As a general contractor, you have likely seen firsthand that things don’t always go as expected, and it’s difficult to plan for every possible situation. That’s why it’s important to have the proper business insurance coverage in place to account for any unforeseen events. Whether it’s a natural disaster or a workplace accident, business insurance can help protect you from a variety of risks and liabilities and keep your business running in challenging times.

What insurance coverage do I need as a general contractor?

Some of the most common coverages for general contractors are listed below, along with relevant examples of incidents that would trigger these coverages.

General Liability Insurance

Perhaps one of the most important coverages for general contractors, general liability insurance protects your business if you unintentionally injure another person or cause damage to someone else’s property. Often a requirement for doing business, general liability insurance will pay for the legal fees, settlements, judgements, and even medical payments involved in third-party damage or injury claims.

For general contractors, much of your work involves being on-site at a customer’s home, office, or worksite. You’re also working with a number of different tradespeople, from plumbers to electricians, who may be working with dangerous equipment or tools. This opens you up to a high level of liability, as accidents and injuries are more likely to happen on a construction site. Moreover, if you have your own offices that are visited by customers, vendors, or suppliers, there is also risk of someone being injured on your own business property. General liability provides coverage for all of these risk factors.

Examples:

• Property damage: You are managing a residential home remodel and are delivering materials into the client’s home. You and your employees are carrying a heavy bathtub up the stairs when your grip slips and the tub crashes down the staircase, damaging your client’s stairs and ruining the antique railing. The client sues for the damage.
• Bodily injury: A client trips over a nail gun that was left out by one of your workers. In the process of tripping over the nail gun, the nail gun fires and punctures your client’s foot. The client requires surgery and sues your business for medical expenses and lost wages from being unable to work.
• Products and completed operations: You complete a project for a client which includes a tankless water heater installed in the attic. Months after completing the job, because of improperly fastened anchors, the water heater falls through the ceiling and onto your client, causing serious injury. The client sues your business.

Workers’ Compensation Insurance 

A critical coverage in the construction industry, workers’ compensation insurance provides financial benefits to employees who suffer work-related illnesses or injuries while employed by your business. Because construction has a higher rate of injury than many other professions, it is very important for general contractors to have workers’ compensation coverage. In almost all states, workers’ compensation insurance is required for companies that have employees. In exchange for accepting workers’ comp benefits, an injured employee agrees to not sue your business for the injury. Workers’ compensation insurance is no-fault, which means that it pays benefits regardless of whether the employer or employee is at fault for the injury.

Workers’ compensation can cover the costs of:

• Funeral expenses
• Disability benefits
• Medical expenses
• Rehabilitation costs
• Death benefits
• A portion of lost wages

Example:

• One of your employees is using a power saw and injures his hand, leaving him unable to work. Workers’ compensation insurance would provide coverage for the employee’s medical bills, rehabilitation expenses, and a portion of his lost income while he is unable to work.

Commercial Property Insurance

If your business owns or leases office space, commercial property insurance can help protect the value of that property, including business property inside your office space and any property that is under your care, custody, or control. For general contractors, this is an important coverage because dealing with the financial consequences of a natural disaster or another catastrophe can put your business at risk.

Example:

• A fire breaks out in your office, damaging your office computers, furniture, and construction equipment. Commercial property insurance would pay to replace or repair your office space and the damaged property.

Inland Marine Insurance

As a general contractor, you are constantly on the move, traveling to and from different project sites. Because of the nature of your work, you may be transporting valuable property and equipment that is expensive or difficult to replace. Inland marine insurance can provide coverage for these items, serving as insurance for property that is not tied to a fixed location and is not covered by a standard commercial property policy. Some types of property that inland marine insurance covers include:

• Property that is being moved or transported. This might include a new cast iron bathtub you are transporting to a client’s home.
• Property you’re holding for someone else. This might include a customer chandelier you are storing for a client prior to installation.
• Property installed in a vehicle. This might include a hoist you’ve installed on your truck.
• Property that moves from place to place. This might include construction equipment and tools you use at different project sites.

Example:

• You own a table saw that is being used at one of your project sites. A windstorm knocks down a tree branch that damages your table saw. Inland marine insurance would cover the damages to your equipment.

Builder’s Risk Insurance

Builder’s risk insurance protects a building while it is under construction or being renovated. Besides covering the building itself, builder’s risk can also include protection for construction materials at the site or in transit, labor costs, and temporary structures such as fencing and scaffolding.

Builder’s risk insurance is a crucial coverage for general contractors who are involved in new building construction or renovations. Standard property insurance policies will not cover the structure, materials, equipment, and supplies for a construction project that’s in progress, so builder’s risk insurance serves to fill that coverage gap.

Example:

• You are managing the construction of a new townhome. Construction on the townhome is about halfway complete when a storm destroys the half-built project. Builder’s risk insurance would cover the costs of the materials used so far and the labor costs you’ve expended in completing half of the townhome.

Commercial Auto Insurance

If your business owns or leases vehicles for business purposes, commercial auto insurance is a critical coverage to obtain. Commercial auto insurance protects your business financially if you or one of your employees injures someone else with a business vehicle and protects the investment you have in business vehicles from crashes and theft.

Examples:

• On your way to a project site, you rear-end another car at a stoplight. The other driver is injured and sues your business. Commercial auto insurance would cover any medical fees, legal costs, and property damage from the accident.
• One of your company trucks is stolen from your parking lot. Commercial auto insurance would cover the cost to replace the truck.

Professional Liability Insurance

Professional liability insurance provides protection for general contractors who provide design or construction management services to their clients. It provides financial protection for your business if you are sued by a dissatisfied client for work errors, undelivered work, misrepresentation, or negligence. Professional liability insurance is also important for general contractors who hire subcontractors that provide design work, as you may also be held liable for their mistakes or negligence.

Example:

• You create a design for a remodel for a client, and specifications for the design are included in the contract. The client believes the final product does not meet the design specifications and is unhappy with your work. The client sues your business.

Subcontractor Coverage

As a general contractor, you may hire subcontractors to perform specific tasks on your project. It is important to know that many liability insurance policies do not cover work done by subcontractors. In order to protect your business, you’ll want to make sure that you require all subcontractors to carry the same limits of liability insurance that your business carries.

Additionally, subcontractors need to have their own workers’ compensation insurance policies. The laws in many states hold contractors responsible for workers’ compensation of their subcontractors if the subcontractors are uninsured.

Example:

• You are hired to remodel a client’s office. You hire a subcontractor to complete the plumbing work since your company does not have plumbing expertise. The plumbing subcontractor installs a pipe incorrectly, leading to a burst pipe that causes water damage to the client’s office. The client sues your company for damages. Your business would be responsible for the damage, and your insurance company may not cover the damages since the work was performed by a subcontractor.

When you hire a subcontractor, ask to see their certificate of insurance (COI) for both commercial general liability insurance as well as workers’ compensation. For liability insurance, you should also request that they add your company as “Additional Insured” onto their insurance policy. This will ensure that the subcontractor’s insurance company will cover your business if you are sued over work performed by the subcontractor.

If your subcontractor can’t obtain liability or workers’ compensation insurance, you can add the subcontractor to your insurance policies. Contact your insurance company or agent/broker and request that they add the subcontractor as “Additional Insured” under your policy. This will cover the work that they do for your company but will not provide coverage for work they do for others. Adding subcontractors as “Additional Insured” may require the payment of additional premiums.

Additional Coverages

• A business owner’s policy (BOP) combines general liability, property, business interruption, and extra expense coverage into a single package. For small or midsize businesses, this could be a convenient way to obtain a wide range of coverage. Premiums for a business owner’s policy are typically cheaper than the cost of buying each coverage separately.
• Wrap-up insurance bundles various insurance coverages necessary for a large-scale construction project that requires many contractors and subcontractors. While policies may vary and depend on the specific project, generally, wrap-up insurance includes coverage for employer’s liability, general liability, and workers’ compensation.
• Employment practices liability insurance (EPLI) protects your business against lawsuits by prospective, current, or former employees accusing your business of wrongful treatment such as discrimination, harassment, or other employment-related issues.

Pricing and Quotes

Pricing for general contractor insurance will vary based on the type of insurance coverage and the risk profile of your business. Insurers consider factors such as:

• Business size
• Industry
• Location
• Number of employees
• Claims history

Businesses with higher risks will have higher premiums than those deemed lower risk. For example, a general contractor with a history of frequent claims will face higher premiums. Premiums also rise as you increase the limits of insurance. Different insurance companies have different models for rating risks, so it is worth comparing pricing across different insurers.

In order to get an accurate estimate on pricing, it’s best to get a quote from a reputable insurance company. Below we’ve highlighted a few of our trusted partners who offer coverage for general contractors:

Provider	General Liability	Professional Liability	Business Owner's Policy
Embroker	??	??	??
CoverageSmith	??	??	??
CoverWallet	??	??	??
Hiscox	??	??	??
Thimble	??	??	??

Final Word

As a general contractor, you are constantly planning and making sure your projects go off without a hitch. Having the right business insurance coverage will only serve to complement your preparedness, giving you peace of mind and financial backing in case things go awry. From fires to workplace accidents to litigious clients, you never know what unfortunate event may occur. With a comprehensive insurance plan in place, you can rest assured that you, your employees, and your customers will be protected in the face of unexpected and challenging times.