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A Guide to General Liability Insurance for Construction Contractors

Yancy Lassiter
Published Jul 10, 2024

If you want to protect your head on the job site, you wear a hard hat. So what do you do if you want to protect your business? The simple answer is, you get insurance. The problem is, there are more types of contractor insurance than you can count on both hands, so how do you know which policies are right for your construction business? 

Today we’re going to talk about general liability insurance in construction, one of the most common (and most important!) policies you can have as a contractor. 

Key Takeaways


  • General liability insurance is one of the most important types of insurance for construction business owners.
  • Commercial general liability covers your business in the event your work causes bodily injury or property damage. It also protects against lawsuits made by other businesses for advertising injury (this includes libel and slander).
  • A lot of project owners will require you to show proof of general liability insurance before they’ll work with you. In some states, contractor general liability insurance is also required for licensure.

What is General Liability Insurance for Contractors?

A general liability insurance policy protects your construction company from third-party liability claims that your work led to property damage or bodily injury. In other words, if someone outside of you or your team gets hurt, or a part of the property gets damaged, the responsibility for settling those damages falls on the insurance company instead of your business. A third-party lawsuit can lead to thousands (if not millions) in financial losses for your business, so this is a must for businesses in high-risk industries like construction. 

General Liability Insurance vs. Professional Liability Insurance

While general liability and professional liability policies both protect your business against risks, the risks they cover are pretty different. General liability covers physical risks, like property damage or injury. Professional liability (also known as errors or omissions insurance) covers more abstract business risks, like design errors.  

Who Needs General Liability Insurance in Construction?

If you’re responsible for a project in some way, shape, or form, it’s safe to assume you need general liability insurance. 

Normally, general liability policyholders include: 

  • General contractors
  • Subcontractors
  • Construction managers
  • Independent contractors and handymen (plumbers, etc)

The majority of project owners don’t want to work with an uninsured contractor, so they’ll require you to submit a certificate of insurance before they let you on their job site. This is especially true for public works projects. Some states also have their own general liability insurance requirements to even get licensed as a contractor. Basically, if you want to work on good, profitable jobs, you’ll need to have the right insurance coverage. 

What Does General Liability Insurance Cover?

There are two types of general liability insurance: Claims made, and occurrence. Claims made policies only cover claims on active policies, regardless of when the damage or injury happened. An occurrence policy covers claims made during the policy term (even if they’re filed after the policy ends/is canceled). 

A typical general liability policy will cover third-party claims related to: 

  • Bodily injury - Covers falls and other injuries on the work site and their associated medical costs. Heads up: This doesn’t cover your own employees’ medical expenses. You’ll need workers’ compensation insurance for that.
  • Property damage - If you damaged some drywall which was not in your scope of work, for instance, this will cover those expenses.
  • Advertising injury or copyright infringement - Let’s say someone on your team made a false statement about another business. General liability will help pay for damages caused to that business.
  • Products-completed operations liability - If something you worked on breaks (even months after a project is completed), you can still be held liable because it’s your handiwork. In cases like this, general liability coverage will cover any legal costs.

If a third-party claim that falls under one of these categories is made against you, your insurance will cover settlements, attorney fees, medical bills, and court fees up to your policy limit. Your policy will have per-incidence limits as well as in aggregate limits

For example, say you have a policy of 1 million / 2 million. This means each incident that results in a claim will be insured up to 500k, and your yearly coverage limit for all claims is 1 million. 

What General Liability Insurance Doesn’t Cover

General liability covers a lot, but it doesn’t cover everything. Generally speaking, you can think of general liability insurance as covering things that happen to other people or businesses because of your work. If something happens to you or one of your crew, you likely won’t be covered under this type of policy.

Most general liability insurance policies have the following exclusions:

  • Workers’ comp
  • Vandalism or theft of your equipment/property
  • First-party property damage
  • Design errors and omissions
  • Pollution
  • Intentional damage to third-party property

Thankfully, other construction insurance policies exist to cover these gaps, like inland marine insurance, or builder’s risk insurance.

Benefits of General Liability Insurance for Construction Projects

You already know the construction industry is risky, so why put your business in front of any more risk than necessary? Good risk management in construction is all about planning ahead, but there are some things you just can’t plan for - and those often come in the form of third-party claims. 

From long, drawn-out lawsuits and legal fees to medical bills from personal injury, third-party claims against your contractor business can be financially devastating. General liability insurance coverage gives your company the financial protection it needs to not only withstand these potential events but maintain your professional reputation and credibility. Put simply, if you want to mitigate risk in your business, you need good coverage with the right kind of insurance. 

Plus, as we touched on earlier, most project owners will require you to show proof of insurance before they agree to work with you. By being proactive about general liability business insurance, you’ll demonstrate that you’re a professional contractor who cares about minimizing risk on the job. 

How Much Does General Liability Insurance Cost?

 Sadly, there’s no one fixed price for general liability insurance. Every construction business is different, and your insurance quote will be calculated by an underwriter looking at several different risk factors, including: 

  • Where your business is located
  • Your specialty
  • The number of employees you have
  • Your annual revenue
  • Your claims history and safety record
  • Your desired policy limit

If you want to save some money, most insurance companies will offer to bundle multiple policies together. 

Additional Coverages You Can Add to Your Policy

Sometimes, a basic general liability policy isn’t enough. If your business needs additional endorsements or coverage, most policies have the option to add on what you need. Depending on your business, you may want to pay for extra coverage in areas like:

  • Equipment coverage - Extra equipment insurance covers the gap between general liability and commercial property insurance by covering the cost of replacing tools or equipment that is damaged or stolen.
  • Data breach coverage - If someone hacks into your computer system, this covers the cost of increasing security and credit monitoring for your customers. This may also be handled by a stand-alone Cyber Liability Policy.

How Do You Get General Liability Insurance For Construction?

To get general liability insurance, you’ll work with an insurance company or insurance broker to explore your coverage needs and get a quote. As always when it comes to insurance, we recommend talking with an insurance provider that specializes in the construction industry. 

While you’re talking with your insurance agent, make sure you understand exactly what your policy does and doesn’t cover. If you have any questions about exclusions or want to talk over specific situations with your broker, now’s the time to ask them. 

Wrapping Up

When it comes to insuring your small business, you should always start with general liability coverage. This probably won’t be the only policy you’ll need, but having this will lay the foundation to keep your business safe from potentially devastating liability claims.


Author
Yancy Lassiter

Yancy Lassiter, a CPA with a degree from the University of Texas, has 12 years under his belt as a Controller and CFO in the construction industry; he’s your go-to guy for finance in the building industry.

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