If you’re a contractor, you know that you need general liability insurance coverage. General liability insurance is a must-have for any contractor because it protects against the hazards of your industry.
Many contractors don’t understand their insurance needs and opt to purchase policies that are too expensive or do not fit their business at all. With help from this article, you’ll learn the ins and outs of purchasing general liability insurance.
General liability insurance for contractors will cost you an average of $65 a month or $780 each year. General liability insurance can range from $30 to $95 and up per month, depending on the type of contractor.
The cost for contractors depends on the business’ size, the number of employees, and other risk factors. What Is A Risk Factor? Anything that could increase the likelihood or severity of a loss.
For example, being in an area with extreme weather or using certain tools that could cause dangerous situations for others may increase risk factors. The more risk factors associated with your business, the higher the cost of general liability insurance.
- How Much Does General Liability Insurance Cost?
- Who Needs General Liability Insurance?
- What Can General Liability Insurance Be Used For?
- What Does General Liability Insurance Not Cover?
- How Much Does General Liability Insurance Cover?
- What Are the Requirements For a General Liability Insurance Policy?
- What Does General Liability Insurance Protect?
- What Can You Use General Liability Insurance For?
- Professional Liability vs. General Liability Insurance
- What is Business Owners Insurance?
- Do I Have To Have General Liability Insurance?
- Insurance To Protect Your Tools and Equipment
- How To Protect Your Business From Employee Accidents
- Make The Right Choice
How Much Does General Liability Insurance Cost?
General liability insurance will cost an average of $65 per month for a $1,000,000 coverage policy. Over a year, expect to pay an average of $780 for $1,000,000 in general liability insurance.
For each claim, expect to pay a deductible averaging $500, but this will depend on your specific policy. Policy deductibles can range from $0 to $5,000, making choosing an amount to pay out of pocket very important.
For example, if two claims are brought against you in one year, and you had a $1,000 deductible on your policy, you would pay $2,000 out of pocket, but if you had a $500 deductible, then your total out of pocket cost would be $1,000.
Average Cost By Industry
Depending on what industry you are in, your cost for general liability insurance can vary. General liability insurance for contractors ranges from $35 to $95 per month, while an architect’s insurance costs around $70 monthly.
General liability costs for roofers are about $75 per month, painters pay about $56 per month, plumbers have an average rate of $50, and electricians pay about $57 monthly for their policy.
Here are some examples of cost variables:
HVAC Contractors – $730 (annually)
Handymen – $540 (annually)
For home improvement, cleaning, or landscaping companies, expect to pay about $60 monthly.
Electricians – $850 (annually)
Average Cost By Company Size
Small Businesses (10-99 Employees) – $520 (annually)
Medium Businesses (100-499 Employees) – $1,720 (annually)
Large Businesses (500+ Employees) – $2,380 (annually)
Who Needs General Liability Insurance?
Any contractor needs to have this type of coverage, but any business can purchase general liability insurance with sufficient needs for protection.
What Are Some Examples Of Contractors?
– Construction companies that build or tear down homes or buildings.
– Lawn care professionals who mow and care for lawns at residential and commercial properties.
– Plumbers who work on pipes, sinks, baths, and other fixtures.
– Pest control specialists who work to keep homes and properties free of pests like termites.
– Even pool cleaners and repair technicians who work on pools also need general liability insurance to protect their income from claims made by customers or others who may be injured while the insured is working.
What Can General Liability Insurance Be Used For?
General liability insurance can protect a contractor against claims that could arise from damages on a construction site.
The damage caused could be to people or property. For example, if someone slips and falls at the construction site causing them injury, general liability insurance is meant to cover these types of claims.
General liability insurance can also protect contractors in the case they are sued over inferior quality. For example, faulty construction of a house could result in the homeowner suing the contractor due to water damage or illness caused by mold.
What Does General Liability Insurance Not Cover?
General liability insurance covers claims made against the work done by a contractor.
For example, general liability insurance would not cover this type of claim if someone fell at a construction site and broke their arm when the constructor is not working on the site.
General liability insurance does not cover injuries acquired by contractor employees because these claims are covered under workers’ compensation.
Does General Liability Insurance Cover Claims Against Employees?
No. Like injuries caused by faulty workmanship, contractor employees who cause damage to people or property in the course of their duties are also not covered by general liability insurance.
This type of claim would also fall under workers’ compensation.
For example, if an employee of a contractor is working on the wiring in a home when it causes the house to catch fire and burn down, workers’ compensation would cover this type of claim.
How Much Does General Liability Insurance Cover?
General liability insurance does not cover all types of claims, and this coverage should be determined on an individual basis.
The amount of money provided by general liability insurance depends on the contractor’s policy and their type of work. Generally, contractors will receive $1 million or more in protection for other people’s claims against them, depending on the size of their business.
This amount can be increased if desired. Typical policy coverage will range from $300,000 to $5 million.
Suppose there is a large project, such as a major construction or remodeling job. In that case, this could result in claims that exceed the amount included in the current policy, and additional insurance may be needed for this particular project.
In some cases, general liability insurance will require an endorsement if the limit is exceeded.
What Are the Requirements For a General Liability Insurance Policy?
General liability insurance policies must meet special requirements before they can be taken out.
The essential requirements are:
- work performed must be construction-related
- the contractor needs to be licensed in their state or local area
- there should be no other general liability insurance policies in effect for the same work
This will vary by the insurance company, so it is advised that you contact your insurance agent to find out what is required.
If any of these requirements are not met, the contractor may want to look for an alternate provider or correct any issues before applying for insurance.
What Does General Liability Insurance Protect?
General liability insurance protects against financial loss that may occur due to accidents at the job site. This may include injury to others during construction or damage to others’ property.
It may also include injury or loss of life.
General liability insurance is required by law for some occupations, but for many, it’s optional. If you are responsible for your business finances, this coverage can be a good idea if any risks are associated with your work.
What Can You Use General Liability Insurance For?
Contractors often use general liability insurance for the following:
- Completed operations
- Personal and advertising injury
- Medical expenses resulting from bodily injury
- The cost of defending the claim
- Damage to property that the contractor is responsible for
- Loss of use of damaged property
- Any other expense arising from an allegation, accusation, or claim arising from your operations.
Professional Liability vs. General Liability Insurance
Professional liability insurance protects businesses that provide services for clients, while many contractors require general liability insurance before they can begin working on a construction site.
General liability insurance protects the contractor from accidents that may occur during their work. Whether it is damage to property or an injury to another person, the contractor’s general liability insurance would be held responsible and compensate the victim(s).
Professional liability insurance will cost an average of $40 per month which will average you $480 per year. This will cover your business up to $300,000 per occurrence.
Professional liability insurance typically has a higher deductible which will average $2000 per occurrence.
What is Business Owners Insurance?
A business owner’s insurance will typically include general liability, commercial auto, building & personal property coverage. This insurance will range from $1,100 to $1,900 per year for a small business.
The advantage of having business owner’s insurance is that you can purchase additional coverage for your home, office, or other buildings on the same policy.
This coverage will allow you financial protection for any damages that may occur to your business or home during your daily activities.
Most lenders typically require business owners’ insurance before they will loan money.
Optional Business Insurance Coverage
Other types of business insurance coverage that are available for purchase are:
Bodily Injury/Property Damage: This will protect against injuries of another person on your premises. This policy typically has a limit of $1 million per occurrence.
Products-Completed Operations: If you sell any type of product, it is required to cover it under this type of policy. This protects your business against any property damage or bodily injury that may occur after the product has been sold.
Personal Injury Protection: This is also known as medical payments insurance. It will pay for injuries sustained by an employee while on the job.
Business Income/Extra Expense: This will protect your business if you cannot operate due to covered loss.
Business Income insurance usually has a limit of 12 months and will only reimburse the policyholder’s lost profits, not overhead expenses (rent, payroll, etc.).
Employee Dishonesty/Money/Bank: Employee dishonesty insurance protects against embezzlement by your staff. Money and bank coverage will protect against loss of cash or securities due to theft, robbery, burglary, forgery, or embezzlement.
Employee Benefits Liability: This protects employers from mistakes or errors made in the administration of employee benefit plans such as group health, life insurance, LTD disability plans, etc.
This coverage is usually an optional $100,000 per employee with a total aggregate limit of $3 million. This is for all claims arising out of one policy period.
Do I Have To Have General Liability Insurance?
General liability insurance is not legally required for most contractors, but it is advisable. It can help you cover legal expenses, claims brought up against you, and court costs.
It could also protect your company’s assets in the event of a claim or lawsuit.
For most home improvement contractors, general liability insurance is generally not needed unless they perform certain types of work. For smaller home improvement contractors, it’s cheapest to get general liability insurance at the same time you purchase your business insurance policy.
Insurance To Protect Your Tools and Equipment
General liability insurance does not cover your tools and equipment, so you need a separate insurance policy to protect them.
Most contractors will get inland marine coverage along with general liability insurance. It covers tools and equipment against specific perils such as floods, earthquakes, and fires.
Inland marine coverage is a form of property insurance policy that provides limited protection for business goods and equipment.
Inland marine insurance will cost you around $12 per month, adding $144 per year to your expenses. Typically this insurance will cover between $5,000 and $10,000 worth of equipment replacement or repair.
When buying inland marine insurance, make sure you understand what equipment is covered under the policy as there are typically restrictions.
How To Protect Your Business From Employee Accidents
Employees are another risk to your business. If an employee is injured on the job, liability insurance will cover their injuries and any medical bills.
Almost every contractor that has employees will want to have a workers’ compensation policy. It is required by law in all 50 states and Puerto Rico.
Penalties for not having this insurance could result in a fine of up to $1,000 per employee per day.
Some states only require workers’ compensation when you have a certain number of employees working for you. This can range from 1 employee to 5 employees.
In general, workers’ compensation will cost you an average of $45 a month. Many factors can increase the price of your policy, including:
- the cost of living (it can be more expensive in states like California, for example)
- number of employees
- the geographic location you will be working in (urban, suburban, or rural)
- the state where you are doing business (some states like New York, for example, have their own workers’ compensation insurance, and you may not be able to use your policy from another state)
Make The Right Choice
When thinking about whether you need general liability insurance, make sure to do your research. Make sure to understand the cost of purchasing the policy, the limits on your expenses, and how much coverage is provided.
It can be helpful to speak with an insurance agent if you need help understanding the different types of policies available to you.