As a general contractor, ensuring you have the right business insurance coverage is paramount for protecting your business and mitigating potential risks. From general liability insurance to workers' compensation and professional liability coverage, we will provide insights and recommendations to help you make informed decisions regarding your insurance needs.
Whether you are a seasoned contractor or just starting your business, understanding the best insurance options for the year ahead will provide you with peace of mind and financial security.
Looking for the best general contractor insurance options? Here are our top picks.
General Contractor insurance is a type of business owners policy, or "BOP," that packages different lines of coverage into a single insurance product. These lines include general liability, or "GL," property damage, bodily injury, as well as personal and advertising injury. BOPs are appropriate for small and medium-sized construction businesses. For larger general contractors—with higher value construction projects or revenues in the millions—a Commercial General Liability policy, or "CGL," are available. Separate commercial property insurance policies are also available. This can be for coverage of general contractor-owned buildings, personal property, or protection for other types of perils, losses, and property damage.
Yes, insurance for general contractors is an absolute requirement. Many states will not issue or renew a license for a general contractor unless a certificate of insurance is provided that proves general liability and workers compensation insurance are in place and active. Few owners or businesses will hire a general contractor that does not have evidence of appropriate insurance. Oftentimes, clients will request they be named as an additional insured on the general contractor's certificate of insurance. Some cities and counties will not issue a building permit without proof from a general contractor or owner of appropriate insurance.
General Contractor insurance covers general liability and property damage. This can include legal costs to defend against a claim, medical payments or medical bills related to bodily injury, and a wide variety of property damage, including weather damage. General contractors, also called just "GCs," specialize in constructing, renovating, and installating buildings, various structures and systems, on land or in the environment surrounding them. The business of building is extremely hazardous, and it is also very cost, time, and capital-intensive. Both the materials and labor required to build buildings are expensive and limited by resources—especially time. Commonly, debt or interest accrues on loans or mortgages during the timeline of a construction project. This additional cost means delays and losses can be financially disastrous. Safety is also a major concern in the building trade. General contractors are responsible for protecting and providing safe working conditions for their employees and the public.
Because general contractors have so much responsibility, they need the right type of coverage for a wide range of the work they do. This is to protect their own financial interests, as well as their clients' interests and their business reputation.
At a minimum, general contractors need a business owner's policy that includes general liability, property damage, and workers compensation. Some general contractors do not self-perform work and instead contract labor out to other construction companies, trades, or laborers, called subcontractors. Subcontractors also often need to provide the general contractor with proof of general liability as well as "workers comp." Before each payment is made to a subcontractor, general contractors usually request a waiver that accompanies an application for payment. This waives financial payment claims for the value of work already performed.
Even if the general contractor performs no work or has a single employee, states often require licensed general contractors to carry workers compensation coverage as mandated by law. There are many types of construction companies, subcontractors, trades, and consultants in the construction industry. Some companies just act as construction managers that supervise general contractors on a project. While the risk is lower for construction managers, they still carry liability coverage for the benefit of their clients and need a comprehensive insurance policy.
Bonds are also a common type of protection needed by both general contractors and subcontractors. This is especially true on government projects or projects tens of millions of dollars and above. A bond is not insurance but is a contract between several parties that promises the fulfillment of an obligation. We will discuss more about bonds below.
The cost of general contractor insurance depends on the value of the projects a general contractor performs. Some handymen that perform small jobs may even be a licensed or registered general contractor. Licensing bodies and city and county building departments frequently require millions of dollars of coverage. Average policies should run about $100 per month for small policies to much more. Workers compensation is typically also required and is usually expensive, running several thousand per year. The reason it's expensive is because rates are regulated 'and injuries are quite common on even small projects. Sometimes general contractors will only bind policies during the course of projects and pause or cancel them upon completion to save on the high annual premiums.
Here are a few factors to carefully consider when shopping for a general contractor insurance policy:
AM Best is an insurance rating agency founded in 1899. They review and rate the financial strength of insurance companies. Their plus-and-minus letter grades judge an insurance carrier's ability to meet the obligations to its policyholders. Always look for a carrier that has an "A" rating, with no less than a "B."
General Contractor insurance should fit the type of company, type of work, and location of work it performs. For example, a general contractor that works repairing marinas in coastal waters nationwide, will need different coverage than a builder that just builds single-family homes in one county. Also, certificates of insurance can feature the name of additional insured and a specific property or site address that is being worked on by a GC. Look for a carrier that offers the flexibility to add additional insured for various project locations, and one that covers your general contracting company wherever you build projects.
Construction disputes are very time-consuming and expensive to litigate. A lawsuit can cause delays and add significant costs to a project. Look for general contractor insurance that provides the broadest coverage, with the highest property limits, at a fair premium price, for the full duration of projects.
General Contractor businesses exist in many forms. This includes sole proprietors, partnerships, joint ventures, LLCs, S-Corporations, and C-Corporations. The type of business structure—as well as project size, revenues, and type of work you perform—will determine what affects what type of general contractor insurance coverage is needed.
Construction may be complex, but getting a quote for general contractor's insurance is simple. Many carriers now offer online instant quotes for small to large construction companies. Some carriers may ask for proof of incorporation, proof of licensure, or even an AIA construction contract with a schedule of values for specific projects.
Claims are frequently handled electronically. Carriers may ask for digital photos of the loss and a sworn statement. What documentation may be required depends on the type of loss. If there was a fire and the fire department was dispatched, a fire department report, and even a police report may be requested—especially in the case of theft or if an accident results in a worker dying. On large losses, insurance claims adjusters may inspect the property or send construction consultants to evaluate the extent and cost of the damage. Public adjusters may be hired by an insured if the insurance carrier denies a claim or disputes covered elements or the cost or extent of damages.
Deductibles are a financial strategy insurance companies use to discourage small, frivolous, or false claims by policyholders. A deductible is a stipulated sum of money the insured must pay towards a loss before the insurance will pay benefits on a loss. If a policy has a $5,000 deductible and a loss only amounts to $2,000 in damages, the insured will be responsible for paying the full amount of the claim with no participation by the carrier. Every policy period or year, the deductible typically resets until the deductible is exceeded. If there are multiple losses in a single year, once the deductible is satisfied by the insured, the insurance carrier will be responsible for first-dollar coverage of any claims.
The higher your deductible, typically, the lower your premiums are. Some deductibles for general contractors can be $100,000 or more for large projects. When choosing a general contractor policy, carefully evaluate your business needs and expenses against the lump sum cash requirement for a large deductible.
Each general contractor business is different and has unique needs. While business owner's policy include many types of coverage, certain policies may also be needed by some builders but not others. Stand-alone policies, endorsements, or add-on coverage include:
Commercial Auto Insurance
Builders Risk Insurance
Tools and Equipment Insurance
Errors & Omissions Insurance
Getting licensed as a general contractor may be a challenge, but getting the right insurance coverage is a cinch. Here are a couple of steps you need to follow:
General contractors all need business owners policies that include general liability and property damage, as well as workers compensation. Choose your amount of coverage based on the value of your construction contracts or the value of the buildings you work on.
Always get a few separate quotes from different companies, to compare cost and coverage. Sometimes shorter coverage can be more affordable than a quote for the entire year. Some commercial carriers often require full payment of the premiums for the bound period of coverage. Look for one that will either finance premiums or offer easy monthly installments.
Insurance protection is only as good as the quality and financial strength of a carrier. Some policies, like coverage procured with Lloyd's of London, may split coverages between carrier and reinsurance companies, to spread the risk of a large policy between them. Look for a carrier that has excellent communication and online tools to help you operate your construction business effectively.
In addition to instant online quotes, Hiscox Insurance offers monthly premium payments and a business support hub where you can get expert insurance agents to help with complex commercial liability insurance for your construction projects. With 100 years of experience, they are a great option for general contractor insurance coverage.
Becoming a general contractor often entails meeting specific requirements set by local building departments. These requirements typically include obtaining a license or registration, with some jurisdictions necessitating education and a qualifying test for licensure. Apart from licensing, additional obligations may include posting a bond, undergoing criminal and credit background checks, and maintaining sufficient general liability and workers' compensation coverage. These measures ensure compliance with regulations and safeguard the interests of clients and workers. Familiarizing yourself with these prerequisites is crucial for aspiring general contractors seeking to establish a reputable and legally compliant business.
Yes, however some cities, like New York, don't offer or require a general contractor license. Still, permits often require proof of insurance or proof of licensure for electrical and plumbing trades.
General contractor insurance covers general liability, which protects the insured from costs related to legal actions, property damage, or personal injury. It may even cover advertising injury where the reputation or marketing causes infringement or financial harm to another business.
The best liability insurance policy is the one that affordably fits the needs of your general contracting business. One of the best and oldest carriers is Hiscox, which offers excellent support in the event of a claim.
An occurrence policy covers losses during the policy period, even if the policy is no longer in force. This means that claims filed even after a policy has expired may be covered. A claims made policy covers loss and claims made only while the policy is in force. It also may limit coverage before the start of the policy, retroactively. Both are worthwhile protection, but general contractors may benefit from occurrence policies because damage or latent defects in the construction may manifest well after the completion of a project.
A Certificate of Insurance, sometimes called an ACORD form, is proof that coverage is in place. It lists the carrier, the name of the insured, the insurance broker, as well as the amount and types of coverages. There is a space on the certificate of insurance to name additional insured, such as clients or building owners, as well as the address of the physical location of project sites.
Yes, general contractor insurance usually features deductibles. There are also policy limits that determine how much total an insurance company will pay an insured for a loss.
Many things can go wrong on a construction project that have a financial, quality, or scheduling impact. Construction errors, accidents, professional mistakes, faulty workmanship, material defects, vandalism, construction equipment theft, inclement weather, fire, and unintentional and intentional delays all may result in a claim. Because of the nature of general contracting, many claims can come from subcontractors and subcontracted vendors or employees. Injuries and associated medical bills are very common claims on construction projects. In the case of a subcontractor injured by the negligence of a general contractor, a hold harmless agreement may mean that the general contractor insurance carrier is not required to pay a claim because of a contractual liability exclusion.
Yes, multiple carriers now let you quote, bind, and store your insurance policy. You can even modify or download a certificate of insurance at the touch of a button.
Generally most professions should get some form of liability insurance such as:
Yes, carriers like Next Insurance and Hiscox Now both have mobile apps that make accessing your policy seamless, even while on a construction site.
Cheapest does not mean best, and the wrong type of coverage could be financially disastrous for your general contracting business. If you want to compare and contrast multiple carriers at once, try commercialinsurance.net.
General contracting insurance can be purchased immediately and made effective as soon as payments and any request documentation has been uploaded.