Best General Liability Insurance for Contractors
In a field like construction, which comes with higher risks of personal injuries or property damage, having strong commercial insurance policies in place is critical for protecting your business. General liability insurance is the foundation of risk management not only for construction businesses but for almost any small business, as it offers protection from common claims relating to injuries and property damage caused by your business. In this guide, we will detail what general liability insurance for contractors is, why it is important, what to look for when shopping for a policy, and our favorite insurers for liability coverage.
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Understanding Contractor Liability Exposure
In legal terms, liability refers to the responsibilities or obligations one party has to another under the law. When a party is found to be liable in a court case, the court essentially rules that they can be held responsible for harm that came to another party due to a particular action or failure to act. And these rulings often come with legal or financial penalties meant to punish the liable party and compensate the parties that experienced harm.
Any business can face the risks of a liability suit. A recent study found that commercial liability claims in the U.S. legal system collectively cost $343 billion annually—up from $300 billion just two years before—and that small businesses bear 53% of that cost. Damages from a liability claim can be enough to wipe out some smaller businesses, and even many mid-sized or larger firms can still struggle to withstand the costs.
Some businesses face particularly high risks for liability claims, and contractors and construction professionals are among them. Because of the nature and complexity of the work, liability claims in construction are fairly frequent and can come from a number of sources: A vehicle transporting materials to a job hits another vehicle, damaging it and injuring the driver. An office renovation takes longer than expected, leading a client to lose business income from having the office closed. An electrical system is installed improperly, causing a fire that destroys a new home. An employee slips and falls at a job site and suffers an injury that leaves them unable to work.
These are just a small sampling of the types of claims that a construction business might face. Fortunately, commercial liability insurance exists to help businesses with the costs of legal defense, damages, and other expenses related to liability claims. Some commercial insurance types, like workers comp and commercial auto, are used widely across most industries. Others, like builders risk, are specific to the types of claims that a construction business will face. But one of the most fundamental forms of commercial coverage in any industry is a general liability policy, and construction is no different.
Understanding General Liability Insurance for Contractors
Construction is a risk-heavy industry, and accordingly, insurers offer a number of coverages to help construction contractors and tradespeople protect themselves against potential legal and financial challenges. While a business’s specific coverage needs may vary depending on their size, specialization, or other factors, the foundation of any contractor’s insurance coverage should be a general liability policy.
Understanding general liability coverage for contractors is important because it addresses many of the most common liability risks that a business encounters. But despite its general coverage, there are a number of significant risks that a general liability policy provides limited or no coverage for. Contractors who understand what general liability does and does not cover will be better equipped to shop for additional coverages that address all of their risks.
What Is General Liability Insurance?
General liability insurance is, as its name suggests, a form of insurance coverage that addresses common types of claims made against a business. General liability insurance may also occasionally be referred to as commercial general liability insurance (CGL insurance) or business liability insurance.
Unlike some other forms of commercial insurance, general liability insurance covers risks that can occur in any industry and, as a consequence, is virtually a necessity for any business. Specific coverages may vary slightly by insurance carrier, but most commonly, general liability covers risks including bodily injury, property damage, advertising injuries, and certain types of product liability. Whenever one of these covered risks results in a lawsuit or claim against a commercial general liability insurance policyholder, the insurer may pay a portion or all of the costs for which the business is considered liable.
General liability is frequently offered as one component of a business owner’s policy, or BOP, along with commercial property coverage and business interruption insurance. However, many carriers also offer commercial general liability insurance as a standalone coverage. This may be preferable for some businesses with low or no property risk, such as those that do not have commercial buildings.
How Does Contractor General Liability Insurance Work?
General liability insurance for contractors is structured in the same way as most other forms of commercial insurance: a policyholder makes regular payments to an insurance carrier, and in exchange, the insurance carrier agrees to take on financial risks if the policyholder faces a claim. And like other forms of insurance, contractor general liability policies include a common set of components:
- Coverage: The terms under which an insurer will agree to pay out claims. This includes the types of incidents eligible for coverage and other restrictions that may limit eligibility, like intentional or criminal acts.
- Premiums: The regular payments a policyholder makes to retain insurance coverage.
- Deductibles: The amount of money a policyholder must pay toward a claim before coverage kicks in.
- Policy limit: The maximum amount that an insurer will pay for claims under a policy, which can be set on a per-claim basis or as an overall limit.
Each of these policy features can affect the others. For instance, policies with more extensive coverage may charge higher premiums because the risk that an insurer will have to pay a claim is higher, while a policy with higher deductibles may have lower premiums because the policyholder carries more risk.
One of the most important aspects of a commercial general liability insurance policy is filing claims. Just because an incident has occurred does not mean that the insurer will pay out costs associated with a claim. Instead, the claim has to be reported to the insurer and investigated to determine whether the incident meets the insurer’s standards for coverage. In addition to providing details about how the incident occurred, policyholders or those bringing a claim may also be required to document any damages caused by an incident to prove the extent of the loss.
In the event of a claim, the first step for the policyholder should be to contact and notify their insurance provider. Insurers typically have phone lines or online portals where policyholders can go to initiate claims, submit documentation, and track claim status. Policyholders should also review their policies for any other required steps. A failure to submit all required information in a timely manner could lead insurers to decline coverage. Policyholders should also keep thorough records of documents and interactions relating to a claim.
Liability claims may also be filed by the individual or business that experienced a harm. If the claimant knows the insurer of the liable party, they can contact the carrier to initiate a claim.
Claims Made vs. Occurrence Policies
One of the key distinctions to keep in mind when evaluating an insurance policy is whether the policy is based on claims made or occurrence.
Occurrence policies provide coverage for any incident that occurs within the policy period, regardless of when a claim is made. Because claims can arise at any time and are not limited by the dates set in a policy, occurrence-based policies carry more risk for insurers and as a result can come with more expensive premiums. General liability policies are commonly written as occurrence-based policies, though not always.
Claims-made policies tend to be more common for most forms of insurance, but less so for general liability. Under a claims-made policy, the insurer will agree to cover claims that are filed while the policy is active. Policyholders may extend coverage beyond a particular policy period in two ways. One is to set a retroactive date, which provides coverage for claims that arise before a policy takes effect but that are reported during the policy period. The other is to set an extended reporting period or tail coverage, which covers claims made for a short period of time after your policy expires. Retroactive dates and tail coverage can be especially helpful when transitioning between insurance providers or policies to avoid gaps in coverage.
What Types of Contractors Need General Liability Insurance?
General liability is a standard commercial insurance coverage for businesses of all types. Contractors of any focus or specialty can also benefit from having a policy in place because risks of bodily injury and property damage are fairly high in construction and contracting. Below are some examples of how different professions might benefit from having a contractors general liability policy in place:
- General contractors: GCs can face numerous bodily injury and property damage risks, from the office to job sites. But there are less obvious risks that general liability policies could cover as well. For instance, a GC who denigrates a rival contractor in the process of providing a quote to a potential client could face an advertising injury claim if the rival company found out.
- Electricians: Working with active circuits, live wires, and specialized equipment, electricians’ job sites have a number of potential risks for bodily injury and property damage. Say a faulty installation causes a fire damaging a neighboring building. If the owners of that building sued for the damage, the electrician’s legal costs could be covered by a general liability policy. CGL insurance is one of the most important forms of insurance for electricians.
- HVAC specialists: If an unsecured piece of ductwork fell on a customer while the installer and customer were doing a walkthrough, general liability insurance would cover medical expenses associated with any injuries the customer experienced.
- Carpenters: Carpentry work can sometimes cause property damage at a job site. For example, if a carpenter hanging new cabinets were to hit a pipe or electrical wire while drilling into a wall, their work could cause a flood or fire.
- Plumbers: Say that while installing a new toilet in a home, a plumber drops the unit and ruins the tilework in the client’s bathroom, requiring expensive repairs. General liability insurance coverage could help pay for the costs of the property damage.
- Handymen: Handymen may be less likely to have a physical premises where customers or other visitors may suffer bodily injury, but they can still make mistakes that could lead to a claim. For example, if a handyman leaves out their toolbox in a home and the owner trips over it, the handyman could potentially face a claim coverable by general liability. This is why handyman insurance packages always include general liability coverage.
Contractor Liability Insurance Requirements
General liability insurance is not a universal requirement for every state, but certain jurisdictions do require insurance coverage for contractors to operate. As such, construction businesses should check with their state’s licensing body or state insurance department to be sure that they meet coverage requirements for their state.
One common way that jurisdictions may require general liability insurance coverage for contractors is to make it a condition of licensure. In addition to passing certain exams or certifications and paying fees, states like Georgia and Tennessee require certain types of contractors to hold a minimum amount of coverage to be licensed to operate in that state. Further, some states leave licensing to cities or counties, and these localities may have insurance requirements even if the state does not. One example is Pennsylvania, which does not have statewide requirements but whose largest cities of Philadelphia and Pittsburgh do.
Even some states that do not strictly require general liability insurance may have other policies in place that encourage contractors to obtain coverage. For example, California does not have a general liability insurance requirement, but contractors are required to disclose whether or not they have coverage. Disclosing that a business is uninsured could scare off some clients, and not reporting or misreporting coverage status could come with legal penalties.
It is also important to note that states that do not have requirements around general liability insurance may have other insurance requirements as a condition of operation or licensure. The most common of these is workers compensation, which is required in almost every state with Texas (in most cases) being the most significant exception. There may be other requirements depending on location and specialty, like commercial auto or professional liability.
Finally, just because general liability coverage is not always required doesn’t mean that it’s not still worth having. Construction is a fairly high-risk industry, so the likelihood that a business will face a claim that could be covered by general liability insurance is relatively high. And some potential clients or investors will request proof of insurance before entering into any agreements with a contractor. These factors make coverage a good idea regardless of what a jurisdiction or licensing body requires by law.
What Does Contractor General Liability Insurance Cover?
In short, general liability insurance provides financial protection for businesses in the event that the business’s products or operations cause damage or injury to another party, or when an injury occurs on the business’s premises. When a claim is made against a policyholder, a CGL insurance policy can cover legal costs associated with the claim, including defense and damages for which the policyholder is found liable.
Not all general liability policies are exactly the same, so it is important to review a carrier’s policy for particular conditions or exclusions that could affect what is actually covered. That said, most all commercial general liability policies include three categories of coverage: bodily injury and property damage, personal and advertising injury, and medical expenses.
Bodily Injury & Property Damage (Coverage A)
Bodily injury and property damage are perhaps the most widely understood component of general liability coverage. Liability claims may be covered if a policyholder’s negligence leads to a third party’s physical, mental, or emotional injury or damage to a third party’s property. Someone slipping and falling on a business’s premises is the classic example of a potential bodily injury claim.
Importantly, this coverage does not address injury risks to a business’s workers. If an employee becomes sick or injured due to their work, workers’ compensation coverage will help cover medical and related expenses. Additionally, bodily injury and property damage under general liability coverage are related to non-professional negligent acts. This means that additional, specific coverage may be required to cover claims that arise as a result of how a business did (or did not) do its job. Examples include product liability insurance, which covers damages from faulty or defective products, or professional liability or errors & omissions insurance, which cover damages related to professional services performed.
Personal & Advertising Injury (Coverage B)
The second standard component of a general liability policy is personal and advertising injuries. Claims of personal and advertising injuries extend to certain issues that violate the personal or intellectual rights of the party bringing the claim.
One of the most common examples of a personal or advertising injury is defamation through libel or slander. Libel and slander are, respectively, written and oral statements that injure another party’s reputation. Other examples of personal and advertising injuries that could lead to claims under a general liability policy include copyright infringement and invasion of privacy.
Medical Expenses (Coverage C)
A third common component of general liability policies is coverage for medical expenses. Coverage under this part of a policy extends to the cost of medical expenses when someone suffers an injury on the policyholder’s premises or due to their operations, regardless of the policyholder’s negligence.
This coverage is used to quickly settle smaller medical claims without legal proceedings, so it is more limited than what might be included in Coverage A, which also covers defense and legal liability costs. But this form of coverage is useful in certain cases because simply paying for the injured party’s medical expenses can head off more expensive lawsuits and reputational harm.
Common Endorsements to CGL Policies
Commercial general liability policies are really only the foundation of contractors’ risk management needs. General liability covers basic risks common to all businesses, but when shopping for insurance, contractors should work with potential carriers to identify other risks based on profession or specialization and choose coverage accordingly. In many cases, a contractor will need to obtain an entirely separate policy to cover certain risks, but insurers may also write endorsements that expand, limit, or clarify coverage on a general liability policy.
Contractors’ policies frequently have endorsements. For example, endorsements can be used to extend coverage to a contractors’ tools and equipment or property in transit. “Additional insured” endorsements extend CGL coverage to certain other parties, including a property’s owner or subcontractors, which is especially helpful in construction. Endorsements for hired or non-owned auto can cover auto accidents that occur while an employee is doing a work-related task, which is useful for businesses that do not have a commercial auto policy in place.
One important note is that insurers may also use endorsements to restrict general liability coverage to less than what is included on a basic insurance form. This is common for contractor general liability coverage in particular. For instance, a CGL policy might have an endorsement that excludes certain types of projects from coverage or limits coverage only to those trades listed on the insured’s application.
Endorsements can sometimes offer limited coverage that is available in a more comprehensive form with a full policy, like certain forms of commercial auto or product liability. As such, businesses should also look into the possibility of bundling policies together when shopping for general liability insurance. Business owners policies (BOPs) and commercial package policies (CPP) commonly combine liability, property, and business interruption insurance into a more affordable single product while offering additional options for coverage like commercial auto, workers comp, or professional liability.
What Do CGL Policies Not Cover?
Contractor general liability policies are not meant to cover every risk, especially in a risk-heavy industry like construction. Occasionally, insurers will have endorsements that cover special cases or offer coverage in a limited form. But usually, insurers will try to steer customers to additional commercial policies for legal reasons (because of what a state regulating body allows insurers to provide for a form of coverage) or actuarial ones (because the insurer wants to minimize their own risk exposure).
Examples of risks that are not covered under a CGL policy that may require a separate type of commercial insurance include:
- Professional mistakes (covered by professional liability, sometimes called errors & omissions)
- Damage to a business’s own property (covered by commercial property)
- Injuries to employees on the job (covered by workers comp)
- Lawsuits from employees (covered by employment practices liability)
- Cars and trucks used by the business (covered by commercial auto or commercial truck)
Additionally, policies may exclude certain situations from general liability coverage. Typically, insurers include these terms to make sure that policyholders act responsibly and in good faith. Common situations where coverage for general liability claims could be denied include:
- Claims arising from intentional acts by the insured
- Expected damage or injury
- Infringement of others’ intellectual property
- Claims arising from false advertising or a failure to perform services
- Injuries or damages caused by pollution
Policyholders should review their policies closely for any information about instances where coverage could be denied.
Sample Contractor Liability Insurance Policy
Because general liability is such a common coverage, most insurance carriers write policies on standard forms. Endorsements also typically include standardized language that can be added to policies based on a policyholder’s preferences or the insurer’s requirements. These standardized forms are often available from organizations like Insurance Services Office, Inc. (ISO) or the American Association of Insurance Services (AAIS), that provides data and technical assistance for insurance carriers, agents, and brokers.
Standardization in the industry means that sample policies are relatively easy to find, which is helpful for shoppers who want to take a closer look at terms and conditions before they sign up for coverage. Common forms include ISO CG 00 01 04 13, which is an occurrence-based general liability policy, and its claims-made equivalent ISO CG 00 02 04 13.
Note that forms may vary depending on jurisdiction, as each state has different laws and regulations governing insurance. Shoppers may be able to find forms and endorsement language specific to their own location through a state government insurance agency or professional association. For example, Independent Insurance Agents of Texas maintains a library of CGL forms and endorsements, including Texas-specific modifications.
Related Types of Insurance for Contractors
Construction businesses can be subject to a wide variety of legal and financial risks from liability and other claims. Contractors should not make the mistake of thinking that general liability insurance will address every risk that they will encounter in the course of doing work. Insurers offer numerous policy types that help provide comprehensive coverage. Understanding the differences between these policies and how they work together alongside general liability coverage is key for making sure that a business has appropriate protection.
General Liability Insurance vs. Errors & Omissions
General liability and errors and omissions insurance both provide coverage for businesses that face liability claims stemming from work they have performed for others. However, there are important differences in what each policy type will cover.
General liability policies for contractors usually include products-completed operations coverage, which extends liability coverage to work done at job sites away from a business’s premises. Contractors errors and omissions insurance is a form of coverage for contractors that protects the value of work done in instances of faulty workmanship. Together, these two coverages can shield contractors and their clients from risks in the event that the contractor makes a mistake while performing work. For instance, if a contractor’s faulty installation of electrical equipment caused a fire and the equipment needed to be replaced, general liability would cover costs associated with the fire, while contractors E&O could help recover the cost of new electrical equipment.
It is also important to note that these policies have some slight differences from professional liability policies, which cover instances where a mistake made by the policyholder in the course of providing service causes some sort of harm to the recipient of the service or another party. While the terms errors and omissions and professional liability are often used interchangeably, “contractors E&O” does have a distinct meaning for construction professionals. However, some construction firms may want both forms of coverage, such as those that provide design, engineering, or architectural services.
General Liability vs. Commercial Property Insurance
General liability and commercial property insurance are two common, complimentary insurance coverages that are frequently combined into a business owners policy. Both include coverage for property damage, but the key distinction is in whose property damage is covered.
In a general liability policy, insurers cover costs of property damage claims that another party brings against the policyholder. This means that when an insured’s negligence or other action leads to property damage to a third party’s facilities or property, the insurer will compensate the third party. In a commercial property insurance policy, property coverage is for the policyholder and extends to buildings, their contents, and certain other physical property that the business owns or rents. If the business’s facilities are damaged by fire, weather, or certain other causes or if property is stolen, the insurer will pay for some or all of the costs to repair or replace property for the insured.
General Liability Insurance vs. Builders Risk
General liability and builders risk are two of the most common insurance coverages that a construction business may need to obtain. One reason is that clients frequently require a contractor to have both builders risk and general liability policies in place, especially for large jobs. Despite this, the coverages are fundamentally different in a few noteworthy ways.
Builders risk policies are technically a form of property insurance, designed to cover certain losses related to properties while they are under construction or renovation. Like a regular commercial property policy, builders risk coverage pays the insured for losses stemming from causes like fire, theft, or weather damage. The policies last for as long as the project does, after which time the structure should be covered by a standard property policy held by the building’s owner.
Being a form of property insurance, builders risk does not cover the liability risks that a commercial general liability policy does. However, in some cases, general liability coverage may cover risks related to a building in progress, such as when damages to the structure are caused by a subcontractor.
General Liability Insurance Cost
General liability coverage should be part of any business’s budget. Because general liability insurance covers common—but potentially expensive—legal and financial risks, this form of insurance is practically a necessity for organizations in any industry. But just because general liability insurance is a must-have doesn’t necessarily mean that businesses need to break the bank obtaining coverage. This section of the guide will preview what contractors should expect to pay, the factors that affect coverage, and strategies to find good deals on general liability insurance.
How Much Is General Liability Insurance for Contractors?
Broadly speaking, general liability insurance tends to be a fairly affordable coverage across industries. For example, Progressive reports a median monthly premium at $48 with an average monthly premium of $65, which totals out to $576 and $780 annually. Hiscox, an insurer specializing in small business coverage, estimates that 95% of customers pay less than $50 per month in general liability insurance costs.
Estimates of the typical costs for general liability insurance can vary depending on the industry, business size, and insurance carrier. Construction tends to be a more expensive field because of the greater risks associated with the industry. For example, insurance provider Next reports that among all general contractors, their premiums for most policyholders range from $61 to $192 per month ($732 to $2,304 per year). Other industry experts typically cite median figures between $80 and $100 per month, or $960 to $1,200 annually. That said, the most reliable way to know what general liability will cost your business is to get a quote from an insurer.
Factors That Affect the Cost of Coverage
Like other forms of commercial insurance, general liability policies are usually adjusted to factors specific to each business. These factors can affect both the types or amount of coverage available and how much policies cost.
- Industry: One of the first things an insurer will want to know when preparing a general liability policy is the business’s industry. The types of incidents that can lead to general liability claims may be much more common in some fields than in others. Construction tends to be a more expensive industry to insure because injuries and property damage can easily occur at job sites or as a result of construction work.
- Business size and number of employees: As a business grows, they take on more projects, encounter more customers or other parties, and add more employees. All of these are good for a business but also provide increased possibilities of making mistakes that could lead to a liability claim. These changes also mean businesses have more to protect. To account for these greater risks and coverage needs, larger businesses usually pay more in general liability premiums.
- Location and premises: Where a business is based and the type of premises can also affect a business’s risk profile and accordingly their commercial liability premiums. For example, contractors in states that make it easier to bring liability suits may be more expensive to insure. Premises that are larger, older, in poor condition, or generally more prone to accidents—such as construction sites—will likely see more claims, so premiums will be higher.
- Claim history: Companies that regularly face claims are perceived by insurers to be riskier. For example, if a general contractor has faced a high number of personal injury claims from falls on their premises, it could be a sign that the business is not being adequately cautious in maintaining a safe environment. Insurers will charge more in these situations.
- Deductibles and coverage limits: Businesses that are willing to absorb more of the costs for claims can save on the cost of their ongoing premiums for general liability policies. Choosing a higher deductible—which means that the insured pays more before coverage kicks in—or a lower limit—which means paying out more of the cost above a certain threshold—usually results in lower premiums.
- Endorsements and additional coverages: Conversely, adding insurance coverage naturally comes with increased costs. Endorsements to extend coverage often add to the premium for a policy because they increase the risk exposure for the insurer.
How to Find Cheap Contractor Liability Insurance
With a wealth of tools and resources available for business customers seeking affordable liability insurance policies, it is easier than ever to find savings. Below are some of the most effective ways to ensure that your business gets the best deals on contractor general liability insurance policies:
- Comparison shopping: General liability is one of the most common forms of commercial insurance. As such, almost any insurer providing business insurance should be able to give a quote for a liability policy, allowing contractors to find the best price for similar amounts of coverage. Other resources are available to help with this process too. Insurance brokers do the work of shopping around for you in exchange for a fee, and some innovative tech companies today use data analytics and AI to make comparison shopping easy online.
- Bundling: Business insurance carriers are always eager to have policyholders add coverages and are frequently willing to offer discounts to businesses who bundle together multiple lines of coverage. The most common form of this is the Business Owners Policy or BOP, which brings together commercial liability and property coverage for a combined cost lower than what separate standalone policies would cost. Providers may also offer other discounts for different combinations of policies.
- Deductibles and coverage levels: Businesses that are willing to take on more risk can also get savings when buying a policy. Higher deductibles usually come with lower premiums because the insured carries more of the initial cost before coverage kicks in. Similarly, choosing a lower coverage limit or accepting exclusions on certain types of coverage lowers cost because insurers will have less to pay out in the event of a claim.
- Risk management: Staying on top of potential liability risks is one way to save on the costs of insurance in the long term. Insurers sometimes provide discounts for policyholders who have avoided liability claims or provide evidence that they have policies or procedures in place to prevent common liability issues.
Comparing Contractor Liability Insurance Companies
General liability policies are a fairly standardized form of coverage, so contractors comparing potential carriers may not be able to clearly discern the differences between companies’ offerings. But the details can make the difference in preventing coverage gaps and getting good deals on insurance. Below we will explain some of the key criteria to look out for when evaluating contractor liability insurance options.
Coverage Options & Coverage Limits
The most important factor to consider when evaluating potential insurers is making sure that a carrier provides the right type of coverage for your needs. When evaluating policies, talk with a broker or agent to help understand exactly what provisions mean and what is or is not covered under a particular policy. Based on your business’s needs, you may also need to ask what endorsements an insurer will provide to extend coverage on certain risks or scenarios. It’s also worthwhile to see what other commercial insurance coverages might be available—especially if the carrier offers discounts for taking out a BOP or another bundle of policies.
Having the right amount of insurance coverage is also key. Limits can be set on both a per-occurrence and aggregate limit for each policy period. A fairly standard setup for general liability policies is a $1 million occurrence limit and a $2 million aggregate limit, but insurers offer lower and higher limits as well. Smaller businesses may be able to save by choosing a lower coverage limit, while larger businesses or businesses that face greater risks may find it worthwhile to purchase higher coverage limits.
Company Reputation & Financial Strength
Looking to external experts can be a good signal that you’re considering high-quality insurance providers. Two of the key qualities to look out for are an insurance carrier’s reputation and their financial strength ratings.
Shoppers can get a sense of an insurer’s reputation in a variety of ways. For example, you can always ask peers about their experiences or check online ratings and reviews. But other sources provide comprehensive information about how well insurers are serving their customers. J.D. Power compiles annual customer satisfaction surveys for commercial insurance companies, while the Better Business Bureau rates businesses including insurance carriers on their fairness and responsiveness when dealing with customer complaints.
Financial strength is an important consideration for determining companies’ reliability when paying out claims. Credit rating agencies like AM Best, Moodys, and S&P evaluate insurers for their financial resources and track record of paying off debts and other liabilities. An insurance carrier with a good credit rating can be trusted to pay out claims reliably.
General liability insurance is commonly available across almost every commercial insurer. While this makes it easy to find potential insurers, carriers may not necessarily have general liability products that are well-tailored to the needs of businesses in specific industries.
Because policies for construction and related businesses often need to be more tailored, it is worth seeking out insurance carriers who deal frequently with the industry. They may have a greater willingness to extend coverage in certain situations that others might exclude. Insurers with industry specialization may also be more likely to offer construction-oriented coverages like builders risk that are less common with other carriers.
Cost is naturally one of the primary considerations for companies evaluating their general liability insurance options. Some factors specific to your business will have unavoidable effects on what you pay, as detailed above, but there may be differences between insurers’ pricing and offerings that are worth exploring. Companies may vary in discounts they offer for bundling coverage or how much they adjust premiums based on deductibles or coverage limits. When comparing insurers, you should shop around and get quotes from a few different carriers to make sure that you are getting a good deal and work with agents to identify potential discounts or other ways to save.
Best Contractor General Liability Insurance Companies
Next Insurance (Best Contractor Liability Insurance Overall)
Next Insurance is a newer insurance provider with an innovative approach to providing small business insurance. Using AI-based technology, Next simplifies the process of obtaining quotes, purchasing policies, and managing claims with tailored, affordable coverage.
- Affordable policies with 10% discount for bundling
- Fast and easy online quoting process
- Solid customer reputation despite being newer carrier
- Limited industry specialization in construction
- Lacks long track record and financial strength of larger and more established competitors
Next Insurance was founded in 2016 with a goal of modernizing the way small businesses obtain insurance coverage. With AI-based technologies and excellent online tools and resources, Next makes it easy and convenient for small business owners to obtain coverage and manage policies.
One of Next Insurance’s best innovations is its simple online quoting process, which allows shoppers to obtain a quote for coverage in just a few minutes. Another useful feature is Next’s live certificates of insurance, which make it easy to provide up-to-date information about your insurance coverage to clients, subcontractors, or others who might require that information.
General liability policies with Next are available as a standalone coverage or as part of a BOP. Aggregate limits are available as low as $300,000 but can easily scale up with the size of your business. Coverage includes standard general liability protections for bodily injury, property damage, legal fees, medical payments, and advertising injury. Next also provides coverage for tools and equipment as an add-on for general liability coverage and permits additional insureds on policies. And Next Insurance conveniently offers other coverages that construction businesses may require, like contractors E&O, commercial auto, and (in some states) workers’ comp.
Next’s use of technology and well-tailored policies also help keep coverage affordable. As with any insurer, premiums will depend on your business type, location, and size, but Next helpfully publishes data on what customers typically pay for general liability. According to the data, 85% of Next customers pay less than $100 per month. Next also offers 10% savings for customers who bundle together multiple policies.
Next Insurance cannot claim the decades-long track record of competitors in the field, but Next’s reputation after just a few years in business is already strong. Next holds an A rating with the Better Business Bureau and has been a BBB-accredited business since 2018, meaning that they meet the BBB’s top standards for business ethics. And reviews and customer ratings for Next similarly appear positive.
The newcomer to the insurance market is also quickly building up its strength. Major insurer Munich Re has invested hundreds of millions of dollars to back the company, and Next insurance began writing its own policies as an independent licensed carrier in 2018. The company currently holds an A- financial strength rating from AM Best.
The convenience, affordability, and innovative approach of Next Insurance make it a well-rounded, hassle-free choice for insurance. While larger or more complex businesses may want to consider other options, we think that for many small or mid-sized businesses, Next Insurance offers the Best Contractors General Liability Policy.
THREE (Best CGL Insurance for New Businesses)
THREE is another newcomer to the small business insurance field, albeit one with the backing of insurance giant Berkshire Hathaway. The company distinguishes itself with simple, comprehensive small business policies that combine multiple essential coverages into one.
- Simple, easy to understand policies
- Multiple commercial coverages included in policies along with general liability
- Excellent reputation and financial strength through relationship with Berkshire Hathaway
- Newer product with more limited track record
- Simplified policies may have coverage gaps and limited options for customization
- Not available in every state
THREE Insurance was established in 2019 with a goal to dramatically simplify commercial insurance coverage for small business owners. THREE offers simple, jargon-free policies that include several essential coverages that business owners need, including not only commercial general liability but also property, auto, workers’ comp, and other forms of liability like employment practices and E&O. The policy is designed to be three pages long—giving the business its name—and a sample version is easily available on the company’s website. By combining all of these coverages into a single, straightforward policy, THREE makes it easy to obtain all the right coverages in one place.
Like other carriers, THREE will consider factors specific to your business before issuing a quote. You can start the quote process online by filling out a quick form. In general, however, THREE boasts that its comprehensive coverages cost 20% less than purchasing separate standalone policies. And additional discounts may be available, like 5% off for paying premiums for the policy period upfront.
The simplicity of a single policy is appealing, but some insurance experts point out that THREE’s approach does have downsides. By simplifying coverages, THREE’s policies do leave some gaps, like medical payments and coverage for additional insureds. There is also less room to customize commercial general liability coverage to your business’s particular needs and risk profile through endorsements, which may be a problem for more complex businesses. THREE is also not currently available in every state, so shoppers should check to see if they can obtain coverage.
While THREE is a newer insurance product, it is an affiliate of well-respected insurance conglomerate Berkshire Hathaway, whose portfolio includes other notable insurance brands like Geico and Gen Re. But THREE is carving out its own strong reputation among customers. The Better Business Bureau has awarded THREE an A+ rating and accredited the carrier in 2021.
THREE’s policies are backed by another Berkshire Hathaway subsidiary, National Indemnity Company, which carries stellar financial strength ratings. S&P awards National Indemnity Company an AA+, an A++ from AM Best, and an Aa1 from Moody’s, each of which are among the top ratings available. And parent Berkshire Hathaway is a major presence in the industry as the fifth largest commercial insurer by premiums written at $13.2B annually according to the Insurance Information Institute.
THREE is a great option for businesses just starting out. By combining essential commercial coverages into a single, simple, affordable policy, THREE takes the hassle out of business insurance shopping for new business owners who may not know exactly what their needs or risks will look like. Some of THREE’s downsides may not make it a long-term fit for larger or more complex businesses, but otherwise, THREE is a solid choice as offering the Best CGL Insurance for New Businesses and Small Businesses.
Liberty Mutual (Best for Large Construction Businesses)
Founded in 1912, Liberty Mutual is one of America’s largest commercial insurers. Liberty Mutual distinguishes itself with an approach focused on meeting industry-specific needs when developing commercial policies, which is a major asset for construction businesses seeking general liability policies.
- Industry-focused approach with specialized knowledge of the construction industry
- Excellent financial strength ratings
- Customer satisfaction ratings are lackluster
- No ability to obtain quotes online
Liberty Mutual’s general liability policies offer standard coverages for advertising injury, bodily injury, personal injury, and property damage, with endorsements to tailor policies to particular industry and business needs. Liberty Mutual also offers BOPs and commercial package policies that incorporate property damage, with BOPs targeted toward smaller business and commercial package policies providing higher limits and more complex coverage for mid-size and larger operations. Liberty Mutual’s policies include 24/7 claims reporting, a library of resources for risk management, and an online portal to manage policies and track claims.
One standout feature of Liberty Mutual is its industry-oriented approach, which includes expertise in the field of construction. Liberty Mutual uses deep knowledge of a number of industries to develop policies that speak to business’s unique risks. For policyholders, this approach makes it easier to identify the right coverages and improves claims handling. And for construction businesses, it means that Liberty Mutual can also be a partner for other forms of coverage that a business might need, like designers and contractors professional liability, contractors equipment, builders risk, and surety bonds.
One downside of Liberty Mutual is its customer satisfaction ratings. Liberty Mutual comes in below the industry average in the J.D. Power small commercial insurance rankings, with a score of 834 out of 1,000. But Liberty Mutual somewhat makes up for this with an A+ rating from the Better Business Bureau. And Liberty Mutual has additionally held BBB accreditation for more than 90 years.
Liberty Mutual is the third largest commercial insurer by premiums written at nearly $20B per year, according to the Insurance Information Institute. Liberty Mutual couples this strong position in the insurance market with good marks from the major credit rating agencies. AM Best and S&P each offer Liberty Mutual an A rating on their respective scales, while Moody’s gives them an A2.
Finding cost information for a Liberty Mutual policy is a more involved process than some other competitors because Liberty Mutual does not offer online quoting. Instead, interested shoppers must contact an agent or broker to get a quote based on their specific business characteristics. However, working directly with an agent often produces a policy more closely tailored to the shopper’s needs.
Given its ability to serve specialized construction businesses and its financial strength, Liberty Mutual is a great option for larger construction businesses that have more complex coverage needs. These attributes make Liberty Mutual our choice as offering the Best General Liability Insurance for Large Construction Businesses.
State Farm (Best for Small Contractors & Handymen)
State Farm is one of the most recognizable brands in insurance in the U.S. While perhaps better known for its personal home and auto coverages, State Farm nonetheless offers strong commercial insurance products, including its general liability policies.
- Industry-leading customer satisfaction and financial strength
- Tailored coverage options for small and mid-sized contractors
- Nationwide network of agents
- Not well-suited for larger or more complex construction businesses
- Subpar online tools for shopping, managing policies, and tracking claims
State Farm tends to direct general liability shoppers toward its business owners policy offering. State Farm’s BOP combines general liability with property insurance and can easily be tailored with other endorsements and additional coverages like professional liability, depending on the business’s needs.
State Farm’s recommended coverages for contractors also include features like tools and equipment coverage and installation floaters that are useful for covering liability issues that a small contractor may encounter. And State Farm makes it easy to purchase umbrella liability coverage on top of a standard policy in $1 million increments. That said, State Farm is less equipped for more complex construction liability needs than some other competitors, so larger construction businesses may need to look elsewhere.
State Farm emphasizes the relationship between customers and local agents from shopping to claims. This has both pros and cons. On the plus side, working with a trusted agent helps ensure that a policyholder’s coverage is well-designed for their specific business needs, and State Farm has a network of agents in all 50 states and D.C. But on the negative side, State Farm’s approach makes it harder to get quotes, and the claims management process is more involved as well, with fewer online tools to file and track claims.
State Farm is the industry leader when it comes to reputation and customer satisfaction. J.D. Power rates State Farm’s customer satisfaction for small business at an 856 out of 1,000, the highest of any carrier in the category. On top of this, State Farm also holds a strong A+ rating with the Better Business Bureau.
Beyond customer satisfaction, State Farm is also a leader when it comes to financial strength. AM Best awards State Farm its highest rating, an A++, while S&P and Moody’s give State Farm their second highest respective ratings, an AA and an Aa1. Anyone insured through State Farm can rest assured that the business will be reliable when paying out claims.
State Farm’s commercial policies are a great choice for small business owners, with BOPs targeted at smaller businesses that cover both general liability essentials and more industry-specific needs. For these reasons, State Farm is our pick as offering the Best Liability Insurance for Small Contractors and Handymen.
Nationwide (Best Liability Insurance for Builders & Tradesmen)
Founded in 1926, Nationwide has nearly a century of experience providing both personal and commercial insurance lines and today serves more than half a million small business customers. As a large, experienced provider, Nationwide can meet the needs of most any contractor.
- Wide variety of endorsements and coverage types available
- Experience working with contractors and construction trades
- Excellent reputation and financial strength ratings
- Some sources report that prices are higher than comparable insurers
- Shoppers cannot purchase coverage without speaking directly to an agent
Nationwide offers a host of policy and coverage options for commercial customers. Its general liability policies are available both through BOPs and separate commercial liability options. Nationwide writes policies with plentiful endorsement options available, including hired and non-owned auto, product and completed operations, and umbrella coverage. Nationwide also offers valuable inland marine coverages for contractors, including installation floaters, equipment and tools, and builders risk (the latter two both as standalone policies and endorsements).
Nationwide has experience insuring businesses of all types and sizes, but it has good expertise in working with contractors. Nationwide typically recommends a contractor general liability policy coupled with equipment and tools coverages, but its willingness to provide a number of endorsements and additional related coverages ensure that contractors can find all the coverage needed for their unique risk profile.
Shoppers can start the quote process online or by speaking directly to a Nationwide agent on the phone but will need to work with an agent to put a policy in place. Nationwide provides limited information online about its pricing and discounts, but our experience is that the carrier’s policies are slightly more expensive than comparable policies with other insurers.
Nationwide is one of the top insurers when it comes to reputation. According to J.D. Power, Nationwide currently holds a customer satisfaction rating of 854 out of 1,000—third among small business insurers, but just two points off of the leading position. Nationwide also carries a clean A+ rating from the Better Business Bureau and has held BBB accreditation since 1955.
As one of America’s most prominent insurers, Nationwide has excellent financial resources. Nationwide is one of the top 10 largest commercial insurers by premiums written, at $9.7 billion annually. And Nationwide holds stellar ratings from the credit rating agencies, including an A1 from Moody’s, an A+ from AM Best, and an A+ from S&P.
With its wide variety of coverage options and experience insuring contractors and tradesmen of different specializations, Nationwide is a reliable choice for lots of business types. Its highly customizable policies make it our choice for having the Best Liability Insurance for Tradesmen.
The Hartford (Runner-Up)
The Hartford is one of the most well-established commercial insurers in the industry. With a history stretching back more than 200 years and having served more than 1 million small business customers, there are few insurance challenges The Hartford hasn’t dealt with. This makes The Hartford a viable option for general liability coverage for businesses of all types and sizes.
- Extensive track record in the insurance industry
- Offers general liability policies appropriate for businesses of different sizes and specializations
- Expertise in and policies designed for the construction industry, especially for mid-size or larger firms
- Coverage may not be available in every state, particularly for certain policy types like BOPs
- Occasionally low satisfaction ratings
The Hartford was founded in 1810, making it one of the oldest major insurers in the U.S. Over that time, The Hartford has become a leading commercial insurer for businesses of all types.
The Hartford offers general liability through both standalone policies and BOPs, though BOPs tend to be more common for small contractors insured through The Hartford. The company also provides options for contractors equipment insurance, along with other construction-related coverages like professional liability, commercial auto, and workers’ comp.
One benefit of The Hartford is its extensive knowledge of the construction industry. The Hartford offers a General Liability Choice policy for mid-size and large construction firms that includes features like limited professional liability, per-project and per-location aggregate limits, completed operations coverage, and contractual liability coverage. These are often coverages that construction firms may seek out through endorsements, but The Hartford has crafted a policy with the industry in mind.
The Hartford reports average premiums of $1,057 per year for a general liability policy and $3,135 for a business owner’s policy, which are in line with typical industry figures. Of course, premiums will differ based on characteristics specific to each business. The Hartford allows shoppers to start the quote process online to get a sense of exactly what their policy might cost.
Perhaps The Hartford’s most worrying downside is customer satisfaction. The Hartford holds an 819 out of 1,000 rating in J.D. Power’s most recent consumer surveys for small business insurance satisfaction. The Hartford’s figure is the lowest in the category, a position that The Hartford has held for three straight years. However, other metrics are more positive, including an A+ rating from the Better Business Bureau.
The Hartford delivers good financial strength ratings befitting the carrier’s long track record in the commercial insurance industry. The Hartford carries A+ ratings from both AM Best and S&P, with an A1 rating from Moody’s. The Hartford is the eighth-largest commercial insurer by premiums written, according to the Insurance Information Institute.
The Hartford distinguishes itself with an extensive track record and industry-specific coverage for contractors and construction businesses of all types. Contractors will feel like their needs are well-met by The Hartford’s tailored policies, which makes the insurer a Runner-Up pick for offering the Best General Liability Insurance for Contractors.
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