General Contractor Insurance

General contractor insurance is at once one of the most common, and one of the most complicated, forms of insurance out there. There are so many kinds: residential contractor insurance, professional services insurance, workers compensation insurance… The list goes on and on. And each of them can be the key to protecting your contracting business from the necessary risk that arises out of the necessary course of business. 

The actual nuts and bolts of your coverage are important. That’s a conversation—a very necessary conversation—between you and your counsel or risk management leadership, and your insurance brokers. But what we can talk about today are the ideas that go behind the details of those coverages, so that you can make the high-level and subjective decisions that will inform the objective state of your eventual coverage.

Let’s take a walk through some of those high-level decisions.

Subcontractor Insurance Requirements

If you’re a subcontractor, or you hire subcontractors and have to track the certificates of insurance you receive from them, you may see a few oddities. Depending on what state you’re working in, certificates of insurance for subcontractors may sometimes lack evidence of workers’ compensation coverage. This is because several states do not require workers’ compensation coverage for what are called sole proprietorships, where the individual worker is the only employee of their one-person company. If you’re unsure whether or not there should be a workers comp policy by statute, consult with your state’s workers compensation board.

Even in states where it is not legally required, however, many companies that hire subcontractors still require the coverage as a necessity for employment. In that case, a workers’ compensation certificate of insurance for subcontractors will show the minimum necessary coverage required by the hiring entity.

What’s fun about these one-person plans is that often they’re what are called ghost policies: they are workers’ compensation plans, but they have exclusions disallowing coverage for the single employee. They allow subcontractors to satisfy the requirement of needing workers’ compensation, but since they are excluded, the coverage only covers a ghost.

Or in reality, no one.

Best General Contractor Insurance

Answering the question “who sells the best general liability insurance for contractors?” is as easy as naming off all the top insurance providers. Almost every insurer will offer this kind of protection, though some vary whether they offer it nationally or locally. General contractors insurance coverage is one of the most common forms of insurance.

You should check locally first, however, when you’re figuring out what kind of insurance do general contractors need. Or local to the area that you’ll be working, if you live near a state border and often work across the border. States require different types and levels of general contractor insurance requirements from businesses and contractors. It’s just good practice to check with the states you’ll be operating in; it’s not that uncommon, for example, for one state to require coverage that another state waives. 

Putting in phrases like “general liability insurance for contractors near me” or “general liability insurance for contractors in texas” (if you live or work in Texas) is going to get you a list of the who’s-who of insurance providers. You’ll likely see names like GEICO, the Hartford, Next Insurance, or Hiscox Insurance in the top results.

Take the time to look at your local results, though. Dealing face to face with a local agent may provide you with a better experience than you’ll get filling out a faceless form on the internet. In the end, the best insurance companies for general contractors are the ones that can serve your unique business requirements.

General Contractor Insurance Cost

What your construction liability insurance costs depends entirely on the size of your company, the kind of work you do, revenue, what your contracting company requires in the way of coverage, loss history and who your insurer is. There isn’t a handy independent contractor insurance cost for contractors guide, since there are many factors that come into play. 

Because insurance is the coverage of risk, your insurer will set their rates based on the variables of your company. A company with more employees has a greater potential risk than a company with one employee, just as a company that works indoors in a controlled environment carries less risk (usually) than a company whose employees work outside on tall buildings.

One item to consider is the replacement cost of tools or materials.  using highly specialized equipment to work with rare or expensive materials, the cost of insurance to protect the equipment or materials  is going to be higher.

Companies that hire you to work don’t want to assume that risk. That’s why they insist on certificates of insurance from you, so that you can shoulder the risk that you and your employees are generating. That can be a lot of risk, so be sure of your coverage before you just sign for the cheapest general contractor insurance. 

One unique angle is the sole proprietorship; because they don’t have any other employees, figuring the independent contractor insurance cost becomes difficult. 

General Contractor Insurance Requirements

General contractor insurance requirements vary, like most insurance standards, very much from state to state, and depend very much on the structure of your business. Are you the sole proprietor of a one-person business? You’ll likely need less coverage than a contracting company that employs hundreds of contractors. It’s likely that your counsel or risk team already has a list of insurance requirements for construction projects, which will help you get started.

Remember also that regulatory requirements can sometimes vary greatly from state to state; don’t be afraid to go to Google and look for things like “general contractor insurance requirements Florida,” for example, if you’re based in Georgia but have a job coming up in the panhandle.

Think—and talk to your insurer—about the details of your business, too. Does your business own, lease or rent vehicles? You’re probably going to need to have some form of commercial auto insurance, which is going to add its own rules and premiums.

Do you have an office? Your landlord will almost certainly have requirements about the kind of coverage you need to protect that office or industrial space. Again: talk to your insurer, and check the laws and regulations in your state.

If you have employees, you’re almost certainly going to need to carry workers compensation insurance. The best general contractor insurance agencies can probably help you gain coverage for all of these kinds of insurance, but ultimately the responsibility lies with you.

And if you’re contracting third parties, you need to take extra care with their certificates of insurance. It’s not enough to just collect them. You need to make sure they’re valid, that they carry the coverages you require, and that you have a way to track and verify them. 

myCOI can help with that.

Sample Insurance Requirements In Contracts

There is a great deal of importance in the specific insurance requirements in contracts, perhaps none as important as the certificate of insurance additional insured wording. It can often be the deciding factor between whether a company is liable for a specific claim or loss or not.

Let’s look at this example IRMI provides:

A project owner may enter into a contract with a general contractor that obligates the general contractor and all subcontractors to name the owner as an additional insured on their general liability policies. Even if the general contractor, in turn, requires the subcontractors to name the owner as an additional insured and the subcontractors procure policies containing blanket additional insured endorsements, it is not always clear that the subcontractor’s insurer will be obligated to provide additional insured coverage to the owner due to the absence of a direct contract between those parties.

There is a growing distance between being listed as additional insured and being endorsed as an additional insured, and states and courts have been ruling on this difference in various ways. You need to make sure your counsel or your risk management team clearly understands the statutes  in your state, if you receive additional insured wording on certificate of insurance.

And if you’re a company that often receives requests for additional insured endorsement wording, make sure your requestors are making what they require very clear, because again: there is a difference between being listed as an additional insured and being endorsed as one. You’ll want to work with your insurer to make sure you understand the costs and impacts of each of those scenarios, so you know what your business can accept during the negotiation process.

At myCOI we erase the worry of noncompliant certificates of insurance. We know from experience that 70% of COIs are delivered noncompliant, whether through ignorance, mistake, or outright maliciousness. Our software and expert insurance staff have made an art form of helping teams like yours improve their compliance rating, because we’ve built the tools and technology that takes all the tedious, wasteful man-hours out of working with certificates of insurance.

We can help you. We’re sure of it.