Why You Need Contractors General Liability Insurance
If you own a contracting business, you know that even with the best of planning, things don’t always work out perfectly. Human error, faults in materials, even “acts of God” can contribute to accidents and injuries on job sites every year. That’s why every contractor needs solid, reliable insurance coverage tailored to their specific and changing needs.
What Contractors General Liability Insurance Does
Contractors general liability insurance is defined as an insurance policy that offers protection against third-party claims of property damage, injury or bodily harm, loss of life or limb, or negligence. Commercial liability insurance offers blanket coverage which includes both “public” and “product” liability, meaning that coverage extends to direct or indirect actions of the insured (and the insured’s employees) which result in loss or damage, as well as products or structures manufactured by the insured which cause loss or damage due to a fault in the product.
General Liability Insurance State Requirements
Liability insurance coverage is a state requirement for most contractors, even sole proprietors; additionally contractors with employees are required to obtain worker’s compensation insurance. The levels of coverage differ depending on the state and sector of construction.
Requirements for state and municipal contracts may be different than those for contracts with private parties. The minimum coverage recommended for most contractors and situations is $2 million.
Although in most situations a contractor can bid on a job without proof of insurance, an original proof of insurance certificate is required before work may begin. With a standard $2 million contractor general liability policy in place, contractors can avoid delays at the beginning of a project.
Commercial Client Requirements
Many private companies require contractors working onsite to obtain additional coverage over and above state requirements, especially if there are flammable substances or other hazardous materials on the job site.
Most companies or organizations will expect to see at least one Certificate of Insurance, proving that the contractor has current and appropriate insurance and that it satisfies the company’s individual risk management policy. Some companies also require commercial auto insurance coverage to exceed the amount required by law, as well as indemnity agreements, which transfer liability for bodily and material harm to the contractor.
If you’re working as an independent contractor in any aspect of the construction industry, you’re probably aware that you need insurance coverage over and above what your general contractor is required to carry. In fact, many independent contractors are under-insured, simply because they don’t know how much liability coverage they truly need.
Independent contractor liability insurance is in many ways similar to the insurance policies that general contractors carry. General liability insurance coverage with a limit of at least $1 million is not only recommended, but mandatory for many independent contractors. Also, some form of disability insurance is recommended, in case of an injury on the job. In many states, general contractors are not required to provide worker’s compensation or disability insurance coverage for non-payroll employees. Also, an independent contractor’s liability insurance portfolio should include commercial auto insurance or enhanced personal auto insurance coverage, as well as inland marine insurance if the independent contractor is required to transport or ship their own equipment from job site to job site.
Depending on your area of expertise, it may also be advisable to add professional liability coverage to your independent contractors liability insurance. Professional liability coverage, unlike general liability, covers professional errors and omissions. In certain states or for certain jobs, you may be required to carry this insurance, especially if the majority of your work is in a technical field, like engineering. (Just make sure you are getting the lowest contractors general liability insurance cost as allowed by the state in which you are operating.)
If you are working for a general contractor, the issue of bonding may be raised. There are several bonds that may apply to the independent contractor. Subcontractor bonds offer the assurance that the independent contractor will complete the contracted work on schedule and to the satisfaction of the general contractor. The bond premium for these bonds is usually paid by the independent contractor and may in many cases be obtained through the independent contractors insurance agency. Conversely, contract bonds protect the independent contractor from nonpayment on the part of the general contractor, and premiums are paid by the general contractor. Some projects may require independent contractors to carry employee dishonesty bonds, also known as fidelity bonds, to protect the general contractor from theft of monies or documents. Usually, bond premiums cost about one to three percent (1-3%) of the total bond amount, although bonds considered high-risk may have premiums as high as five to twenty percent (5-20%).
No matter what area of the construction industry you serve, you can’t afford to be under-insured. And if you’ve ever asked yourself “does general liability insurance cover ______?”, you cannot make any assumptions. Always assume that it does not.
At ContractorsInsurance.org we tailor each contractor’s individual coverage to meet both short-term and long-term needs, and we can assist you in obtaining appropriate coverage levels from job to job or from year to year. Our extensive network of affiliates is proud to service the varied and often complex insurance needs of our 4,500 clients with care and strong attention to detail. With over 25 experience insuring individuals as well as businesses of all sizes, we know the ins and outs of contractors general liability insurance.
For more information, click for a free quote or call one of our contractors insurance specialists at 1-800-649-9094