A general contractor insurance policy includes all the coverage you’ll need to protect your business, employees, and clients. It should include coverage for everything from property damage and bodily injury to commercial car accidents and stolen equipment. While there are certain types of coverage you’re required to have as a general contractor, you can add as much coverage as you need to feel like your business is fully protected from just about anything that could go wrong.
What type of insurance do general contractors need?
In order to fully protect your business, your general contractor insurance policy needs to include several types of coverage. They include the following:
- General liability
- Tools & equipment coverage
- Workers’ compensation
- Commercial auto insurance
These are just the required types of coverage. For extra protection of your business, you can always add additional coverage to your general contractor insurance policy, depending on your specific needs.
What are general contractor insurance requirements?
At the very least, you need the general contractor insurance coverage types listed above. But keep in mind that you’ll also need a minimum amount of each type of coverage. The amount varies depending on the state you’re in and the project you’re working on. For instance, in Arizona, the bodily injury liability coverage on commercial auto insurance should be at least $15,000 per person and $30,000 per accident. But in New York, it must be $25,000 per person and $50,000 per accident. And some clients might request higher coverage amounts before you start a project, so the minimum amount you need can vary.
What is general contractor liability insurance?
Your general contractor insurance policy must include liability coverage. This protects not only your business, but also anyone who is accidently injuredon your property. For example, if someone visits your construction site and trips over a piece of wood, your liability coverage will pay for his or her medical care. If you didn’t have liability coverage, your business would have to pay for that care instead. Similarly, if someone drives over a nail on your construction site, liability could pay for a new tire so you don’t have to. Additionally, general contractor liability insurance pays for your legal costs if your business is ever sued.
General contractor tools coverage
One of the most important parts of your general contractor insurance policy is tools & equipment coverage. This part of your policy will pay to replace or repair the tools and equipment you use for business if they’re ever stolen, lost, or damaged. After all, without the tools of the trade, you’d likely have to stop doing business at least temporarily until you can afford to buy new items. Whether this would take weeks or months, you’d surely miss out on work, meaning you’d lose thousands of dollars in projects. So it’s best to plan ahead by adding tools & equipment coverage to your general contractor insurance policy.
General contractor auto insurance
Being a contractor means traveling to different work sites on a regular basis. You and your employees likely use a work truck—or a whole fleet of trucks—to get to construction sites daily. No matter how safe a driver you are, there’s always a risk of a car accident—and your personal car insurance won’t pay for the damages if the accident was associated with your general contracting business. This is why your general contractor insurance policy needs to include commercial auto insurance coverage to pay for property damage and medical expenses after an accident on the way to or from a construction site.
General contractor bond
You need a surety bond as part of your general contractor insurance policy. A bond of this kind serves as a guarantee to your clients that you’ll complete the job you’ve taken on so they don’t have to worry about a half-finished project. In many cases, bonds are required before you provide general contracting services. But even when they’re not, they’re recommended, since many companies will only hire contractors that have bonds in place. As a result, you could be missing out on a lot of jobs if your insurance policy doesn’t have this type of coverage.
What are general contractor insurance claims?
An insurance claim is a request for your insurance company to make a payment on a covered loss. The following are the most common general contractor insurance claims:
- Bodily injury
- Property damage
- Workers’ comp
- Commercial auto accident
- Lost, stolen, damaged, or vandalized tools and equipment
When you make these or other qualified claims with your general contractor insurance provider, you can start the process of getting your covered losses taken care of.
How much does general contractor insurance cost?
The cost of general contractor insurance varies quite a bit. The following factors will make a big difference when it comes to the amount you pay for your premium:
- Business revenue
- Number of employees
- Number of vehicles
- Contracting services provided
- Equipment used
- The level of coverage you want
- Past claims history
Clearly, the average amount varies widely. But in general, expect to pay about $50 per month for each type of coverage you have on your general contractor insurance. So, $150 to $300 per month is a good estimate of what you might pay to have at least the minimum required coverage for your general contracting business.
Why do general contractors need business insurance?
No matter how careful you are in contracting, there’s always a chance something can go wrong. And when you’re dealing with construction projects, a single mistake can cost thousands or even millions of dollars. If you don’t have the cash to pay that amount out of pocket, you need general contractor insurance. Depending on the coverage you have, you’ll get peace of mind by knowing that property damage, medical bills due to injuries, and legal expenses will all be paid for by insurance.
What are the risks of not having general contractor insurance?
In most cases, you’re required to have general contractor insurance if you want to stay in business. So not having the right policy can lead to legal issues and fines. You might also miss out on major projects since most clients will require you to have general contractor insurance before they’ll work with you. And of course, you need general contractor insurance if you want to avoid going bankrupt after someone sues you for bodily injury or property damage. After all, about 40% of businesses that go through some type of costly disaster never reopen, and yet, about 75% of businesses in the US are underinsured. You can avoid being that kind of business by getting general contractor insurance as soon as possible.