General Liability Insurance

If you own a contracting business, you know that even with the best of planning, things don't always work out perfectly. Human error, faults in materials, even "acts of God" can contribute to accidents and injuries on job sites every year. That's why every contractor needs solid, reliable insurance coverage tailored to their specific and changing needs.

General liability insurance is a state requirement for most contractors, even sole proprietors, and contractors with employees are required to obtain worker's compensation insurance. Many private companies require contractors working onsite to obtain additional coverage over and above state requirements, especially if there are flammable substances or other hazardous materials on the job site. Most companies or organizations will expect to see at least one Certificate of Insurance, proving that the contractor has current and appropriate insurance coverage that satisfies the company's individual risk management policy. Some companies also require commercial auto insurance coverage to exceed the amount required by law, as well as indemnity agreements, which transfer liability for bodily and material harm to the contractor.

At contractorsinsurance.org we tailor each contractor's individual coverage to meet both short-term and long-term needs, and we can assist you in obtaining appropriate coverage levels from job to job or from year to year. Our extensive network of affiliates is proud to service the varied and often complex insurance needs of our 4,500 clients with care and strong attention to detail. With over 25 experience insuring individuals as well as businesses of all sizes, we know the ins and outs of contractor's insurance.

No matter what type of general liability insurance you need, we can help you find excellent coverage for the right price. For more information, click for a free quote or call our insurance specialists at (516) 294-1072 today.

Types of Coverage

When you're shopping for contractors insurance, it's important to understand the types of coverage available, and which types of insurance will best serve you and the needs of your business. Government requirements for contractors insurance often vary from state to state, so all contractors should familiarize themselves with their state's insurance minimums before shopping for a policy. It's also a good idea to learn about the minimum requirements for any other states in which you may be working, which can prevent the need for last-minute policy adjustments, and may potentially streamline the bidding process.

General Liability

Every business owner would do well to possess general liability insurance coverage. Many states require this type of coverage for contractors, although the levels of coverage differ depending on the state and sector of construction. Requirements for state and municipal contracts may be different than those for contracts with private parties. The minimum coverage recommended for most contractors and situations is $2 million.

Although in most situations a contractor can bid on a job without proof of insurance, an original proof of insurance certificate is required before work may begin. With a standard $2 million general liability policy in place, contractors can avoid delays at the beginning of a project.

Liability insurance is defined as an insurance policy that offers protection against third-party claims of property damage, injury or bodily harm, loss of life or limb, or negligence. General liability insurance offers blanket coverage which includes both "public" and "product" liability, meaning that coverage extends to direct or indirect actions of the insured (and the insured's employees) which result in loss or damage, as well as products or structures manufactured by the insured which cause loss or damage due to a fault in the product. A professional risk assessment can help individual contractors determine what levels of coverage in specific areas of the general liability policy are appropriate or necessary.

Many contractors require each of their employees or subcontractors to carry a general liability insurance policy of their own. Again, coverage of $2 million is not uncommon. This practice not only reduces the overall liability of the employer, as each of his employees is now a separate entity, but may reduce the cost of the contractor's general liability policy. These single-person policies are often referred to as "professional liability" policies, and are similar in many ways to the malpractice insurance carried by medical professionals.

The term "excess general liability" refers to coverage over and above the minimum requirements of the state or municipality. Many general contractors and owners of larger contracting businesses choose to carry excess general liability insurance policies of $5 million or more, as a precautionary measure as well as to streamline bidding processes and eliminate delays at the start of a job.

Worker's compensation insurance

Although coverage requirements vary from state to state, all fifty states require businesses with payroll employees to carry worker's compensation insurance, commonly referred to as "workman's comp" or "worker's comp." Worker's compensation insurance is especially important for contractors, due to the increased risk of employee injury as compared to workers in other labor fields.

Worker's compensation insurance provides wage replacement coverage for any employee who is injured on the job, as well as coverage for medical costs, economic losses, pain and suffering, and settlement payments for dependents in the case of accidental loss of life. Plans and coverage can be tailored to suit each contractor's needs and the needs of their employees, but each state maintains its own minimum requirements for workers compensation coverage. Worker's compensation insurance is considered a separate form of coverage from general liability insurance, although rates may be included in the premium for some "corporate umbrella" policies.

In some situations, sole proprietorships and businesses that utilize only subcontractors are not required to carry this coverage. However, there are instances where a subcontractor or sole proprietor may be required to carry their own disability insurance in place of or in addition to worker's compensation insurance. An insurance professional can help you determine what, if any, coverage is needed for you situation, and can assist you in obtaining coverage as needed on a yearly or by-the-job basis.

Bonds

Bonds are commonly used in the construction industry, as an assurance between the contractor and the client as well as between a general contractor and his or her subcontractors. Technically, a bond is not an insurance policy but a form of credit issued by the bond holder (also known as the "surety") to the principal (the contractor).

When a bond is purchased, the contractor is required to pay a bond premium, typically between one and three percent (1-3%) of the bond amount, although higher risk bonds may require a five to twenty percent (5-20%) premium. The bond is then extended as a form of credit. In the event that the contractor forfeits the bond agreement or a valid claim is made by the client or subcontractor, the contractor is responsible for the full amount of the bond. Bonds premiums are not included in any general liability insurance policy, as they are not technically insurances, nor are allowances for bond premiums included in corporate umbrella policies.

Types of bonds include bid bonds, payment and performance bonds, contract bonds, subcontractor bonds, maintenance bonds, supply bonds, license bonds, and subcontractor bonds.

Bid bonds state that the contractor will enter into a contractual agreement with the client if their bid is accepted. This is a way for the client to ensure that the contractor will not go back on the agreements put forth in the legal bid. If a contract is offered and the contractor refuses to agree to the terms of that contract, the client may file a claim against the bid bond for the difference between the price of the contact and that of a substitute contract, or for the penalty amount specified in the bid bond.

In order to obtain a contract after the bidding process is completed, many clients require contractors (and often their subcontractors) to provide a performance bond as assurance that the job will be completed to the specifications described in the contract. These bonds are usually required to be produced at the same time as insurance certificates demonstrating proof of general liability insurance. Payment and performance bonds are required for contractors on U.S. Federal Government construction contracts exceeding $100,000, per the Miller Act. Most large corporations and municipalities require surety bonds as well, and will provide blank bond forms (forms which state the precise guarantees of the individual bond agreement) to the contractor and the surety upon conclusion of the bidding process.

Bonds between general contractors and subcontractors, known as "contract bonds" or "labor and material payment bonds," are also common in the industry. These bonds ensure timely and complete payment to subcontractors, suppliers, and employees for materials and services rendered. Conversely, subcontractor bonds are agreements similar to a payment and performance bond, and guarantee that the work outlined in the contract(s) will be performed as stated by the subcontractor and its employees. In cases where subcontractor bonds are required, subcontractors may also be required to provide insurance certificates demonstrating proof of general liability insurance coverage to the surety.

Maintenance bonds are issued when the client wishes a guarantee on the finished product for more than one year after the terms of the construction contract have been completed. Maintenance bonds can be renewed annually, however most are not carried for more than three years beyond the finish date of a project. Supply bonds are generally used when a particular material required for completion of the construction contract is unduly hard to find, expensive, or falls under the status of a proprietary item. Some bonds guarantee only materials purchase orders, while other bonds guarantee timely delivery of the materials in question.

Some contracts require a contractor's employees to carry fidelity bonds (also known as employee dishonesty bonds), forgery bonds, or other bonds governing employee liability. Fidelity bonds guarantee that bonded employees will handle their employer's funds honestly, therefore protecting the contractor from employee theft. Forgery bonds protect the employer from the issuance of false checks and documentation. Some sureties offer bonds that combine both areas of coverage into a single employee bond.

There are numerous other types of bonds commonly used in the construction industry. An insurance professional from contractorsinsurance.org can assist you in finding a surety for any type of bond your clients require, at the lowest possible premium.

Commercial auto insurance

Although many sole proprietors choose to ensure their vehicles under personal insurance policies since they use the vehicle as their primary transportation, a commercial insurance policy provides a broader spectrum of coverage. Companies that maintain several vehicles, or frequently lease or rent vehicles on a job-by-job basis, need the highest level of coverage, as these vehicles may be driven by non-employees.

The main difference between personal and commercial auto insurance is the level of coverage. Premiums and levels of coverage are determined by the type(s) of vehicles, level of usage, type of business, and number and history of insured drivers. Coverage for commercial vehicles typically ranges from $1 million to $3 million. Contractors must keep in mind that although a general liability insurance policy may cover the contractor's liability expenses in the case of an accident if it occurs on a job site, and may offer limited coverage on hired and non-owned autos, a separate commercial auto insurance policy is advisable to ensure the highest level of protection.

When choosing an insurance provider, contractors know that two things are important: the right coverage, and the right price. Insurance needs can vary from year to year, even from job to job. No matter what type of contractor's insurance you need, we can help you find excellent coverage for the right price. For more information, click for a free quote or call our insurance specialists at (516) 294-1072 today.