Contractors are professionals who supervise and coordinate the major stages of remodeling or other construction projects. Their responsibilities include overseeing and scheduling the tasks that subcontractors (i.e. electricians and carpenters) perform and obtaining permits for the renovation. Just like any other type of worker, these individuals need some form of basic protection against certain risks. This type of protection is called general contractor insurance.
Required Coverage for Contractor Insurance
The requirements for contractor insurance often vary depending on several factors, including the types of resources (human, material, or both) you use to conduct business, the state you work in, and whether you are a traditional general contractor or a design-build contractor.
The minimum coverage limits required typically depend on a contract’s scope and size and the types and levels of risks you are potentially exposed to. However, here are the essential requirements for general contractor insurance coverage across the board:
General Liability Insurance
General liability coverage helps pay for claims resulting from damages you (the contractor) inflict on third parties, including property damage and bodily injury claims.
This is perhaps the most fundamental type of insurance you can purchase as a contractor, as it shields you from risks tied to your daily on-site operations.
Workers’ Compensation
If part of your contractor duties includes hiring employees, you must acquire workers’ compensation coverage. This form of insurance covers your workers if they become sick or injured on the job.
Like general liability claims, workers’ compensation claims can sometimes result in costly lawsuits. The cost of workers’ comp coverage typically depends on the contracting occupation you have.
Each state also generally has its own laws and unique limits for workers’ compensation, so be sure to research this information.
Commercial Auto
If you own and/or frequently borrow vehicles for your contracting work, such as pickup trucks and vans, you must purchase commercial auto insurance.
Commercial auto policies typically pay for bodily injuries or damage to property that your business vehicles cause following an accident. Premiums for commercial auto coverage often vary based on the number of vehicles operated and by state.
Property Insurance
Commercial property insurance is necessary if you own some type of real estate for contract work.
This coverage pays for commercial buildings (structures) and their contents. If you own a large facility that contains ample storage space and/or heavy equipment, property insurance is essential.
Equipment Coverage
You are required to obtain equipment coverage, which is also known as inland marine insurance, if you own any type of tools or machinery.
This coverage shields your equipment against incidents of theft and natural occurrences such as fires and floods. You can often buy equipment coverage either as an addition to a contractor’s business owner’s policy (BOP) or as a policy on its own.
The cost of equipment coverage often depends on factors such as the state you live in and the type of tools and machines you own and use for business.
Products & Completed Operations Insurance
This type of coverage protects you against liabilities associated with your work upon the completion of the operations needed to finish your project.
Most general liability insurance policies do not include this type of coverage. Therefore, you may need to purchase it as an add-on.
Recommended Coverages
The following coverages are not typically required for contractors, although it is strongly recommended that you purchase them if they apply to your work:
Leased Equipment Coverage
This insurance covers any equipment (tools or machinery) that you lease for your contracting work. Items such as machines and tools can be expensive to repair or replace if they are stolen, lost, or damaged. Equipment coverage will help alleviate the cost of repairing and replacing these objects.
Employment Practices Liability Insurance
You may likely need employment practices liability insurance (EPLI) if your contracting business starts to grow, both in terms of operations and employees.
This is because as an organization grows, the risks of employee lawsuits associated with employer misconduct often increase.
Examples of such misconduct include wrongful termination, hiring practices, racial discrimination, and sexual harassment. EPLI is also good to have if you intend to lay off a large number of employees.
Other recommended coverages include errors & omissions insurance (and other types of professional liability coverage), builder’s risk coverage, umbrella insurance, specialized insurance, and excess insurance.
Speak to the General Contractor Insurance Pros at JMG
Reach out to the experts at JMG Insurance Corp to learn more about the requirements for general contractor insurance.
Since 1916, we have been dedicated to serving the insurance needs of individuals and companies throughout Connecticut, New Jersey, New York, Hawaii, and Massachusetts. We are an independent agency that collaborates with several well-known insurance carriers.
We offer contractors insurance policies that are tailored to meet their unique needs. We serve professionals such as HVAC technicians, plumbers, and electricians.
Our team also provides plans for riggers, carpenters, environmental workers, and highway laborers. We also sell general liability and business owners’ policies (BOPs) if you feel that you need this type of comprehensive coverage.
Call JMG today at (844) 304-7332 or to receive a free quote or to learn more about our insurance policies.
