Contractor General Liability Insurance
Contractor general liability insurance provides coverage for bodily injury, property damage, and/or personal injury to third parties caused during or after a contractor has performed their work. Contractors are protected from having to pay for these damages or medical payments themselves, if covered properly.
Some states have contractor licensing requirements that include having a minimum liability policy be in place, however it is recommended that all contractors have a general liability policy. Often, a contractor must show proof of coverage to get on a job site.
Contractor General Liability Policy Pricing
Contractor general liability policy prices typically range from $600 to $3,000, with premiums increasing for larger contractor companies. The cost of the policy is primarily dependent on payroll, followed by contractor classification, location, subcontractor costs and total sales, along with several other smaller factors.
|Payroll||Average Policy Cost*|
|$0 Payroll||$600 - $1,000|
|$50,000 Payroll||$950 - $1,750|
|$100,000 Payroll||$1,500 - $3,000|
|$150,000 Payroll||$2,500 - $4,500|
Working with multiple carriers across the United States gives an agency the ability to provide the best general liability rates available for any contractor. Some insurance companies will incorporate claim history, experience, credit score, and policy age factor in order to offer better rates.
Policy price is also dependent upon endorsements and policy exclusions, which change coverages depending on what is added to or taken away from the policy. It is advised a contractor review the general liability policy to make sure they have proper coverage for the work they will perform.
Contractors can also vary the limits and deductible of a policy to get a better rate or enhance coverage. These changes can significantly affect the payout of a claim with little change to the premium paid upfront.
Contractor General Liability Policy Coverage
The contractor general liability policy coverage is for bodily injury and property damage caused by a contractor’s work during the policy period. The contractor is protected from third-party lawsuits arising from these damages.
For example, a properly insured painting contractor covers a car in a driveway with paint overspray while painting the exterior of a home. The damages to the car’s paint are covered by the general liability policy. The homeowner can directly bring a lawsuit against the painter, however, the contractor’s insurance company is where a claim should be made and the insurance company would defend the contractor.
Below is a list and description of the damages that are covered:
- Bodily Injury - Injury, sickness or disease sustained by a person, including death, not including the contractor, employees and independent contractors.
- Property Damage - Physical injury to tangible property, including all resulting loss of use of that property.
- Medical Payments - Medical expenses are covered for bodily injury caused by an accident during the policy period. Coverage is typically limited to $5,000. Coverage is paid out regardless of liability and is not the full limit of medical expenses covered by the policy.
- Product and Completed Operations (additional coverage on some policies) - Coverage is provided for Bodily Injury and Property Damage after a project is completed, but only covers work performed during the policy period.
- Personal and Advertising Injury (not a common occurrence) - Injury arising out of false arrest, malicious prosecution, wrongful eviction, use of another’s idea in an advertisement, copyright infringement, or publication of material that slanders, libels or violates a person’s right to privacy. Not common with contractor general liability claims.
Faulty workmanship or damages to the contractor’s work is not covered by a liability policy. Instead, contractor’s work should be covered by a contractor’s warranty or through a builder’s risk/course of construction policy.
Typically, a contractor general liability policy has limits up to $1 or $2 million, which is more than enough for most contractors and projects. Coverage beyond $2 million can be required to perform certain jobs. In which case, a contractor can obtain an Excess policy to get limits up to $5 million.
Reasons to Carry General Liability Coverage
Many small to mid-size contractors usually purchase general liability coverage due to job site requirements. 55% of contractors will be required to show proof of insurance during at least once a year, per a recent poll conducted by Jet Insurance Services and its affiliates.
Commercial clients, residential clients and municipalities often require general liability coverage to guarantee the contractor has the insurance coverage available if damages occur. This certificate of insurance is free of charge with Jet. The certificate is generated when the policy is bound and upon request an additional insured certificate will be provided to meet any contractor’s clientele requirements.
The following states have some form of general liability coverage required to be an active licensed contractor in that state:
- Alaska, Alabama, Florida, Georgia, Hawaii, Idaho, Louisiana, Minnesota, Mississippi, North Dakota, Oregon, Rhode Island, Tennessee, Utah, Washington, Wisconsin.
Carrying general liability is highly recommended, even in situations the state or job does not impose a requirement. The policy offers the contractor financially protection from exposures caused by their work.
Other Coverages for Contractors
Workers’ compensation is a must for a contractors with employees. Contractor bonds may be required by a municipality or a general contractor to guarantee a contractor’ contractual obligation. Some states, counties or cities may require a contractor to carry a bond in order to be licensed. Tool coverage (inland marine policy) will cover a contractors tools from theft and outside perils. Give Jet a call at 855-296-2633 to find out more.