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The Importance of General Liability Insurance for General Contractors

A commonly asked question by general contractors in the construction industry is “Why do I need liability insurance when each of my subcontractors has their own insurance policy? I’m not doing any of the work myself.” It’s often asked particularly by small business owners in the construction industry that upon getting free quotes, discover how expensive insurance coverage can be. It’s a good question, but there are in fact a large number of reasons why you might want your own policy ranging from lawsuits asking for medical payments to property damage claims by clients.  Today, we’re going to go into exactly what makes liability coverage so important for general contractors.

Protection from Trespassers

When you take over a client property at the start of a contract, you assume any and all happenings on the site and the business owner’s policy will not cover what happens on the site any longer. This can include personal injury to the workers, property damage to the site and even injury to trespassers. That’s why you should always put up warnings at the site talking about what work is being done and advertising injury that could happen if someone does not listen. However, not everyone will listen to these warnings and that is what your fence will be for. However, say that someone walks past your signs and into the fence that your subcontractors accidentally left open.

If, for example, they fall into a hole and break a leg, they now have the ability to sue. They might go to court to ask for recompense and help with their bodily injury in the form of legal fees, medical payments, medical costs, or even financial loss in the form of a check. You’ll have to prove that you did everything in your power to show them that what they were doing was wrong and that they knowingly went somewhere they shouldn’t have. Even if you prove all these things, there is a chance that you will still have to pay the person and that’s where your contractor’s insurance comes into play. If you didn’t have this, you would have to pay that loss yourself, which could total much higher than expected by the end of the lawsuit.

Protection from Independent Contractors or Subcontractors

You might not have someone you boss working on site, but you do have people that subcontract under you working on the site. General liability coverage can be used in these cases much the same way that it can be of use for a trespasser. If you have someone, say a painter, on your site they could be at risk of getting hurt. If while painting, something causes the scaffolding to fall they could be seriously harmed. In general, the subcontractor that you use will have workers compensation for their workers for cases like these. However, should that person find fault of their injury in your site, maybe another contractor put up the scaffolding or you yourself did, they still have the option to sue you as the leader of the site. Your insurance agent has the ability to protect you in these cases ahead of time by crafting the perfect general liability policy as well as any additional insured areas you may need like professional liability, commercial auto, or even workers compensation for your own owners.

Protection from for For Your Own Workers

As mentioned before, you don’t have anyone doing any work on your site directly, however, you probably do have someone working on the site as a superintendent or an assistant superintendent. You may also have people like project managers, project engineers or even interns coming onto the site regularly for meetings or to see progress. Any of these people could twist an ankle run into a barrier, or otherwise hurt themselves or the site. These liability risks are why your insurance company usually will suggest you get not only a general liability insurance policy but also a workers compensation insurance to ensure that no matter what happens, should the worst happen, you will be covered and so will your most valued workers.

Commercial general liability insurance for the construction industry is not only important in modern work but required to run a safe and long lasting business. No one wants for business insurance to have to be used, however, it’s there for the unexpected should it happen. You don’t want someone, no matter who, to get hurt on your site and have the ability to sue you with no protection. You need the coverage should something go wrong, even if it was not your fault and there was nothing that could be done. As always, talk to an informed insurance agency that deals with those in your industry to insurance quotes on what will be best for you whether it’s general or business liability insurance, an umbrella policy, omissions insurance, or even commercial auto. Make sure that the insurance agent can get anything you will need for proof on bids or project applications, for example, a certificate of insurance.

Though it does cost money, it’s something that will have to be budgeted for and considered a required expense, something that you should not penny pinch on. You can always hope that you won’t need it and it will be a waste, but should something go wrong, you will very quickly realize that you are very happy that you talked to an agent and they helped you get what you needed.

No matter what kind of insurance you as a general contractor are looking for, you’ve come to the right place.

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Written by: John Brown
John has more than 25 years of experience in the insurance industry. He grew from a star insurance producer to owning one of the largest agencies in the country; he's a reference regarding contractor's insurance, commercial insurance, and builders' risk insurance.