Why is business insurance a must for general contractors?
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6 policies every general contractor should consider
General liability insurance
A general liability insurance policy protects contractors against legal expenses related to client property damage and injuries. It's often required by state laws and contracts.
- Client bodily injuries
- Damaged customer property
- Advertising injury and copyright lawsuits
Business owner's policy
A BOP bundles commercial property insurance and general liability coverage at a discount. It's often the most cost-effective type of business insurance for general contractors.
- Client slip-and-fall injuries
- Accidental damage to a client's property
- Theft and vandalism
Workers' comp insurance
Most state laws require businesses with employees to carry workers' compensation insurance to cover workplace injuries. In some states, even sole proprietors who work in construction must carry this policy.
- Medical expenses from work injuries
- Disability benefits
- Lawsuits from workplace accidents
Commercial auto insurance
Independent contractors with business owned vehicles must carry this coverage to comply with state laws. It helps pay for financial losses in an accident, including legal costs and property repairs.
- Auto accident injuries
- Auto accident property damage
- Theft of a construction vehicle
Contractor's tools and equipment
A type of inland marine insurance, this policy protects your construction tools and equipment wherever you bring them. That includes items in transit, stored off-site, or used at a jobsite.
- Saws, drills, and other tools
- Hard hats and other safety equipment
- Excavators and forklifts
Professional liability insurance
Professional liability insurance covers legal fees related to a mistake, missed deadline, or other accusation of professional negligence. It's also called errors and omissions insurance (E&O).
- Project delays and budget overruns
- Wrong materials and other mistakes
- Breach of contract
General contractor insurance costs
Here's a quick look at the average costs of common contractor insurance policies purchased by TechInsurance customers:
General liability: $142 per month
Business owner's policy: $121 per month
Workers' compensation: $318 per month
Factors that can influence your premiums include:
- Types of contracting services offered
- Number of employees you have, including subcontractors
- Types of insurance purchased
- Policy limits and other coverage options (e.g., additional insureds)
- Claims history
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Common questions about business insurance for general contractors
What other types of coverage do general contractors need?
Depending on the type of contractor work you do, you may have additional insurance requirements and will need additional types of coverages.
A complete risk management plan for a general contractor project might include:
- Builder's risk insurance: Also called course of construction insurance, this policy helps pay for damage to a structure in progress and construction materials.
- Contractors pollution liability insurance (CPL): This policy protects contractors against legal costs related to pollution, such as a lawsuit about excessive dust raised at your construction site.
- Inland marine insurance: Commercial property insurance only covers items at your business address, so you may need inland marine insurance for items in transit or at a jobsite. Coverages include contractor's tools and equipment insurance and installation floater insurance for materials awaiting installation.
- Commercial umbrella insurance: When your underlying general liability, commercial auto, or employer's liability policy reaches the limit on a claim, umbrella insurance activates to provide additional coverage.
- Mobile equipment endorsement: This type of coverage insures tractors, backhoes, and other construction vehicles not covered by standard auto insurance.
Do general contractors need a license, permit, or bond?
The requirements for licenses, permits, and bonds depend on the type of contractor work you do and the laws in your state. For example:
- You may need a license to do certain types of work, such as plumbing, roofing, or electrical work. These requirements differ by state.
- You might need a permit for a specific project. For example, building a structure of a certain height, or converting one type of room into another, could require a permit. Again, this depends on your state laws.
- Bonds help you secure contracts. Several types of surety bonds are common in construction, including bid bonds, performance bonds, and payment bonds. They act as a guarantee that you'll fulfill the terms of a contract. You may need one to bid on a project, apply for a license, or work with a specific client.
In many cases, your insurance needs are determined by licenses, permits, and bonds. For example, most general contracting businesses often need to buy commercial general liability insurance in order to get licensed in their state.
