General Liability Insurance for Contractors: What You Need to Know
General liability insurance protects your business from potential lawsuits and other claims and may be required as part of a contract.
Randa KrissAugust 31, 2021
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General liability insurance, or GL insurance, can protect you from third-party claims of bodily injury or property damage as a result of business activity. General contractors, carpenters, roofers and other construction workers should carry this type of liability policy and may be required to do so by their employer, city or state.
You might also consider additional small-business insurance coverage, such as commercial auto insurance, professional liability insurance or workers’ compensation.
Here’s what you need to know about general liability insurance for contractors and construction businesses, as well as how to find the right coverage for you.
What types of contractors need general liability insurance?
Contractors, people who work in trades and construction businesses that may need this type of liability coverage include:
General contractors, masonry contractors, concrete contractors, drywall contractors, excavation contractors, paving contractors and permanent yard contractors.
Roofers, carpenters, plumbers, welders, electricians, painters, landscapers, appliance repair technicians, home inspectors and handypeople.
Debris removal businesses, snow and ice removal businesses, tree service businesses, interior and exterior construction businesses
Clients may require that you show proof of general liability insurance before agreeing to work with your business. Your contract may stipulate that you provide a certificate of insurance, or COI, as part of the agreement.
Similarly, depending on the project or type of construction your business performs, your city or state may also require that you meet general liability insurance requirements when seeking a permit or license for that work.
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Bodily injury. If a customer trips and falls at a job site where you’re doing construction work, you could be held liable for their injuries. If the person sues you, your general liability insurance can help cover associated legal, medical and settlement costs.
Property damage. If you’re renovating a client’s house and accidentally damage some of their furniture in the process, you could be held responsible for that damage. Your general liability insurance can cover the cost to replace or repair the furniture, as well as any legal costs if the client sues over the property damage.
A general liability policy will cover damage to third-party property only. You’ll need business property insurance to protect your commercial assets.
Personal and advertising injury. If an employee who works for your contracting company makes false statements about another general contracting company and that company sues you for slander, a general liability policy can help cover legal and settlement costs. Your policy also can cover personal injury claims associated with copyright infringement and libel.
Add-ons for general liability policies
Some insurance companies offer add-ons for general liability policies. Add-ons offer extra protection that basic coverage doesn’t provide. Here are a few examples of add-ons that may be available for contractors and construction businesses:
Equipment coverage: An equipment add-on can help cover the cost to replace or repair your tools and equipment in the event that they break, are damaged or are stolen. This coverage bridges the gap between general liability and commercial property insurance.
Data breach coverage: If a hacker breaks into your computer systems and steals customer information, data breach insurance can help cover the costs associated with notifying clients, offering credit monitoring and improving security.
Other types of business insurance for contractors and construction businesses
Although general liability insurance can protect against common risks associated with running a business, it doesn’t offer complete coverage. The chart below shows some of the types of business insurance that may be applicable for contractors and construction companies — and what these policies typically cover.
Employees who are injured or get sick while at work. Most states require employers to have workers' comp for their employees. If your employee falls off a ladder while painting a house and breaks an arm, their medical expenses would be covered under workers’ compensation.
Claims against your business for physical harm or damage caused as a result of the installation or repair of a certain product.
If you repair a bathroom pipe for a client and a few days later, the pipe bursts and causes flooding throughout their house, the client could sue you for a faulty repair. This type of policy would cover any associated legal costs and settlements.
Business property while it is being transported, or while it is being stored by a third party.
If you’re driving from one landscaping project to another and supplies are stolen from your truck while you’re stopped at a gas station, inland marine insurance will cover replacement costs.
You might also choose to bundle multiple types of insurance into a business owner's policy, or BOP. Business owner's policies usually combine general liability insurance, commercial property insurance and business interruption insurance, but can be customized to meet the needs of a contracting or construction business.
How much does general liability insurance for contractors cost?
Data from Insureon customers indicates that contractors and construction companies pay a median premium of less than $70 per month, or $825 per year, for general liability insurance. According to Insureon, higher-risk businesses, like roofers, pay more for general liability insurance, however, compared with lower-risk companies like paving contractors and locksmiths.
The cost of your contractors liability insurance will also depend on the number of policies. If you need several policies in addition to general liability insurance, the cost of your coverage will increase.
The best way to get a sense of how much a policy will cost is to get a customized quote for your business.
To get liability insurance for a contracting or construction business, you can follow these five basic steps:
Evaluate your risks. Think about the common and industry-specific risks that your business faces. What types of lawsuits, disasters, accidents or hazards might impact your company?
Determine your coverage needs. Your insurance coverage should protect you from the risks that you’ve already identified. Consider the different policies that will best suit your business needs.
Choose how to shop. When you’re looking for contractors business insurance, you can contact providers directly, work with a broker or use an online marketplace. If you have more complex needs and want dedicated assistance, an insurance broker can help you get quotes and compare options. On the other hand, if you’d rather expedite the process and handle it on your own, you might prefer one of the other two methods.
Compare providers. NerdWallet recommends getting quotes from multiple providers before making a decision. You’ll want to consider factors such as coverage, policy limits, cost and reviews to help you determine which provider is right for your business.
Buy your policies. After purchasing policies, you’ll want to make sure that you know how to make payments, file a claim and manage your account.