With every project, you put a lot on the line. Accordingly, it’s important to ensure that you have sufficient liability coverage.
It’s a good day when you win a contract. However, some project owners require you to have specific insurance to accept a bid. Typically, these coverages include general contractor liability insurance, workers comp, and vehicle insurance.
However, a growing number of owners require contractors to invest in owners and contractor’s protective liability insurance. This kind of coverage is not well-known. It’s also often misunderstood.
To learn more about contractor liability coverage and coverage limits, keep reading.
What Is Contractor Liability Insurance?
Independent contractor liability insurance is a standalone policy that’s specific to a particular project.
The policy only protects one party—the owner or the contractor. In most instances, it protects the project owner.
More importantly, the coverage is for specific work performed for project owners. The insurance contract will state the name of the contractor on the declarations page.
It’s important not to use a contractor liability insurance policy as your general insurance policy. Instead, a contractor liability policy is an extra layer of coverage.
In this way, a project owner is an additional insured. This additional coverage proves to a project owner that you can protect them if something goes wrong.
It provides coverage specifically for that project owner. In this way, contractor liability insurance is a narrower range of coverage.
Contractor liability insurance covers claims related to property damage. They also cover claims related to bodily injury.
These liabilities can result due to a project owner’s indirect liability in connection with your work. It might also result from their acts or omissions related to supervising the project.
The coverage doesn’t necessarily protect your firm. However, a growing number of project owners require this kind of coverage before they enter into a project agreement.
What Contractor Liability Insurance Covers
For project owners, contractor’s insurance provides exclusive primary coverage. The protection is solely for the project owner. The project owner alone will receive primary protection and specific coverage limits.
Furthermore, a contractor’s liability policy only covers a specific timeframe. Also, it’s limited to the job site listed in the “declarations notice.”
With a general contracting policy, a project owner is covered as an additional insured. They share protection with other owners. In this instance, your coverage applies to all parties.
The fact that a contractor’s liability policy is primarily for owners is significant. It means that your coverage will apply first before other policies are secured by the product owner.
As a business owner, however, a contractor’s liability policy will prevent an insurance rate hike if something should go wrong. For this reason and others, you’ll still benefit from a contractor’s liability policy.
This kind of policy will pay for losses outside of your regular insurance. For this reason, those losses will not affect your insurance premium.
If your standard insurance were to pay a claim, your rates would increase with the next policy cycle. Resultantly, contractor liability insurance is a great way to keep your premium costs down.
Who Needs Contractors Liability Insurance?
Again, you may need a contractor’s liability policy to secure a project bid. You’ll pay for the policy. However, the coverage doesn’t protect your interests.
Instead, the policy protects the project owner. In the policy, the insurer will list the project owner as the named insured.
The policy will not cover claims due to the project owner’s negligence. However, it will cover claims related to the outcomes of your general supervision.
Furthermore, not all general contractor liability coverage is available in all states. For this reason, it’s a good idea to work with an experienced insurance agency to help you choose the right policy.
You’ll need to speak with a knowledgeable insurance agent to learn what coverages and services are available in your area. The agent will help you to examine your contractor liability coverage policy carefully. They’ll ensure that you choose the correct policy for your needs.
A veteran insurance agent will also help you to identify any exclusions or limitations in your policy. They’ll also show you the terms and conditions that might specifically affect your coverage. If there’s a conflict of interest, the terms and conditions of the policy will prevail.
Most importantly, a skilled agent will help you to access insurance quotes quickly. Ultimately, a good insurance agent will save you time and money.
Keeping Insurance Costs in Control
In most instances, you’ll complete projects without things going seriously wrong. Reliable, successful project outcomes are why your firm is thriving. However, when things do go wrong, they can get expensive.
For instance, imagine that a client files a claim against your firm. If this happens, you’ll need a lawyer. Lawyers can charge as much as $100 per hour.
In total, your cost could easily exceed $75,000 if the project owner takes the claim to court. Even if the project owner drops the suit, you can still end up spending several thousand dollars.
You’ll need to cover the expenses of administrative work and legal secretaries. You’ll also have to pay for any settlements or judgments.
In the end, your business could face hundreds of thousands of dollars in costs. A contractor’s liability policy can protect you and your company from these expenses.
When you don’t use insurance, it’s hard to see its value. However, when something goes wrong, insurance will serve as a lifeline that saves your livelihood and business. Accordingly, it’s important to make sure that your policy never lapses.
Winning Contracts With the Right Insurance
Many companies may offer contractor liability insurance. However, not all of them have the policies that you need.
Today, a growing number of project owners require contractor liability insurance. They want to make sure that you can complete a job, no matter what happens. This kind of policy reduces the builder’s risk.
Furthermore, not all agencies have established themselves by providing contractors insurance for years. Nor had they served a multitude of business owners.
For this reason, it’s important to vet insurance agencies. It’s also important to shop for quotes for various types of coverage.
An established insurance agency can help you to access a range of quotes and policies easily. They’re also well-versed in helping contractors make claims quickly. With the right agency, you can ensure that you have access to the coverage and quality of service you need.
Unfortunately, liability claims are a common occurrence. They come up often during the course of normal operations. Once again, it’s worth noting that they can get expensive.
Many businesses don’t have the resources to cover a liability claim. For example, the average slip and fall claim pays out $20,000. Now, imagine the kind of liability that you might face for a claim related to a large project.
Furthermore, a claimant can damage the reputation of your firm. The right contractor liability policy can protect your bank account and your reputation.
Make Sure That Your Firm Is Protected
A contractor liability policy does not cover damage to your property. For this kind of damage, you’ll need commercial property insurance.
It also does not cover errors related to any consulting services offered by your firm. For this kind of protection, you’ll need professional liability insurance. It will protect you and your firm if you make a mistake.
A contractor’s liability policy will also not cover claims that cost more than the policy limit. For this reason, it’s important to use your coverage along with umbrella insurance to extend your liability coverage. Umbrella insurance will help you to cover expensive liability claims.
Furthermore, your contractor’s liability insurance will not cover intentional acts of illegal wrongdoing. This circumstance applies to whether the act was committed by you or an employee.
It also will not cover vehicular accidents caused by an employee. For this kind of unforeseen event, you need a commercial vehicle insurance policy.
If a worker is injured on the job, you’ll need worker’s compensation insurance. This coverage will protect you from another risk that your contractor’s liability insurance does not cover.
However, most states require you to have worker’s compensation insurance if you have a minimum number of workers. You’d purchase worker’s compensation insurance from either a private insurer, a state-run agency or a monopolistic state fund, depending on your state.
How Much Does It Cost to Get Contractors Insurance?
Insurance is a vital part of protecting your business. It shields you from unforeseen claims.
You may wonder how much various policies cost. However, it’s not possible to provide general costs for various types of insurance policies.
Every policy is specific to your business. You may pay a couple of hundred dollars for coverage.
In other cases, you may pay thousands of dollars. Insurance for every business is unique.
The cost of your policies will vary based on several factors. For example, your insurance costs will vary based on the risk in your industry. If you work in a high-risk industry, your insurance policy will cost more.
The cost of your insurance also varies based on your business location. For example, if you operate in a more populated area, the cost of your policy may prove higher.
Also, the cost of your insurance may vary based on your experience. Typically, the longer you’ve been in business, the less your insurance will cost.
Your insurance costs will also vary based on your claim history. If you have no past claims and take proper risk management precautions, insurers will charge less for your coverage.
Finally, the cost of your policy may also vary based on your required limits. The higher the limit, the more the premium.
Contractor Liability Coverage Limits
Not understanding your coverage limit is one insurance mistake you want to avoid as a contractor. If you have a larger firm, your liability coverage will typically cover you up to $1 million. However, you’ll typically need to purchase an additional umbrella insurance policy to extend your liability coverage for larger projects.
An umbrella policy will raise the limits of your liability coverage. It will also provide you with extra protection for worker’s compensation and automobile liability.
Imagine that you have a standard $1 million in coverage. Next, you purchase $5 million in additional coverage. Now, you have $6 million in total liability limits.
In some cases, this kind of extra coverage is essential. For instance, hired and non-owned vehicle liability coverage protects you from liabilities for vehicles that you rent temporarily.
This kind of coverage isn’t for firm owners. It typically doesn’t apply to self-employed contractors.
However, it’s a policy that you’ll want if a worker gets in an accident while performing work for your firm. Most likely, the claimant will name you in the coming lawsuit. The more damage that occurs during the accident, the more likely you will face steep costs and litigation.
Finding the Right Insurer
There are many kinds of insurance policies. Choosing the wrong policy can leave you exposed to threats.
In other instances, insurance coverage might overlap, resulting in wasted spending. Ultimately, choosing the right insurance can prove confusing.
Furthermore, coverage and policies can vary between insurance companies. For example, one company’s liability policy may not cover the same risk as another’s.
Fortunately, an independent insurance agent understands the differences in insurance policies. They can help you to navigate the complex business insurance marketplace.
An experienced agent can help you identify the coverage that you need. They can then find the best policies to protect your business.
FAQs About Contractors General Liability Insurance
There are a few questions that clients frequently have about contractors general liability insurance. Here are the answers you need to know.
Are you legally required to carry contractors’ general liability insurance?
Contractors’ liability insurance is not required by law in Massachusetts. However, many contractors are required to show proof of insurance as part of the bidding process for a contract. Failing to have the coverage in place could allow competing companies to provide a more attractive offer to your potential clients.
Does my general liability insurance policy cover my subcontractors?
No. General liability insurance typically only covers employees on your payroll. You may be able to purchase add-on packages that provide coverage for regular subcontractors.
How much liability coverage should I buy?
The amount of liability coverage you need depends on the size of your business and the amount of risk you take on. By nature, the responsibilities assumed by contractors include a high level of risk. Talk to your independent insurance agent about the specific duties carried out by your employees and the potential risks that should be covered by your general insurance policy.
What’s the difference between a general contractor liability policy and an artisan contractor liability policy?
Artisan contractors are typically specialists within a certain area of construction. Often, larger construction companies hire artisan contractors as subcontractors to complete a specific part of a job. Your contractors’ general insurance policy covers your regular employees, but rarely covers subcontractors. Since your subcontractors aren’t typically covered by general liability, they should invest in their own artisan contractor liability policy.
Do I need to be a licensed trade contractor to purchase a general liability policy?
No, you can purchase a general liability policy without becoming a licensed trade contractor. When you apply for contractor’s trade licensing and registration in Massachusetts, you’ll be required to provide proof of general liability coverage and workers’ compensation coverage. You will also be required to show proof of experience. While you gain the experience you need to become a licensed contractor, you’ll need liability coverage to protect your growing business.
Trust Us to Protect Your Commercial Interests
Now you know more about contractor liability coverage and coverage limits. What you need is an expert insurance agency that can help you navigate the complex world of business liability coverage.
LoPriore Insurance Agency is an esteemed Trusted Source agency that’s dedicated to providing competitive insurance products. Furthermore, we offer personalized service to our valuable clients.
Our team of experienced and dedicated professionals will take the time to learn your business needs. There’s no such thing as one-size-fits-all policies. We’ll provide you with invaluable advice about the policies that fit your unique requirements.
Contact a LoPriore Insurance Agency expert today at (781) 438-1375 to start finding quotes for the best coverage—at the best price. Alternatively, connect with us online for an instant quote.