Understanding the difference between General Liability insurance and Contractors insurance is essential for anyone working in the construction industry or running a contracting business. While these terms are often used interchangeably, they can refer to different types of coverage, each designed to protect your business from unique risks.
In this article, we’ll break down what each insurance program covers. Whether you’re a general contractor, subcontractor, or small business owner, this guide will help you make sense of your insurance options and choose the right coverage to safeguard your projects, your reputation, and your bottom line.
What Is General Liability Insurance?
General Liability insurance is designed to protect a business’s assets up to the policy limit for a covered loss in the event of a third-party bodily injury liability or property damage claim during the course of the contractor’s work.
What Does General Liability Insurance Cover?
Generally speaking, a General Liability policy covers bodily injury claims by non-employees as a result of your work and covers medical costs and legal fees related to lawsuits for covered losses. It also protects against accidental damage to third-party property and provides coverage for personal and advertising injury claims (such as slander, libel, and copyright infringement).
Products and Completed Operations coverage can be included in some policies to cover claims arising after a project is completed for work performed during your policy period.
Who Needs General Liability Insurance?
General contractors, specialty contractors, and subcontractors should all purchase General Liability insurance to protect their businesses in the event of a claim and lawsuit. Many states require contractors to carry coverage as part of the licensing process. Additionally, most project owners typically require contractors to provide proof of General Liability insurance before work begins.
How Much Does General Liability Insurance Cost?
The cost of General Liability insurance depends on several factors, including the type of work you perform. For example, contractors involved in higher-risk trades, such as roofing, electrical, or heavy construction, typically pay more than those in lower-risk trades, such as painting or handyman services.
Business size and financial details, such as payroll, subcontractor expenses, and gross receipts, also affect costs. Construction companies that have been in business longer and have a strong safety record are often eligible for more competitive pricing, while newer contractors may pay higher premiums until they build experience.
The size of your workforce and where you operate also matter. More employees generally increase the potential for accidents or claims, and contractors working in areas with high crime, severe weather, or stricter legal climates may face higher rates of accidents or claims. Coverage choices, including policy limits, endorsements, and deductibles, impact costs, too.
A clean loss history usually results in better pricing, while businesses with frequent or severe claims may see higher premiums until their record improves.
What Is Contractors Insurance?
Contractors insurance is a broad category and includes General Liability coverage, which serves as the foundation for building a comprehensive program. Additional insurance policies are also needed to protect a contractor’s assets, crew, and customers.
What Does Contractors Insurance Cover?
In addition to General Liability coverage, Contractors insurance can include:
- Workers’ Compensation to provide wage and medical benefits to workers injured on the job.
- Contractors Tools & Equipment to protect assets such as heavy machinery and tools against damage, theft, or vandalism.
- Commercial Automobile for contractors who use their vehicles on the job.
- Professional Liability to protect contractors from alleged acts of construction errors, omissions, or negligence.
- Builder’s Risk to cover buildings under construction or renovation in the event of a loss due to fire, theft, and other perils.
These are just some of the policies contractors should consider when looking at their overall insurance protection plan. Other policies include Commercial Property, Excess Liability, and Contractors Pollution Liability.
Who Needs Contractors Insurance?
All contractors need some Contractors insurance, beginning with General Liability coverage. If you also have employees, you should carry Workers’ Compensation insurance. Contractors Tools & Equipment protects one of your most important assets. To determine what other policies you need, analyze your project types, operational size, and trade-specific challenges.
How Much Does Contractors Insurance Cost?
The cost of Contractors insurance depends on each policy and the factors that go into determining the premium. Pricing varies by trade, business size, location, claims history, and the type of work performed. For example, Workers’ Compensation rates are influenced by payroll, the type of job classifications involved, and a company’s safety record. Businesses with more employees or higher-risk work, such as roofing or heavy construction, typically pay more than lower-risk trades.
Contractors Tools & Equipment coverage is usually based on the value of the tools and machinery you want insured, where it’s stored, and how frequently it’s transported to different job sites. Insurers also consider theft exposure, security measures, and past losses when determining costs.
Because each contractor’s operations and risks differ, premiums are calculated based on the business's unique characteristics and the policies selected.
Contractor Insurance vs. General Liability Insurance: Key Differences
Contractor insurance is a broad category of coverage that can include several different policies. It’s designed to protect a contracting business from the full range of risks it faces on the job. General Liability insurance, on the other hand, is just one component of that protection. While General Liability is essential, it doesn’t cover other common exposures, such as employee injuries, stolen equipment, pollution incidents, or vehicle accidents.
How to Choose the Right Insurance Policy for Your Contracting Business
Choosing the right insurance policy begins with knowing your specific risks and the projects you take on. Consider the type of work you perform, whether you subcontract, how much equipment you use, and whether your jobs require certificates of insurance or special coverage. From there, evaluate the policies that best protect you: General Liability for third-party injury and property damage, Workers’ Compensation if you have employees, and coverages like Commercial Auto or Tools & Equipment.
Your claims history, state requirements, and client contract terms should also guide your decision. Working with an experienced insurance provider or broker who understands the construction industry can help provide the coverages you need, tailored to your business, and protect you from the risks you’re most likely to face.
Frequently Asked Questions About General Liability and Contractors Insurance
What documentation do I need to get a quote for either General Liability or Contractors insurance with CCIS?
Does the cost of General Liability insurance differ significantly from Contractors insurance?
*NOTE: The insuring agreement in a policy sets out the covered perils, assumed risks, and nature of coverage that the insurance company provides to its insured in exchange for the premiums paid. Thus, the terms and conditions of the policy will dictate whether coverage exists and the nature of any potential benefits.