As a general contractor or artisan contractor, having proper insurance coverage is essential to protecting your business from lawsuits, claims for damages, and other liabilities that could arise out of your work. General liability insurance for contractors specifically helps cover the costs if your business is found legally liable for third party property damage, bodily injury, or personal injury. Without adequate general liability protection, a single large claim could devastate your construction company’s finances.

This in-depth guide will thoroughly explain everything general contractors and artisan contractors need to know about securing the optimal general liability policy. Key topics covered include:

  • What is General Liability Insurance?
  • Why Do Contractors Need General Liability Insurance?
  • What Does Contractors Liability Insurance Cover?
  • What’s NOT Covered By Contractors Liability Insurance?
  • Cost of Claims and Value of Risk Transfer
  • Policy Limits For Contractors
  • ContractorNerd’s Study: Cost of Contractors General Liability Insurance
  • Key Factors That Determine Premium Costs
  • Getting the Right Insurance for Your Contracting Business
  • Ways Contractors Can Reduce Their Liability Insurance Costs
  • How Contractors Can Enhance Safety To Reduce Claims And Premiums
  • How Contractors Should Obtain General Liability Insurance

We analyzed general liability insurance costs for contracting businesses of various sizes across all 50 states. The 703 quotes we reviewed provide a broad overview of what you might pay based on your company’s size and location, although your specific situation may vary.

If you’d like to see even more granular guides for specific artisan trades, we’ve written the following guides:

Read on for a comprehensive overview of how general liability insurance functions and why securing the right policy is so crucial for general and artisan contractors.

What is General Liability Insurance?

General liability insurance, also known as general contractor liability insurance, provides financial protection for your contracting business in the event you are found legally liable for bodily injury, property damage, personal injury or advertising injury caused to a third party.

For example, if someone trips and falls over your tools at a job site and suffers injuries, they could file a premises liability lawsuit alleging your company’s negligence led to their harm. Or if you accidentally cause water damage to a client’s floors while working on a project, the client could sue to recover repair and replacement costs.

In cases like these, a general liability insurance policy would pay for any settlements awarded to the injured party, including expenses to cover medical bills, up to the policy limits. It also covers all legal defense fees and court costs associated with defending against a covered liability claim.

Without general liability insurance, such claims could easily put you out of business. The costs of legal fees, medical bills, property repairs and settlements can reach $100,000 or more per incident. Yet having proper insurance allows your business to continue operating without financial ruin, even when substantial claims arise. It provides crucial protection.

Why Do Contractors Need General Liability Insurance?

Contracting work involves substantial risks each day you are on a job site. Power tools, elevated work surfaces, sharp objects, dust and chemicals all pose inherent dangers both to your own employees as well as the client’s property. Accidents happen frequently. Some examples of contractor liability risks include:

  • Tools, equipment or materials dropped from heights leading to injury or property damage.
  • Drilling or cutting into water pipes, gas lines or wires hidden inside walls.
  • Improper electrical wiring leading to fires.
  • Faulty installation or repairs resulting in water leaks and extensive property damage.
  • Failure to secure work areas leading to trip and fall injuries.
  • Damage to nearby property when working on exterior surfaces.
  • Injuries sustained by your own employees (covered by workers’ compensation).

Given the daily hazards contractors face and high frequency of claims in the industry, carrying adequate general liability insurance is essential to business survival. The costs of uncovered property damage and injury claims can bankrupt an underinsured contractor rapidly.

Proper insurance helps guard your assets and prevents financial ruin when claims arise. It’s a must have protection.

What Does Contractors Liability Insurance Cover?

General liability policies are designed to provide broad protection for your contracting business against the legal costs and payouts associated with various types of third party claims:

Bodily Injury:

Covers the medical bills, lost wages, rehabilitation and pain and suffering damages if an injury claim is brought against your business by an injured party. For example, your business insurance can provide reimbursement for a client’s $100,000 in medical expenses if they are injured as the result of your negligence on a job site.

Property Damage:

Provides protection if you are liable for damaging a client’s property or possessions while performing contracting work. For instance, the policy covers the replacement of floors, walls, plumbing, appliances, etc if damaged.

Personal Injury:

Covers legal claims related to libel/slander, false arrest, invasion of privacy, harassment, mental anguish, wrongful eviction or other personal injury offenses.

Advertising Injury:

Provides protection against claims of copyright/trademark infringement, misappropriation, violation of the right of privacy and other offenses related to advertising or marketing.

Completed Operations:

Covers liability claims brought against you after construction is complete and the project is turned over. Provides extended protection.

Additional Insured Endorsement:

This endorsement extends coverage to include third parties, such as property owners or general contractors, as ‘additional insured’ on your policy. Often mandated by contracts, it ensures comprehensive protection against claims related to your operations or premises, vital for project duration security.

With the broad spectrum of risks general liability insurance covers, it is by far the most essential policy contractors need to defend against premises liability, negligence and accident claims that frequently arise during daily operations of construction businesses. It’s your financial lifeline when substantial damages and legal claims occur.

What’s NOT Covered By Contractors Liability Insurance?

While general liability policies provide very broad protection, some exposures are excluded. Common exclusions include:

  • Normal wear and tear or gradual deterioration of property over time.
  • Damage caused by pre-existing conditions out of your control.
  • Damage to your own tools, equipment or other property.
  • Liability arising from the use of automobiles.
  • Intentionally inflicted harm or damage caused by illegal acts.
  • Faulty workmanship to your own defective work product (covered by builders risk insurance).
  • Liability arising from professional advice or design flaws.
  • Does not cover employee injuries or medical costs.

Since general liability has limitations, most contractors need supplemental policies like workers’ compensation, builders risk, and commercial auto to fill all coverage gaps. General liability works hand in hand with these other lines.

Subcontractor Exclusions

Some insurance companies are adding the CG 2294 subcontractor exclusion onto their contractor general liability policies. The CG 2294 is an insurance exclusion that removes coverage for damage caused by subcontractors’ faulty work. Without this exclusion, a general contractor’s insurance would typically cover damages and legal costs if a subcontractor’s negligence leads to a claim.

For example, if an electrical subcontractor installs faulty wiring that later causes a fire, the general contractor’s insurance would normally pay for property damage and legal defense. With the CG 2294 exclusion, there is no coverage for subcontractors’ work under “products and completed operations.”

The exclusion states that insurance does not apply to “‘Property damage’ to ‘your work’ arising out of it or any part of it and included in the ‘products-completed operations hazard.'” Although policies typically exclude damage to “your work,” subcontractors’ work is usually covered. The CG2294 removes this coverage.

For general contractors or those hiring subcontractors, it is important to review policies carefully to avoid restrictive exclusions like the CG 2294. Though affordable coverage options still exist, more carriers are using exclusions to limit coverage. Contractors should understand how the CG 2294 exclusion impacts their particular insurance policy and work with experienced agents to find comprehensive coverage.

Cost of Claims and Value of Risk Transfer

To understand the importance of coverage, examining potential claim scenarios contractors may encounter is instructive:

Bodily Injury Claims

  • Minor Injury – A sprained ankle from tripping over tools at $5,000.
  • Serious Injury – A fall from a roof requiring hospitalization at $150,000.
  • Wrongful Death – Collapsed deck leading to a fatal fall resulting in a multi-million dollar settlement.

Property Damage Claims

  • Accidental fire from equipment igniting a wall and causing $25,000 in damage.
  • Structural failure from improper framing resulting in $500,000+ damage.

Even defending against frivolous lawsuits can cost tens of thousands in legal expenses. While insurance premiums may seem high, those predictable expenses are insignificant compared to the massive and unlimited liabilities contractors could encounter without proper coverage. No prudent small business owner should shoulder the enormous financial risks contractors face daily without mitigating that exposure through insurance.

General liability coverage provides peace of mind for construction companies, ensuring contractors’ hard-earned business assets and personal wealth are protected from potentially company-ending lawsuits or claims. The right liability policy enables even small contracting businesses to thrive and expand over the long-term, regardless of the inherent risks. Here you can learn more about how contractors can make a general liability claim.

Policy Limits For Contractors

The amount of general liability insurance contractors need to carry depends on several factors:

State Requirements – Some states mandate minimum liability limits for contractors. Different states have different limits. Check your state laws.

Contract Needs – Large commercial clients or government contracts may stipulate certain liability limits you must meet. Review project requirements.

Revenue Size – Larger companies with more exposure need higher liability limits. Most experts recommend at least:

  • $1 million per occurrence for small contractors to mid-size companies.
  • $2 million or higher per occurrence limits for large contractors.

Your Assets – Consider an amount sufficient to protect your business assets and personal assets like your home if sued. Don’t leave yourself financially exposed.

Industry Norms – Check what coverage levels other comparable contractors carry so you are properly insured relative to competitors. Don’t underinsure.

Consulting an insurance professional is wise to determine what liability coverage limits adequately fit your contracting business based on these factors. Never take shortcuts when it comes to protecting your hard earned assets and livelihood.

ContractorNerd’s Study: Cost of Contractors General Liability Insurance

As a contractor, you want to evaluate both your level of risk and any state minimum requirements when deciding how much general liability insurance to purchase. Most experts recommend contractors carry at least:

  • Per Occurrence Limit: $1,000,000 per occurrence for bodily injury and property damage. Larger contracting companies with significant exposure may opt for a higher limit such as $2 million per occurrence.
  • Aggregate Limit: Your total aggregate limit across all claims should generally equal double your per occurrence limit. So if you choose a $1 million per occurrence limit, your aggregate would be $2 million. For larger businesses, a $4 million aggregate is recommended. This ensures you have adequate protection funds even in a catastrophic year with multiple claims.

Here’s a simplified version for general contractors:

We examined general liability insurance costs for general contracting businesses of different sizes across all 50 states. Although the 703 quotes we analyzed may not precisely match your specific situation, they offer a general understanding of what you can anticipate based on the size of your business and its location. While precise rates are highly individualized, average annual premiums for contractors typically range from:

  • Small General Contractor ($500K Revenue) – $5,500 to $8,500
  • Medium General ($1M Revenue) – $10,000 to $14,500
  • Large General Contractor ($2.5M Revenue) – $23,500 to $42,000

New contracting ventures starting without history may pay 25%+ more initially, as insurers need time to evaluate the risk. After successfully operating for several years without incidents, premiums often decrease, reflecting a more favorable risk assessment.

Below is a table summarizing typical general liability insurance premiums for contractors based on a sample of states. Each scenario assumes the following for each revenue size:

  • $500K Revenue: Assumes 1 owner and 3 employees with ~10% subcontracting costs and 5+ years of operating without claims.
  • $1M Revenue: Assumes 1 owner and 5 employees with ~10% subcontracting costs and 5+ years of operating without claims.
  • $2.5M Revenue: Assumes 1 owner and 10 employees with ~10% subcontracting costs and 5+ years of operating without claims.

Average General Liability Insurance Premiums for Contractors

State$500K Revenue$1M Revenue$2.5M Revenue
New Hampshire$8,600$14,500$33,500
New Jersey$12,900$22,700$67,000
New Mexico$8,100$13,700$42,400
New York$14,500$25,600$75,600
North Carolina$5,200$8,500$23,600
North Dakota$4,800$10,800$26,800
Rhode Island$10,300$16,800$48,700
South Carolina$14,300$23,100$76,600
South Dakota$8,100$13,700$45,400
West Virginia$9,500$15,100$51,000

Key Factors That Determine Premium Costs

When evaluating general liability insurance costs, contracting business owners should understand the key variables that affect pricing:

  • Location – Depending on the state, minimum liability limits can range from $100,000 to over $1 million per occurrence. High-risk regions like the Southeast and West Coast tend to have higher premiums. Rural areas may cost less than urban regions.
  • Services Provided – General repairs and renovations have lower risks than roofing, deck building, framing or structural work. The more hazardous the work, the higher the premiums.
  • Size of Staff – The number of employees is directly proportional to premiums. More staff means more exposure to injury risks, both to employees and third parties interacting with them.
  • Equipment Used – Power tools, scaffolding, cranes and other dangerous equipment raise liability risks compared to hand tools. Insurers may require schedules of equipment used.
  • Hazardous Materials – Working with treated lumber, lead paint, asbestos, and other hazardous substances adds risks that raise premiums. Proper handling training is key.
  • Revenue Size – Contractors with higher gross annual revenues will pay higher premiums, as larger revenue equals greater exposure. But raising liability limits to grow may be worthwhile if new business warrants it.
  • Claims History – Too many past claims, especially for severe injuries or property damage, will make insurers view the business as high-risk and charge more. Maintaining a safe operation helps keep premiums down.

Understanding these variables allows contractors to work with insurance agents to obtain suitable coverage aligned with their unique risk factors and business model, without overpaying.

Getting the Right Insurance for Your Contracting Business

Because risk profiles vary so much between contractors based on services, equipment, materials, locations, revenues, and past claims, standard “one size fits all” policies often leave contractors underinsured or overpaying. Policy coverage is key.

Working with an independent insurance agent familiar with the contracting industry helps structure tailored coverage and cost-saving measures like:

  • Matching liability limits and deductibles to likely risk scenarios.
  • Considering completed operations coverage timeframes.
  • Meeting unique state/local insurance requirements.
  • Incorporating relevant supplementary coverages like tools insurance.
  • Tailoring policies or accessing group discounts.
  • Excluding secondary risks when possible to lower premiums.

With professional guidance, contractors avoid overpaying for unnecessary protections while still covering their largest liability risks. The peace of mind and sheer financial protection make a general liability insurance policy an essential safeguard for any prudent contracting business owner.

To better illustrate the value of working with an independent agent who specializes in working with contractors, we’ve compiled some data below to illustrate what favorable insurance premiums look like and their implied savings as a percentage saving over the typical premiums above.

State$500K Revenue$1M Revenue$2.5M Revenue
Favorable RateImplied SavingsFavorable RateImplied SavingsFavorable RateImplied Savings
New Hampshire$5,80033%$11,30022%$27,00019%
New Jersey$10,20021%$14,60036%$44,90033%
New Mexico$5,80028%$8,70036%$25,40040%
New York$11,60020%$16,50036%$50,70033%
North Carolina$2,50052%$4,70045%$12,50047%
North Dakota$3,70023%$7,40031%$18,60031%
Rhode Island$7,70025%$14,00017%$33,00032%
South Carolina$5,70060%$11,40051%$28,50063%
South Dakota$5,10037%$8,80036%$25,50044%
West Virginia$5,40043%$10,90028%$27,20047%

5 Ways Contractors Can Reduce Their Liability Insurance Costs

Since general liability represents a major overhead expense, controlling premium costs is important. Strategies to lower your rates include:

1. Increase Your Deductible – Choosing a higher deductible amount like $2,500 or $5,000 reduces your premiums somewhat. Just don’t set it so high claims would be a burden.

2. Maintain Good Loss History – Minimizing past claims helps keep your premiums low long-term. Too many claims leads insurers to deem you high risk.

3. Improve Safety Protocols – Documented rigorous safety training and accident prevention programs can earn you a discount for being low risk.

4. Ask About Contractor Discounts – Some insurers offer discounts for contractors who complete risk management courses.

5. Bundle Insurance Policies – Purchasing general liability along with other policies like commercial auto earns multi-policy discounts.

The most impactful way for contractors to control insurance costs, however, is to invest heavily in safety. Preventing injuries and property damage in your operations helps achieve the lowest premiums over time. This pays dividends.

How Contractors Can Enhance Safety To Reduce Claims And Premiums

By making safety and risk management core priorities – rather than just reactively dealing with claims after they arise – contractors can achieve lower premiums. Steps to make your business safer include:

Institute Ongoing Training – Provide regular training to employees on best practices for tool usage, PPE, hazardous material handling, accident response, fall protection and other key topics.

Conduct Thorough Job Site Risk Assessments – Prior to starting work, inspect sites carefully to identify potential hazards like overhead obstructions, unsafe surfaces, asbestos or lead risks.

Implement Fall Protection – Ensure proper fall prevention and arrest equipment is utilized when working at heights.

Keep Tools in Good Repair – Inspect, maintain and replace all power tools, cords, ladders and equipment regularly to avert failures.

Secure Work Areas Properly – Cordon off work zones, use warning signs/tape and enforce PPE requirements for anyone entering the area. Prevent unauthorized access.

Clean Work Sites Daily – Remove discarded materials, wipe up chemical spills, and keep tools & cords out of walkways to avoid slip/trip risks.

Photograph Work Sites Before/After – Take detailed photos documenting site conditions before and after your work to protect against fraudulent claims.

Making safety your top priority rather than an afterthought directly translates into fewer workplace accidents, OSHA violations, lost time claims and lawsuits over the long-term. And that means achieving lower general liability premiums.

How Contractors Should Obtain General Liability Insurance

For assistance evaluating your unique risks and finding affordable general liability insurance tailored to your contracting business, independent insurance agents are your best resource. Avoid just going directly to a large insurance carrier. Quality agents provide key advantages:

Greater Policy Selection – Independent agents can access multiple specialized insurance carriers, not just a single insurance company. This enables them to compare many coverage options to find you the optimal liability fit.

Customized Coverages – They help build the right policy with enhancements and add-ons specific to contractor risks like job site hazards, products liability, etc.

Superior Guidance – Agents experienced with contractor and construction policies can answer questions and explain how coverages apply to your business in easy to understand language.

Risk Management Assistance – They provide loss control guidance tailored to contractors, helping you implement safety programs that reduce claims and earn lower premiums.

For contractors, partnering with the right independent agent delivers tremendous advantages in securing tailored coverage at competitive rates. Agents help demystify insurance, so you can focus on your business.

Get General Contractor Liability Quotes and Insurance from ContractorNerd

Running a general contracting business comes with risks. Make sure you have customized general liability coverage designed specifically for general contractors.

At ContractorNerd, our online tools simplify getting quotes from top providers. Just input key details about your construction services, locations, claims history and more. We’ll deliver tailored quotes for your review.

Our Platform Helps General Contractors:

  • Obtain general liability quotes tailored for general contracting businesses
  • Tailor limits to meet project requirements
  • Access guidance from our network of licensed advisors

Don’t waste time worrying about insurance. Connect with top providers in minutes for obligation-free quotes tailored to your needs.