scope, location, work type performed, and selected coverage options. On average, general contractor coverage can range from $500 to $2,000 annually for small businesses, while larger businesses might pay considerably more.

The coverage type and amount required or desired can also affect policy costs. For example, policies with higher coverage limits or additional coverage types might cost more than basic policies with minimal protection. It's important for contractors to obtain multiple quotes from reputable insurers and carefully review each policy's coverage and cost to ensure they're getting needed protection at reasonable prices.

Let us help you protect your business with general contractor coverage and maintain your peace of mind. At Harper, our goal is helping you find business protection as efficiently as possible by matching you with appropriate insurance providers. Simply call us at call us at
+1 (470) 410-0093 or complete the form above and one of our specialists will contact you immediately.