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    What Is General Liability Insurance for Contractors?

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    General liability insurance protects contractors from lawsuits and compensation claims that arise from bodily injury or property damage.

    Suppose you renovate a client’s bathroom. During the process, you accidentally drill the wrong area and damage one of the home’s pipes. Contractor liability insurance can provide compensation to remedy this issue.

    In another example, a third-party visits your job site. Suppose they injure themself during this visit — it could be due to a loose nail or scattered lumber. In this case, they might sue for medical costs, pain and suffering, and lost wages. General liability insurance can pay for related legal fees and damage awards in this incident.

    This article highlights general liability insurance for contractors. It notes its importance, the other policies a contractor might need, and how much a general liability policy costs.

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    Why is general liability insurance important for contractors?

    There are three core reasons for a contractor to have general liability insurance.

    1.  Protection and peace of mind

    General liability insurance’s primary purpose is to protect you from lawsuits. It covers the financial fallout of expensive litigation and payouts, costing hundreds of thousands of dollars or even millions. As a result, paying this amount out of pocket and potentially bankrupting your business in the process isn’t another stressor top of mind.

    You might believe you only use liability insurance when you make a claim. However, the right policy provides peace of mind daily.

    Related: Claims Scenarios Every Contractor Should Know

    For example, suppose you or an employee has a “close call” moving material around — you almost damaged the client’s expensive chandelier! The idea that you may damage something else and be liable to compensate for it might linger and add anxiety to your already-stressful job.

    General liability insurance ultimately removes some of this pressure. If you actually damage a chandelier, your liability insurance is ready to provide compensation on your behalf.

    Related: What does contractors general liability insurance cover

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    2. Professionalism in unfortunate incidents

    Imagine there’s an unfortunate accident during a renovation — for example, your client visits their half-complete home and hurts themself.

    Suppose you’re uninsured, as well. This might lead you to argue with the client and state that the injury was their fault — you don’t want to pay for their medical costs and pain and suffering! However, they blame you, and tensions are up-in-arms.

    If it turns out to be your fault, you look unprofessional for not owning up to it. However, it’s understandable because accepting blame could have meant tens or hundreds of thousands of dollars out of your company’s pockets.

    The right insurance remedies this issue. It lets you accept responsibility if you’re wrong because you’re not the one paying the compensation. You understand your insurance will handle the process and pay any related fees. This lets you maintain a good relationship with clients and leaves your reputation, as a contractor, pristine.

    3. Mandatory insurance clauses

    Commercial and institutional clients want to manage their risks. When they hire a contractor for a project, they want to understand that you’re able to pay compensation if anything goes wrong. They don’t want a contractor who makes an error and declares bankruptcy after a lawsuit, leaving them with a loss.

    As a result, commercial and institutional clients often mandate you have the right insurance when signing a contract. They might specify that you need at least a $2 million policy and even request to see an insurance certificate before work begins.

    If your goal is to work with large clients who can afford bigger budget projects, the right general liability insurance is a must-have.

    Related: Independent contractor vs self employed

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    What other insurance policies do contractors need?

    General liability insurance is only one piece of the puzzle. To mitigate the numerous risks in your contracting business, you need a proper business owner’s insurance plan. This may include the following:

    • Professional liability insurance is similar to general liability insurance in that it covers the financial fallout of lawsuits that affect your business. However, instead of covering bodily injuries and property damage, professional liability coverage kicks in when a client sues for negligence, misrepresentation, or errors and omissions.

    • Contents coverage protects your business equipment and assets, like tools or office furniture. If items are lost, stolen, destroyed, or damaged, contents insurance usually provides the replacement or repair value of the belongings.

    • Builder’s risk coverage is more bespoke to contracting professionals. It’s a form of property insurance that insures buildings under construction and renovation. So, if your reno suddenly faces a fire, you’re covered.

    Related: How To Become an Approved Contractor For Insurance

    Need Insurance for Your Small Business?

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    How much does insurance cost for contractors?

    Contractor liability insurance costs depend on numerous factors, including:

    • Your company history

    • Business location

    • Your industry or niche

    • Policy terms like coverage limit, scope, and deductible

    • The size of your business

    Find out how much insurance costs for your business. Get a quote and purchase insurance online in under five minutes with APOLLO. Our online insurance portal lets you quote, purchase, and bind a policy from anywhere, on any device, and around the clock — seven days a week.

    APOLLO’s insurance advisors are also available to answer questions and help assess your business’ risks.

    APOLLO Has You Covered

    We can help you understand the benefits of Business Insurance, and get the kind of protection you need in minutes.

    Learn More

    Originally published February 14, 2022, updated August 25, 2023

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