contractor liability insurance: construction workers on scaffolding


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Insurance is always a good business investment. However, when cash is tight, contractors may wonder if they need contractor liability insurance.

The answer is: Yes. Besides the benefits of having coverage for potential damages caused by your workers and your business, clients want it — and in many states, it’s required to get licensed.

We’re going to look at three benefits of having liability insurance, what it covers, and what affects how much it costs.

Contractor liability insurance protects you and your business

Commercial general liability insurance protects you and your business from paying costs for damaging clients’ property, causing bodily harm, and legal fees from a lawsuit due to damages.

If you or your employees cause damage or hurt someone while performing work, liability insurance pays the damages and expenses incurred by your client. Otherwise, you would have to pay for repairs, medical bills, and legal fees arising from the incident.

Learn more: The Risks of Not Taking Out Contractor Insurance

Clients want liability insurance

Your clients and potential clients want the peace of mind that comes from knowing they are protected if something happens when you’re on their property.

This is especially true in the commercial sector, where general contractors and project owners may require that you have liability insurance in order to work for them. For some projects, you may need to purchase additional insurance to meet the requirements to work on the project. Residential customers also want to know they are protected while you are in their home.

Liability insurance is required to get licensed

Most states have laws that require contractors to get licensed, which is a process of registering with the state. Licensing helps assure your customers that you are a legitimate business, and it provides them with protection if there is a dispute on the project or substandard work. In order to get licensed most states require contractors to purchase general liability insurance to protect both the state and clients.

What does contractor liability insurance cover?

Contractor general liability insurance covers claims alleging property damage or bodily injury caused by you or your workers. It also protects you from legal fees if a customer files a lawsuit alleging property damage or bodily injury and pays for your defense from allegations of slander or libel.

Examples of incidents where contractor liability insurance protects you

  • Your customer falls and injures themselves at your office. Insurance protects you from paying for medical bills and treatment, along with any other damages.
  • A worker damages your customer’s property while working on a project. Insurance protects you from paying for the cost to repair the damage.
  • If a competitor files a lawsuit alleging slander or libel, insurance will pay for your defense.

Purchasing general liability insurance can save you and your company thousands of dollars if a claim is made.

In addition to general liability insurance, contractors should consider additional coverages to help protect them in the case of loss or damages caused by their company.

Read more: Contractor Insurance – 16 Types of Insurance for Construction Businesses

Commercial property insurance

Commercial property insurance protects your offices, shops, and tools against theft, damage, or injury.

Business income insurance

Business income insurance covers lost income when your business is closed due to damage from a covered loss. For example, if you have to shut down for repairs to your shop or office, this type of insurance replaces lost income during that time.

Automobile insurance

If your business owns vehicles, automobile insurance will protect them from damage and expenses caused by theft or accident.

Equipment insurance

If your business owns equipment or large tools, equipment insurance, also called inland marine coverage, will protect your equipment and tools from theft or damage.

Completed operations insurance

General liability insurance protects your business during ongoing work. If something happens and damage is caused on a project you’ve already completed, and it’s determined it was caused by your work, completed operations insurance would cover the cost of damages and repairs.

Data breach coverage

Data breach insurance covers costs associated with a data breach, cyber-attack, loss of customer payment information, or the stealing of hardware with customer information.

How much does contractor liability insurance cost?

There is no standard cost for contractor liability insurance because there are so many variables that go into determining the amount of coverage needed and the risk to the insurance company.

Here are some of the variables that insurance companies look at when determining how much to charge for liability insurance:

  • Physical size of your business: The larger the business, the more the insurance will cost.
  • Risk in your business: Contractors that perform riskier work will require more insurance and have a greater chance of having a claim, which will increase premiums.
  • Experience/age of the business: Contractors with more experience and who have been in business longer will have lower premiums.
  • Number of employees: The smaller the company, the lower the premiums.
  • Location of your business: Depending on where your business is located, premiums may be higher or lower.
  • Desired limits and deductible: The more coverage you desire, the higher your premium will be. Lower deductibles also translate into higher premiums.
  • Claims history: If you have a history of having a lot of claims, your premiums will be higher.

Protect your business with liability insurance

Contractors need liability insurance to protect themselves, their business, and their customers. It protects contractors from paying for damages caused by their work or workers.

Additionally, clients want the peace of mind that comes with knowing you are insured. And many states require liability insurance in order to get licensed, which is also required by law. 

Learn more about LegalGuard and how you can get connected to a construction lawyer in your area. Receive on-demand legal advice, contract reviews, and more.

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