Contractor Insurance Glossary
Every insurance term contractors run into, from additional insured to wrap-up programs, explained without the jargon.
Written by Curran Clark
Co-Founder & Licensed Insurance Producer
Written by Charlie Hughes
Co-Founder & Licensed Insurance Producer
Insurance has too much jargon. Here’s every term you’ll run into as a contractor, explained the way we’d explain it to you over a tailgate.
A
Additional Insured
Someone added to your policy who gets coverage under it even though they didn’t buy it. GCs, project owners, and property managers will ask you to add them as additional insureds on your general liability. You do this through an endorsement. Once they’re listed, they have direct rights under your policy if a claim comes from your work.
ACORD Form (ACORD 25 / ACORD 28)
The standard certificate forms the whole insurance industry uses. ACORD 25 is the liability certificate you’ll see on almost every COI request. ACORD 28 is for property insurance. When a GC asks for your “cert,” they want an ACORD 25 showing your GL, workers’ comp, auto, and umbrella details.
Admitted Carrier
An insurance company licensed and regulated by the state’s department of insurance. Admitted carriers follow state rate and form filing rules, and if they go under, a state guaranty fund usually covers unpaid claims. The opposite is a non-admitted carrier (see Excess and Surplus Lines).
Aggregate Limit
The most your insurance company will pay for all claims combined during one policy period (usually a year). A $2,000,000 aggregate means the carrier pays up to $2M total, no matter how many claims hit. Once it’s used up, you’re on your own until renewal. Most contractor GL policies carry a $2M aggregate.
Artisan Contractor
A contractor who does specialized trade work on a smaller scale. Electricians, plumbers, painters, carpenters. Not a GC running multi-trade projects. Carriers distinguish between artisan and general contractors because the risk profiles are different. Many trade-specific programs are built for artisan contractors.
Audit (Premium Audit)
Your carrier’s annual check on whether the payroll, revenue, or other numbers you estimated when you bought the policy were accurate. Higher actual numbers mean you owe more premium. Lower numbers mean a refund. Audits are standard on both GL and workers’ comp. Keep your records organized by class code and you’ll avoid ugly surprises.
B
Bid Bond
A surety bond that says you’ll actually sign the contract if you win the bid. Walk away after being awarded the job, and the project owner can claim against your bid bond to cover the cost of going with someone else. Usually set at 5% to 10% of the bid amount. Required on almost every public works project.
Binder
Temporary proof of coverage issued before your full policy documents are ready. You’ll need one when a project owner won’t let you start work without proof and your policy hasn’t been fully issued yet. Binders are legally binding but temporary, usually good for 30 to 90 days.
Blanket Additional Insured Endorsement
An endorsement that automatically adds anyone you’re contractually required to name as an additional insured. No need to call your broker every time a new GC wants to be added. If you regularly work for different GCs or property owners, a blanket endorsement saves you from a lot of back and forth.
Bodily Injury (BI)
Physical harm to a person caused by your work. Homeowner trips over your equipment and breaks an arm? That’s a BI claim against your GL. BI claims can include medical bills, lost wages, and pain and suffering.
Broker
An insurance professional who works for you, not for a specific insurance company. Brokers shop your coverage across multiple carriers to find the best fit and price. ContractorNerd is a brokerage, so we work for you and have access to multiple carriers that know contractor risks.
Builder’s Risk Insurance
Covers a building under construction against fire, theft, vandalism, and weather damage. It protects the materials, fixtures, and equipment being used on the project while work is ongoing. Coverage ends when the project wraps or the building is occupied. This is separate from your GL, which handles third-party claims, not project damage. More on this in our construction insurance guide.
Business Owner’s Policy (BOP)
A bundle that combines general liability and commercial property insurance, often at a discount. BOPs can also include business income coverage and equipment breakdown. Not every contractor qualifies, and some need standalone policies instead.
C
Certificate of Insurance (COI)
The document proving you have active coverage. Lists your policy types, limits, effective dates, and any additional insureds. Nearly every project owner, GC, and property manager asks for one before you start work. With ContractorNerd, COIs are instant and digital, available 24/7. Learn more in our guide to certificates of insurance.
Certificate Holder
The party listed on a COI who receives proof of your insurance. Being a certificate holder does not give them coverage under your policy. That’s the difference between a certificate holder and an additional insured. A GC might be both: certificate holder to get the document, additional insured to actually have coverage under your policy.
Claims-Made Policy
A policy that only covers claims both made and reported during the policy period. Different from an occurrence policy, which covers incidents that happen during the policy period no matter when the claim is filed. Professional liability and cyber liability are usually claims-made. Cancel a claims-made policy without buying “tail” coverage and you could have no protection for past work.
Class Code
A number that categorizes what kind of work you do. Class codes set your base insurance rates because they reflect your trade’s risk level. GL uses ISO codes. Workers’ comp uses NCCI codes in most states. Wrong class code = wrong rate, and that can cost you thousands. See NCCI and ISO.
Classified Payroll
Your payroll broken down by workers’ comp class code. Getting this right is one of the biggest ways to control your workers’ comp costs. Your office manager shouldn’t be classified the same as your field crew. Misclassification leads to painful audit adjustments.
Coinsurance
A property or builder’s risk clause that requires you to insure to a minimum percentage of your property’s total value (usually 80%+). Insure below that threshold and the carrier can reduce your claim payout. If the clause says 80% and you only insure to 60%, your payout could be cut by 25%.
Collateral
Something of value pledged as security. In bonding, a surety may require collateral like a bank letter of credit or CD to back a bond, especially if your financials are thin.
Combined Single Limit (CSL)
One dollar amount covering both bodily injury and property damage per occurrence, instead of separate limits for each. Common in commercial auto. A $1,000,000 CSL policy pays up to $1M total for injuries and property damage from a single accident.
Commercial Auto Insurance
Insurance for vehicles used by your business. Your personal auto policy won’t cover trucks driven to job sites, material hauling, or equipment towing. Commercial auto includes liability, collision, comprehensive, and uninsured motorist protection. More at our coverages page.
Commercial General Liability (CGL)
See General Liability Insurance.
Commercial Property Insurance
Covers the physical stuff your business owns at a fixed location: your office, warehouse, shop, equipment yard, and everything inside. Different from builder’s risk (projects under construction) and inland marine (equipment on the move).
Completed Operations Coverage
The part of your GL that covers claims from work you already finished. You built a deck and it collapses six months later? Completed operations handles that. Defects and failures tend to show up long after you leave the job site, which is why this coverage matters so much.
Contractor License Bond
A surety bond required by your state or local government to get or keep your contractor’s license. It guarantees you’ll follow applicable laws and codes. Break them, and consumers or the licensing agency can file a claim. Bond amounts vary by state and license type. See state-by-state requirements on our surety bonds page.
Contractual Liability
Coverage for liability you take on through a written contract, like an indemnification clause. Your standard GL includes this by default for “insured contracts,” which covers most standard construction agreements. This is what makes your hold harmless agreements actually work from an insurance standpoint. If a carrier adds a contractual liability exclusion to your policy, that’s a red flag. It means your GL could deny claims arising from contractual obligations.
Cross-Liability Coverage
Treats each insured party on a policy as if they have their own separate policy when claims happen between them. If a GC and sub are both on the same policy and one sues the other, cross-liability keeps the policy in play.
Cyber Liability Insurance
Covers losses from data breaches, ransomware, and other cyber incidents. If you store customer data, take digital payments, or use cloud-based project management tools, this covers notification costs, credit monitoring, legal defense, and regulatory fines.
D
Damage to Rented Premises (Fire Legal Liability)
A sublimit in your GL that covers damage you cause to a space you’re renting or temporarily using. Standard limits are $100,000 or $300,000. It shows up as its own line on every ACORD 25. If you rent shop space, lease a storage unit, or work inside someone else’s building, this pays when you accidentally start a fire or cause other covered damage. Landlords check this number on your COI.
Deductible
What you pay out of pocket before insurance kicks in. Higher deductible means lower premium. For contractors, GL deductibles range from $500 to $10,000+ depending on carrier and risk profile.
Declarations Page (Dec Page)
The summary pages of your policy. Lists the named insured, policy number, dates, coverages, limits, deductibles, and premium. Review it every time you get a new or renewed policy. Mistakes here create problems later.
Directors and Officers Insurance (D&O)
Protects your company’s directors and officers from lawsuits about their management decisions. If you’re an LLC or corporation, D&O shields leadership from claims like mismanagement and breach of fiduciary duty. More on our coverages page.
Designated Construction Project Aggregate
A GL endorsement (CG 25 03) that gives a specific project its own aggregate limit instead of sharing one across all your jobs. Without it, claims on one project can eat through your aggregate and leave other projects exposed. GCs on larger jobs often require this. See also Per Project Aggregate.
Dual Wage
A workers’ comp concept for employees whose pay rate changes (shop rate vs. field rate, for example). Some states allow dual wage classifications, which affects premium calculations. Keep good records of hours at each rate.
E
Employers’ Liability Insurance
Part B of your workers’ comp policy. Part A pays statutory benefits to injured workers. Employers’ liability handles lawsuits that go beyond the workers’ comp system, like when an injured worker’s spouse sues you for loss of companionship.
Endorsement
A written change to your policy that adds, removes, or modifies coverage. Could be adding an additional insured, expanding your territory, excluding certain work, or changing limits. Also called “riders.” Read every endorsement you get. They can change what your policy covers more than you’d expect.
Excess and Surplus Lines (E&S)
Insurance from non-admitted carriers. These companies aren’t licensed in your state but can write coverage under surplus lines laws. E&S carriers take on risks that admitted carriers won’t, like new contractors, high-hazard trades, or businesses with bad claims history. Premiums run higher, and there’s no state guaranty fund backup. ContractorNerd works with both admitted and E&S markets depending on what you need.
Exclusion
Something your policy specifically does not cover. In contractor policies, common exclusions include intentional acts, pollution, professional errors (unless you have E&O), and work done by uninsured subs. Know your exclusions. A claim that hits one means zero payout.
Experience Modification Rate (EMR/Mod Rate)
A multiplier on your workers’ comp premium based on your claims history vs. similar businesses. 1.0 is average. Below 1.0 means fewer claims and lower premiums. Above 1.0 means more claims and higher premiums. The difference between a 0.80 mod and a 1.20 mod is 33% on your premium. See NCCI.
Exposure
The number used to calculate your premium. For GL, it’s usually revenue or payroll. For workers’ comp, payroll. For commercial auto, number of vehicles. More exposure, more premium.
F
First Dollar Coverage
Insurance that pays from the first dollar of a loss with no deductible. Some workers’ comp policies work this way.
Franchise Deductible
A deductible that vanishes once the loss crosses a threshold. $5,000 franchise deductible and the loss is $4,999? You get nothing. Loss is $5,001? The insurer pays the full $5,001. Different from a regular deductible where you always pay your share.
G
General Aggregate
See Aggregate Limit.
General Liability Insurance (GL)
The baseline coverage every contractor needs. Covers third-party bodily injury, property damage, and personal/advertising injury claims. Client’s property gets damaged during your work? Bystander gets hurt at your site? GL responds. Standard limits are $1M per occurrence, $2M aggregate. Most contracts, licenses, and project owners require it before you can work. Get a GL quote.
Ghost Policy
A workers’ comp policy bought by a sole proprietor or owner with no employees who needs proof of coverage for a contract or license. Ghost policies carry the minimum premium and exclude the owner from coverage. They exist to check a compliance box, nothing more.
Governing Class Code
The workers’ comp class code covering the largest chunk of your payroll. It drives your experience rating and is the primary code used to calculate your mod rate.
H
Hazard
A condition that makes a loss more likely or more severe. For contractors: working at heights, running heavy equipment, handling flammable materials, digging trenches. Your trade’s hazards directly set your class codes and rates. See trade-specific details on our trades page.
Hold Harmless Agreement
Hired and Non-Owned Auto (HNOA)
Liability coverage for vehicles your business uses but doesn’t own. “Hired auto” covers rentals. “Non-owned auto” covers employees driving their own cars for work, like a run to the supply house. GCs request this on COIs constantly because your standard commercial auto policy only covers vehicles listed on it. HNOA is added as an endorsement. If any employee ever drives a personal vehicle for work, you need it.
I
Indemnification Clause
A contract provision where you agree to take on financial responsibility for certain losses. GCs routinely require subs to indemnify them. These come in three flavors: “broad form” (you cover everything, including the other side’s negligence), “intermediate form” (you cover losses proportional to your fault), and “limited form” (you only cover your own negligence). Some states have banned broad form in construction.
Inland Marine Insurance
Covers your tools, equipment, and materials in transit, stored off site, or at a job site. Your commercial property policy usually stops at your business premises. Someone breaks into your truck at a job site and steals your tools? Inland marine is what pays. Annual cost is typically $200 to $2,000+ depending on equipment value. Also called “tools and equipment coverage.”
Insurance Services Office (ISO)
The organization that writes standard policy forms, class codes, and rating data used by most property and casualty insurers. “ISO GL codes” and “ISO forms” refer to their standards. Your general liability class code is usually an ISO code.
J
Joint Venture Coverage
Insurance arranged for a temporary partnership between two or more contractors on a single project. Standard individual policies may not cover the exposures a joint venture creates, so separate coverage is usually needed.
K
Key Person Insurance
Life or disability insurance on a critical person in your business, like the owner or lead estimator. Surety companies sometimes ask about key person coverage when underwriting larger bonds because your bonding capacity depends on who’s running things.
L
Lapse
A gap in coverage, usually from non-payment or forgetting to renew. Lapses are red flags to future carriers and make coverage harder and more expensive to get. You’re also completely exposed during the gap. Many states require continuous workers’ comp and penalize lapses.
Letter of Experience (LOE)
A letter from a previous carrier confirming your coverage history: policy types, limits, dates, and claims. New carriers request LOEs during underwriting to verify you’ve had continuous coverage and to see your claims track record.
Liability
Your legal obligation to pay for damages or injuries caused to others. As a contractor, liability can come from your active operations, your finished work, materials you supplied, or professional advice you gave.
Lien
A legal claim against a property to secure payment. In construction, mechanics’ liens are filed by contractors, subs, or suppliers who haven’t been paid. Payment bonds exist to protect against liens on public projects where you can’t lien government property.
Limits of Liability
The maximum your carrier will pay. Expressed as “per occurrence” (one claim) and “aggregate” (all claims in a policy period). Standard contractor GL: $1M per occurrence / $2M aggregate.
Loss Run
A report from your carrier listing your claims history, usually covering five years. Includes dates, claim types, amounts paid, and amounts reserved. New carriers ask for these first when quoting you. Clean loss runs get better rates.
M
Maintenance Bond
A surety bond guaranteeing you’ll fix defects in workmanship or materials for a set period after project completion, typically one year. If problems surface and you won’t fix them, the project owner can claim against the bond.
Manuscript Policy
A custom-written policy built for a risk that doesn’t fit standard forms. Large or unusual construction projects sometimes need manuscript policies.
Material Safety Data Sheet (MSDS/SDS)
Documents listing the properties, hazards, handling, and emergency procedures for chemical products. If you work with paints, solvents, adhesives, or other chemicals, keep current SDS files. Carriers and OSHA inspectors may ask for them.
Medical Payments (Med Pay)
No-fault coverage in your GL that pays for minor third-party injuries regardless of who caused them. Standard limits are $5,000 or $10,000 per person. Shows up as its own line on every ACORD 25. Somebody trips on a cord at your site and needs an ER visit? Med Pay handles it fast without a lawsuit. It’s a goodwill coverage that keeps small incidents from turning into big claims.
Minimum Premium
The lowest amount a carrier will charge for a policy, even if your actual exposure is tiny. For contractor GL, minimum premiums run $500 to $2,500 depending on carrier and class code.
Monopolistic State Fund
A state where workers’ comp can only be bought from the state fund, not private carriers. As of 2025: North Dakota, Ohio, Washington, and Wyoming.
N
Named Insured
The person or entity listed on the dec page as the policyholder. Has the broadest policy rights, including cancellation, renewal, and return premium. Make sure your business name is listed right (LLC, Corp, DBA). Mismatches create coverage gaps.
NCCI (National Council on Compensation Insurance)
The organization that builds workers’ comp class codes, collects claims data, and calculates experience mod rates in most states. Codes like 5645 (residential carpentry), 5403 (commercial carpentry), and 5183 (plumbing) determine your workers’ comp base rates. California, New York, and Pennsylvania run their own rating bureaus instead of NCCI.
Negligence
Failing to use reasonable care, causing harm or damage. Most liability claims against contractors come down to negligence: someone says you didn’t do the work to the standard a reasonable contractor would.
Non-Renewal
Your carrier choosing not to renew your policy at term end. Could be from too many claims, a shift in their appetite for your trade, or underwriting policy changes. Less severe than a cancellation, but you still need to find new coverage before your policy expires.
Notice of Cancellation
A policy provision requiring the carrier to give the certificate holder advance notice before cancelling your policy. Standard is 30 days for most cancellations, 10 days for non-payment. GCs and project owners watch this closely because they want to know the moment a sub’s coverage is at risk. It’s on every ACORD 25. Some contracts require specific notice periods, so check that your carrier’s notice matches what your contract demands.
O
Obligee
The party a surety bond protects. For license bonds, the obligee is usually the state licensing board. For performance and payment bonds, it’s the project owner. If the contractor defaults, the obligee files the claim.
Occurrence
A single event or continuous exposure causing bodily injury or property damage. How your policy defines “occurrence” matters because your per-occurrence limit applies to each one. A plumbing leak that damages three apartment units might count as one occurrence. Three separate incidents on different jobs are three.
Occurrence Policy
Covers incidents that happen during the policy period, no matter when the claim gets filed. Your GL was active when a pipe you installed burst? You’re covered even if the claim comes two years later. Most contractor GL policies are occurrence-based, and that’s the better deal for you compared to claims-made.
Operations Limitation (Classification Limitation)
A GL endorsement that restricts coverage to only the types of work listed on your policy. Work outside those classifications? Not covered. Your policy says “interior painting” and you do some exterior power washing? A claim from that job can be denied. There’s also a “premises limitation” version that restricts coverage to listed locations only, meaning a job site you didn’t report could have zero coverage. Check your policy for these and make sure your broker knows every type of work you do.
OSHA (Occupational Safety and Health Administration)
The federal agency that sets and enforces workplace safety rules. Covers fall protection, scaffolding, electrical safety, trenching, and more. Violations mean fines, potential shutdowns, and higher insurance costs. OSHA 10/30 certifications can help lower premiums and improve bonding capacity.
Overhead and Profit (O&P)
The markup a GC adds to sub costs for their own overhead and profit margin. Relevant in insurance because policies and adjusters sometimes handle O&P differently when settling construction damage claims.
P
Payment Bond
A surety bond guaranteeing a contractor will pay their subs and suppliers. Required on most public works projects (under the Miller Act for federal work) because you can’t put a mechanics’ lien on public property. If a GC stiffs you on a bonded public project, you file a claim against their payment bond.
Penal Sum
The maximum dollar amount on a surety bond. A $25,000 license bond has a $25,000 penal sum. That’s the cap on what can be claimed.
Per Occurrence Limit
The most your insurance pays on a single claim. Standard GL is $1,000,000 per occurrence. You can increase it with umbrella or excess liability.
Per Project Aggregate
An endorsement giving each of your projects its own separate aggregate limit instead of one shared aggregate for the whole year. Without it, a big claim on one job can drain your aggregate and leave other active jobs exposed. Required in a lot of construction contracts. Formal name: Designated Construction Project Aggregate (CG 25 03).
Performance Bond
A surety bond guaranteeing you’ll finish the project per the contract. Abandon the job, miss deadlines, or fall short on quality, and the surety can bring in another contractor to finish or compensate the project owner. Standard on public works and large private jobs.
Personal and Advertising Injury
Part of your GL that covers claims like libel, slander, false arrest, wrongful eviction, and copyright infringement in your advertising. Competitor says your marketing materials ripped off their content? This section handles it.
Policy Period
The dates your policy is active. Most contractor policies run 12 months. Claims from outside your policy period generally aren’t covered, though occurrence-based policies can still respond to incidents that started during the period.
Pollution Exclusion
A standard GL exclusion that eliminates coverage for pollutant discharge, dispersal, or release. The catch for contractors: “pollutants” is defined broadly and can include paint fumes, drywall dust, and cleaning chemicals. If pollution is part of your work, you may need a separate pollution liability policy or endorsement.
Premium
What you pay for coverage. Can be annual, semi-annual, quarterly, or monthly. Calculated from your class code, exposure (revenue/payroll), claims history, mod rate, and location. At our quote page, you can compare premiums from multiple carriers in minutes.
Principal
The party that buys a surety bond and whose obligations are guaranteed. In contractor bonding, you’re the principal. The project owner is the obligee. The surety company backs the guarantee.
Prior Acts Coverage
Covers claims from work done before your current policy’s start date. Matters most on claims-made policies (see Claims-Made Policy). Without prior acts coverage, work from last year under a different carrier might not be protected under your new one.
Primary and Noncontributory
An endorsement making your GL pay first (primary) and without asking the additional insured’s own policy to chip in (noncontributory). GCs require this constantly. They want your policy to handle claims from your work start to finish, without dragging their carrier into it. Without this endorsement, both policies might try to split the claim, causing delays and disputes. You’ll see it listed in the “Description of Operations” section of your ACORD 25.
Professional Liability Insurance (Errors & Omissions / E&O)
Covers claims that your professional advice, designs, or specs caused financial harm. If you do design-build, construction management, or consulting, this handles mistakes and oversights. Separate from GL, which covers physical injury and property damage. More on our coverages page.
Products-Completed Operations
See Completed Operations Coverage.
R
Retroactive Date
The cutoff date on a claims-made policy. Work done before this date isn’t covered. If your retroactive date is January 1, 2024, and someone files a claim for work you did in 2023, your policy won’t respond. Keep this date consistent when switching carriers or you’ll create gaps.
Return Premium
Money back from a carrier when a policy is cancelled early, your audit exposure was lower than estimated, or other adjustments reduce what you owe.
Risk Management
Identifying and controlling the things that can hurt your business. For contractors: safety programs, requiring COIs from subs, solid contracts with indemnification clauses, and carrying the right insurance. Good risk management directly lowers what you pay for coverage.
Risk Transfer
Shifting financial risk to someone else through insurance or contracts. When a GC makes subs carry their own GL and names the GC as additional insured, that’s risk transfer. Buying an insurance policy is risk transfer too, from your business to the carrier.
S
Self-Insured Retention (SIR)
Like a deductible, but you handle and pay the claim yourself up to the SIR amount before the insurance company touches it. With a regular deductible, the insurer manages the claim from day one and bills you for your share. SIRs show up more on larger commercial and umbrella policies.
Split Limits
Liability limits broken into separate categories instead of combined. In commercial auto, split limits look like $100,000 per person / $300,000 per accident / $100,000 for property damage. Compare to Combined Single Limit.
Subcontractor Default Insurance (SDI)
A policy GCs buy to cover losses when a sub fails to perform. It’s an alternative to requiring performance bonds from every sub. Gives the GC control over the claims process and covers the cost of completing or correcting the defaulting sub’s work.
Subrogation
Your carrier’s right to go after the party that actually caused a loss after paying your claim. Your insurance pays to fix damage caused by a negligent sub? Your carrier may subrogate against that sub’s insurance to recover the money. Waiver of subrogation endorsements are common in construction contracts and block this recovery between parties.
Surety
The company that issues surety bonds. Third party in the bond agreement (principal, obligee, surety). If the contractor defaults, the surety pays the obligee, then comes after the contractor to get its money back. Unlike insurance, a bond is a credit instrument. You’re always on the hook for claims.
Surety Bond
A three-party agreement where the surety guarantees to the obligee that the principal will meet specific obligations. For contractors, that means license bonds, bid bonds, performance bonds, payment bonds, and maintenance bonds. Bonds are not insurance. If a claim gets paid on your bond, you owe the surety back. More on our surety bonds page and complete guide.
T
Tail Coverage (Extended Reporting Period)
An add-on purchased when a claims-made policy ends that extends the window for reporting claims on incidents that happened while the policy was active. Retiring or switching to an occurrence policy? Buy the tail or you could have no coverage for past work.
Total Cost of Risk (TCOR)
The full cost of managing risk. Includes premiums, deductibles, retained losses, claims management, risk control, and admin overhead. If you only look at premium, you’re missing the real picture.
Umbrella Insurance (Excess Liability)
Extra liability limits that sit on top of your GL, commercial auto, and employers’ liability. $1M GL plus a $1M umbrella gives you $2M of protection on a covered claim. Matters on bigger projects where one bad claim could blow past standard limits. A $1M umbrella usually costs $1,000 to $2,000+ per year. Higher limits available for larger operations.
Underwriting
How a carrier evaluates your risk, decides whether to offer coverage, and sets your premium. They look at your trade, experience, revenue, payroll, claims, safety record, and location. Different carriers have different appetites, which is why a broker who knows contractor risks gets you better options than shopping on your own.
Uninsured/Underinsured Motorist (UM/UIM)
Commercial auto coverage that protects you and your crew when you’re hit by a driver with no insurance or not enough insurance. Contractors spend a lot of time on the road between jobs. This is worth having.
V
Vacancy Clause
A property/builder’s risk provision that reduces or kills coverage if a building sits vacant for a set period, usually 60 days. On renovation projects, this can bite you if the building being worked on counts as “vacant.”
Valuation
How your carrier determines the value of property when settling a claim. “Replacement cost” pays what a new item costs. “Actual cash value” (ACV) subtracts depreciation, so you get less. For tools and equipment, replacement cost is usually worth the extra premium.
W
Waiver of Subrogation
Prevents your carrier from going after another party to recover money after paying your claim. GCs require subs to provide waivers so that if the sub’s work causes a loss, the sub’s carrier can’t turn around and sue the GC. Added to your policy as an endorsement.
Workers’ Compensation Insurance
Covers medical bills, lost wages, rehab, and death benefits for employees hurt or made sick on the job. Required in almost every state once you have employees. In some states, even sole proprietors in construction must carry it. Premiums are based on payroll, class codes, and your mod rate. State-to-state variation is huge: under $2 per $100 of payroll in some places, over $40 in others depending on trade and location. Get a quote.
Wrap-Up Insurance (OCIP/CCIP)
A single policy covering all contractors on a large project. OCIP (Owner Controlled Insurance Program) is bought by the project owner. CCIP (Contractor Controlled Insurance Program) is bought by the GC. Wrap-ups consolidate coverage and can reduce costs on major jobs.
Numbers and Acronyms
1099 Subcontractor
A worker classified as an independent contractor, not an employee. The distinction matters a lot for insurance. If a 1099 sub doesn’t carry their own workers’ comp and GL, your policies may get charged for them. Worse, a claim from an uninsured sub can land on you.
ACV (Actual Cash Value)
Replacement cost minus depreciation. Your 5-year-old table saw gets stolen and you have ACV coverage? You get what a used 5-year-old saw is worth, not what a new one costs.
ACORD
See ACORD Form.
AI (Additional Insured)
See Additional Insured.
BOP
CCIP
See Wrap-Up Insurance.
CGL
See General Liability Insurance.
COI
CSL
E&O
See Professional Liability Insurance.
EMR
See Experience Modification Rate.
GL
See General Liability Insurance.
HNOA
ISO
See Insurance Services Office.
NCCI
See NCCI (National Council on Compensation Insurance).
OCIP
See Wrap-Up Insurance.
SIR
WC
See Workers’ Compensation Insurance.
Still have questions? Get a quote or talk to one of our licensed agents at ContractorNerd. We know contractor insurance, and we’d rather explain it straight than make you guess.
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