General Liability Insurance for Contractors: Everything to Know (2024)

General liability insurance protects against negligence claims that arise from property damage, advertising injury, or bodily injury, including indemnity and defense costs for covered claims. In addition to construction contractors like carpenters, roofers, electricians, handymen, general contractors, and engineers, general liability insurance protects other kinds of contractors, such as business consultants, hair stylists, app developers, editors, house cleaners, bookkeepers, tax preparers, and more.

What Is General Liability Insurance for Contractors?

A basic general liability insurance policy for contractors covers the contracting company from loss relating to

• Property damage – to a premises or items on the premises
• Bodily injury - slips and falls, etc. that occur on a job site (does not encompass employees)
• Personal and advertising injury – false statements

In addition to this basic coverage, extra protection may be added on to a general liability policy, such as data breach coverage or equipment coverage.

An employer, a government entity, or a business agreement may require a contractor to carry general liability insurance. Proof of general liability insurance may be required by law in some situations. In addition a customer or prospective client may require proof of insurance before agreeing to work with your business. Some agreements require a contractor to provide a certificate of insurance as a condition of the transaction.

Additional information about General Contractor Liability Insurance is available from HUB’s insurance glossary.

What Types of Contractors Need General Liability Insurance?

A host of construction contractors need general liability insurance. This type of an insurance policy helps to cover:

• General Contractors
• Sub-Contractors
• Masons
• Door and window installers
• Electricians
• Plumbers
• Engineers
• Floor and tile installers
• Painters
• Homebuilders
• Developers
• Renovation contractors

General liability insurance also protects independent contractors from loss and liability. Examples of the wide variety of these business types include:

• Accountants and auditors
• Bookkeepers and tax preparers
• App and website developers
• IT consultants
• Janitorial and security services
• House cleaning services
• Landscape designers, lawn care and gardening
• Insurance agents
• Management and marketing consultants
• Photographers
• Authors and editors

What Does General Liability Insurance for Contractors Cover?

General Liability Insurance covers the following basic items:

• Property Damage – this aspect of a general liability policy covers damage to another’s property and includes loss arising from
  • Negligent performance
  • Theft
• Bodily Injury – this aspect of a general liability policy covers damage to a third-party and includes loss arising from:
  • Libel
  • Invasion of privacy
  • False arrest
  • Wrongful eviction
• Personal and Advertising Injury – this aspect of a general liability policy covers damage to the intellectual rights and includes loss arising from:
  • Misappropriation of advertising ideas
  • Copyright infringement

A basic General Liability Insurance policy may also be customized to meet a contractor’s specific coverage needs by adding on other insurance to supplement the basic coverages. These add-ons may include:

• Data breach coverage – for costs associated with the theft of or unauthorized access to computer systems and customer information, including notification, credit monitoring, and developing improved security
• Equipment coverage – for costs associated with the repair, replacement, or theft of tools and equipment, that can fill any gap that exists between the company’s general liability policy and its commercial property insurance coverage.

What is The Difference Between Construction Insurance and General Liability Insurance Cover for Contractors?

Construction insurance—which is also called Builders Insurance or Builders Risk Insurance—is coverage that protects a building during construction. It covers damages that result from:

• Weather (lightning strikes and hail)
• Theft and vandalism
• Fire and explosion

Construction insurance covers the contractor’s materials, plus the equipment and property that is related to the building being constructed. This insurance protects the contractor’s interest in the equipment, the value of the property, and the materials, while they are being used in the construction that is the subject of the policy. Construction insurance can also be supplemented with extended coverage that protects temporary structures and the removal of debris. Typically excluded is damage caused by earthquakes and collapses, flooding, weather damage to unprotected property, war and government activities, faulty design/materials/workmanship, or contract penalties. Coverage under a construction insurance policy continues until the project is completed and the owner signs off on the construction.

On the other hand, a Contractors General Liability Policy does not protect the contractor’s property or equipment. Rather, this other kind of essential insurance for construction contractors is designed for a contractor’s specific liability coverage needs and protects against the possible bodily injuries and property damage, and the accidents and liability that arise from these. A general liability policy also protects a contractor from negligence and covers defense of litigation and legal fees.

Other Types of Business Insurance Contractors

In addition to Contractors General Liability Insurance and Construction (or Builder’s Risk) Insurance, a contractor may also need additional kinds of coverage, including:

• Commercial property insurance – covers the contractor’s owned or rented building and equipment on premises (tools, equipment, computers) from theft, fire, and other hazards
• Commercial auto insurance – covers vehicles the contractor uses in the course of doing business, including property damage and personal injuries related to accidents
• Workers’ compensation insurance – covers the work-related injuries and illnesses sustained by a contractor’s employees
• Business income insurance – covers income that is lost when a business cannot operate because of property damage
• Cyber insurance – covers data breaches, including the theft or loss of information, and costs associated with the breach
• Professional liability insurance – covers errors and oversights in performing a service, breach of contract, professional negligence, and failure to deliver a service on time
• Product liability insurance – covers claims for physical harm or damage a contractor may cause from installing or repairing a certain product
• Inland marine insurance – covers business property while it is being transported or stored by a third party

General Liability Insurance for Contractors FAQs

Does general liability cover independent contractors?

General liability insurance does cover independent contractors, who have legal obligations and liability exposures and can be sued and held liable for damages like any other small business owner. Independent contractors should secure general liability insurance to protect themselves and their businesses from damages arising from legal liability, including attorneys’ fees and judgments. Depending upon the applicable laws and regulations that apply to an independent contractor’s business, he or she may be legally required to have general liability insurance. An independent contractor may also need to provide proof of insurance to a customer or prospective client as a condition of doing business.

What insurance do I need as a general contractor?

The two most fundamental kinds of insurance that a general contractor must have are Contractors General Liability Insurance and Construction Insurance (also known as Builders Risk Insurance). These policies will give a general contractor financial protection in the building it’s working on and provide protection for materials needed for a job. A general contractor would also benefit from commercial property insurance (to cover its business premises), commercial auto insurance (to cover vehicles used during the course of doing business), and workers’ compensation insurance (to cover employees from work-related injury and illness).

Other potential coverages, depending upon the general contractor’s business needs could include business income insurance (to recover income lost when a business cannot operate because of property damage), cyber insurance (to cover theft or loss of information and costs associated with a data breach), professional liability insurance (for professional negligence and breach of contract), product liability insurance (for harm or damage caused from installing or repairing a particular product, and inland marine insurance (to cover business property being transported or stored by a third party).

What insurance do I need as an independent contractor?

Independent contractors—especially those who work in the construction industry such as carpenters, painters, installers, electricians, plumbers, general handymen, and the like, need many of the same kinds of insurance as a general contractor. Independents require a strong coverage foundation comprised of both contractors general liability insurance and builders risk insurance. Depending upon the size of the independent contractor’s business operation, it may also benefit from commercial property insurance.

Commercial auto insurance is essential for any independent contractor that operates a vehicle and workers’ compensation insurance is required in most states, no matter the company’s size. An independent contractor may also wish to secure errors and omissions insurance (similar to professional liability insurance) to cover negligent mistakes and breach of contract. Coverage such as cyber insurance and inland marine insurance are also potential options, depending upon an independent contractor’s size or type of service it performs. For example, an IT or web developer may wish to consider cyber insurance while foregoing commercial auto insurance.

How is general liability insurance calculated for contractors?

The cost of a contractor’s general liability insurance policy depends upon a variety of factors and is therefore unique to each policyholder. Underwriting criteria include:

• Type of business – rates may be higher depending upon the type and amount of risk involved in the applicant’s business compared to other insureds
• Experience doing business – the length of time that a contractor has been in operation impacts the cost of general liability coverage
• Location – rates may be higher if the contractor does business in high crime areas
• Number of employees – more workers means more risk, which may increase insurance rates
• Claims history – past experience tends to suggest future experience; applicants with fewer claims in their history may have lower insurance costs
• Policy details – specifics such as coverage limits and deductibles will also impact the cost of a policy, with more coverage and lower deductibles usually resulting in higher rates

How much is general liability insurance for contractors?

The cost of general liability insurance for contractors is more for high-risk businesses (such as roofers) than it is for low-risk operations (like a landscape designer). The cost of insurance also depends on the number of policies that a contractor secures; if a business needs more coverage in addition to general liability insurance, the cost of coverage will go up. General contractors pay between $70 to $90 per month, or $825 to $1,090 per year, for general liability insurance.

How Can HUB Help You Protect Your Business with Contractor Liability Insurance?

Contractors and independent contractors can trust HUB to help them create a customized bundle of insurance coverages to meet their specific business criteria. HUB can help a contractor conduct a business assessment to consider basic insurance requirements and put together a coverage package that addresses the company’s needs, from general liability and construction insurance to workers’ comp, commercial auto and property, and even cyber insurance. HUB can also help contractors navigate the laws and regulations that impact a contractor’s business and ensure that the insurance that business secures includes all mandated coverages. HUB will also help direct a business towards those carriers that provide the most comprehensive coverage for the best price. Whether you’re a new contractor, or an established general seeking a wider or more affordable range of coverage, HUB will help you secure the best possible insurance for your company.