Why you may need general liability insurance

Contractors general liability insurance covers the type of incidents that can occur during general contracting work.

As a business owner, there’s one thing you can count on: Accidents. And just one accident could undo all the years of hard work you put into making your business a success. General liability insurance for contractors is designed to protect your company and your clients from loss. Being properly insured is also a hallmark of a professional, dependable business.

What is general liability insurance?

Contractors general liability insurance covers the type of incidents that can occur during general contracting work. Policies typically cover physical injury, damage to property, and contract and personnel disputes. It also provides coverage from projected future losses, pain and suffering incurred by the injured party, and punitive damages, which can be awarded if you are found negligent in your supervision or oversight of a jobsite or crew.

General liability insurance covers injury accidents, for example, a worker falling or hurting himself while on the jobsite. Policies can also cover damage to property or injury to third parties unintentionally caused by your workers. It can even cover injury to others caused by items that you made or built.

Contractors general liability insurance will also cover you from breach of contract claims if you cannot begin or finish a job on time and on budget.

What type of insurance do you need?

The exact type and amount of insurance you need depends on the complexity and scope of work you perform. Generally, the larger the job, the greater the coverage you need. While you can “design” the type of coverage you need, there are four basic types of insurance:

• Primary – This general policy covers a wide range of liability for contractors working in homebuilding, road repair, construction and utility work.
• Lead umbrella – This provides excess coverage over the amount provided in your primary insurance. It will cover subcontractors you hire and most jobs that you subcontract out.
• Owner’s interest – You need coverage if you own the land or structure where the work is being done.
• Layered primary coverage – This is an extension of primary general coverage and insures you over a wide range of projects and locations.

Before you sign the insurance agreement, be sure you understand the terms of your policy. Typically, there are two numbers listed in the contract. The first is the coverage limits for a single incident or claim. The second is the limit for the yearly payout. For example, in a $500,000/$1,000,000 policy, you are only covered for $500,000 per individual claim. If regulations require you to carry $1,000,000 coverage for a specific job, you would need more coverage.

To avoid contractual disputes, present your certificate of insurance to your client before you start a job. If coverage is required for a specific job, you can bid on the job without coverage, but you can’t start the job until a policy is in effect.

 – By Carlos Uribe