Contractors are at risk of facing a lot of legal issues because of the nature of their work. Accidents are not uncommon on construction sites, and damage to property can occur at any time. In such instances, the contractor may be held responsible and may need to pay compensation for the damage caused. This is where general liability insurance comes in.
What is General Liability Insurance for Contractors?
General liability insurance is a type of insurance that protects contractors from claims made against them for damage to property or injury to individuals. The insurance policy covers the contractor’s legal fees, compensation, and other related costs associated with such claims.
General liability insurance may also be referred to as commercial general liability insurance or contractors’ liability insurance. It is also commonly referred to as CGL insurance in the industry.
What Does General Liability Insurance Cover?
General liability insurance for contractors typically covers the following:
What is Covered
What is Not Covered
Property damage caused by the contractor or their employees
Damage caused to the contractor’s own property
Injury to third parties (e.g. customers or visitors to the construction site)
Injury to the contractor or their employees
Advertising and personal injury (e.g. slander or libel)
Intentional acts or deliberate damage
It is important to note that general liability insurance does not cover the contractor for professional errors or omissions. For this, contractors will need to purchase professional liability insurance (also known as errors and omissions insurance).
Is General Liability Insurance for Contractors Required?
General liability insurance is not legally required for all contractors but it is highly recommended. Some states and municipalities may have specific requirements for contractors to carry general liability insurance, and some clients may require the contractor to have insurance as a condition of the contract.
Contractors who do not have general liability insurance are at risk of facing significant financial losses if they are sued for damages or injuries caused by their work. In some cases, contractors may even be prevented from bidding on certain contracts if they do not have adequate insurance coverage.
How to Choose the Right General Liability Insurance Policy
When choosing a general liability insurance policy, contractors should consider the following:
Contractors should select a policy limit that is high enough to cover any potential liability claims. The policy limit is the maximum amount that the insurance company will pay out for a claim. Policy limits can range from $100,000 to $5 million or more.
Contractors should also consider the amount of the deductible they are comfortable with. The deductible is the amount that the contractor must pay out of pocket before the insurance company will pay out for a claim.
Exclusions and Endorsements
Contractors should read the policy carefully to ensure that they understand any exclusions or endorsements that may affect their coverage. Endorsements may provide additional coverage for specific situations or risks.
Benefits of General Liability Insurance for Contractors
Having general liability insurance provides several benefits for contractors, including:
Peace of Mind
Contractors with general liability insurance can have peace of mind knowing that they are protected from potential liability claims. This can help them focus on their work, rather than worrying about the financial implications of a potential lawsuit.
Contractors with general liability insurance are often seen as more credible and professional than those without insurance. This can help contractors win more business and build trust with clients.
Protection for Clients
General liability insurance also protects clients from potential losses due to contractor negligence or accidents. Clients are more likely to hire a contractor with insurance, as they are less likely to face financial losses if something goes wrong.
General liability insurance is a crucial type of insurance for contractors to have. It protects contractors from potential losses due to liability claims, provides peace of mind, and improves credibility with clients. Contractors should carefully consider their options when selecting a policy to ensure they have adequate coverage and protection.