General Contractor Insurance

General contractors and handymen may need the following types of coverage to comply with local laws and license requirements:

• General liability insurance is the foundation of a general contractor's protection. It covers accidents that damage a client's property or cause a bodily injury, along with libel and other advertising injuries. In some states, Georgia and Tennessee for example, contractors are required to maintain a specific amount of general liability insurance.
• Workers' compensation insurance covers medical costs and disability benefits when an employee is injured on the job. Most construction and home improvement businesses are required by law to carry this coverage—especially in high-risk professions like roofing. In some states, such as California, it's required for every licensed contractor.
• Commercial auto insurance pays for property damage and medical bills in the event of an auto accident, as well as vehicle theft, weather damage, and vandalism. Most states require a commercial auto policy for business-owned vehicles.
• Surety bonds guarantee reimbursement for the client if a general contractor fails to fulfill the terms of a contract or adhere to building codes. Bonds are often required to get licenses and permits in the construction industry.

Here are some of the top factors that determine premiums during the underwriting process:

• Type of construction work. A contractor who works on smaller residential projects will likely pay less for insurance than a contractor who does large-scale commercial work.
• Business property and equipment. Expect to pay more to insure an office building and expensive equipment than a smaller setup.
• Number of employees. A larger workforce brings a higher risk of employee accidents and mistakes, which raises the cost of workers' comp, general liability, and similar policies.
• Annual revenue. Increased business revenue is associated with higher risks and more frequent claims, which results in higher insurance costs.
• Policy limits and deductibles. Policies with higher limits cost more but cover more expensive claims. Choosing a higher deductible can lower your premium, but your insurance won't activate until you pay the full amount.
• Claims history. It'll cost more to insure a business that has filed an insurance claim in the past than one that has a clean history of claims.
• Location. Regional factors such as crime rates, population density, and property values affect how much you pay for insurance.

Depending on your location, you may need to obtain a general contractor license from a state licensing board or local governing body before you accept your first job. Some regions require insurance or a bond as part of their licensing requirements.

Here are a few examples:

• California requires all contractors who build or modify buildings to be licensed with the state if the job cost exceeds $1,000 or if the project requires permits or employees.
• New York mandates that home improvement businesses carry a license only if they operate in certain cities or counties.
• Texas does not require a license for general contractors at the state level, but some city and county governments do require it.

The type of license you need depends on the work you do, such as plumbing or electrical work. Permits, on the other hand, are often required for specific construction projects, especially larger ones involving structural changes, demolition, or specialized work requiring a plumber or electrician.

Clients may ask to see proof of insurance or a license before they'll hire you. Being insured, bonded, and licensed shows your business is reputable and gives your customers peace of mind, which is especially helpful when you're working to attract clients to a new business.

Simply put, contractors work directly with a client on a project, while subcontractors assist contractors in completing the project. Because of this, contractors and subcontractors have a different set of liabilities that can affect the insurance policies they need.

Here are the policies that general contractors and subcontractors most often need:

• General liability insurance is sometimes required by clients before they'll sign a work agreement. It may be required for both the contractor and any subcontractors who join the project.
• Workers' compensation insurance may be required by some clients for both general contractors and subcontractors. State laws may also mandate businesses to carry workers' comp for any licensed worker, even a contractor or subcontractor.
• Surety bonds are usually only purchased by general contractors to fulfill contract or license requirements. In most cases, any subcontractor work is covered by the contractor's surety bond.

Contractors, subcontractors, and employees of subcontractors all need to make sure they're protected. Clauses such as an action over exclusion on a general liability policy can deny coverage for those who are not directly employed by the policyholder.

In addition to the policies mentioned above, general contractors should consider:

• Commercial property insurance covers your building and its contents, such as tools, furnishings, and computers. It protects against financial losses from fires, storms, and burglaries.
• Business personal property (BPP) coverage can be added to your general liability policy to cover business property kept at a designated location, though you may not have a building.
• Installation floater insurance is a type of inland marine insurance that covers materials being installed or built by a contractor during a construction project.
• Business interruption insurance, also called business income insurance, reimburses you for lost income and day-to-day expenses if your business is forced to close temporarily due to a fire or other covered property claim.
• Owners and contractors protective (OCP) liability insurance is often bought by independent contractors to provide the project owner or general contractor with liability protection during a specific project.
• Employment practices liability insurance (EPLI) pays for legal defense costs related to claims of unfair hiring practices, wrongful termination, and other violations of employee rights.
• Commercial umbrella insurance boosts the coverage on your general liability, commercial auto, or employer's liability insurance once the policy limit is reached.

General contractors and construction businesses can save money on insurance by comparing quotes from different providers. With Insureon, you can get free quotes from top-rated insurance companies by filling out our easy online application.

Other ways to save money include:

• Bundle policies. General contractors can often buy general liability coverage and commercial property insurance together in a business owner's policy, which costs less than buying these policies separately.
• Customize your coverage. Choose lower limits or higher deductibles to reduce your premium, but make sure your policy can still cover a potential claim.
• Avoid accidents and claims. Contractor businesses can prevent employee injuries and customer accidents that lead to claims by implementing a strong risk management strategy that includes employee training and strict enforcement of safety protocols.

Our agents can help you find the right insurance solutions for your budget and your business needs, whether you take on minor home improvement tasks or large-scale commercial projects.