Contractors are faced with numerous responsibilities, ranging from managing their business operations to personally executing various construction tasks. This entails an increased likelihood of personal injuries or property damage, necessitating the need for a policy. General liability insurance serves as the fundamental component of risk management, playing a crucial role not only in the construction industry but also in various other small business sectors. It provides coverage for potential liability claims arising from injuries and property damage from business operations. However, it is worth noting that contractor insurance can be costly, intricate, and obligatory for numerous projects. To quench the thirst of numerous contractors seeking the cheapest general liability insurance policy, we examined a range of providers below.
What Is General Liability Insurance?
General liability insurance is a type of insurance coverage that specifically addresses various types of claims that may be filed against a company or business. It is sometimes used interchangeably as commercial general liability insurance (CGL insurance) or business liability insurance.
General Liability Insurance for Contractors
The construction industry is known for its inherent risks, prompting insurers to provide various coverage options to assist construction contractors and tradespeople in safeguarding themselves from potential legal and financial difficulties. The insurance coverage requirements for a business may differ depending on factors such as size, specialization, and other variables. However, it is essential for contractors to establish a solid foundation of insurance coverage by obtaining a general liability policy.
Since general liability insurance covers the majority of popular liability issues that a business faces, it is crucial for contractors to be familiar with this type of coverage. However, despite its broad coverage, general liability insurance offers little to no coverage for an array of important potential dangers. Contractors will be better able to obtain supplemental insurance policies that successfully mitigate all potential risks they may encounter if they have a thorough understanding of what general liability covers and does not cover.
General liability insurance, in contrast to certain other types of commercial insurance, insures against risks that might arise in any industry and is therefore almost a must for every kind of firm. Insurance companies may differ slightly in the specific coverages they offer, but generally speaking, general liability insurance protects risks such as property damage, advertising injuries, personal injury, and some forms of product liability. When a policyholder with general liability insurance is sued or has a claim against them due to one of those insured risks, the insurance provider may cover all or part of the expenses for which the company is held accountable.
General liability is commonly provided as a constituent of a business owner’s policy (BOP) in conjunction with commercial property coverage and business interruption insurance. However, it is worth noting that several carriers also provide standalone coverage for commercial general liability insurance.
How Does Contractor General Liability Insurance Work?
Contractors’ general liability insurance follows a similar structure to other types of commercial insurance. The policyholder pays regular premiums to an insurance carrier, and in return, the carrier assumes financial liabilities in the event that the policyholder encounters a claim. Similar to other types of insurance, contractor general liability policies consist of a standard set of components:
- Coverage: The conditions upon which an insurer will consent to provide claim settlements This encompasses the various categories of incidents that qualify for coverage, as well as any additional limitations that may impact eligibility, such as deliberate or unlawful actions.
- Premiums: The periodic premiums that a policyholder pays to maintain insurance coverage.
- Deductibles: The deductible is the monetary obligation that a policyholder must fulfill prior to the activation of coverage for a claim.
- Policy Limit: The maximum reimbursement amount that an insurance company will provide for claims according to a policy. It can be set up either on a per-claim basis or as a total limit.
Each policy feature has the potential to impact the others. For example, insurance policies that offer broader coverage often come with higher premiums due to the higher likelihood of the insurer having to pay a claim. On the other hand, policies with higher deductibles typically have lower premiums as the policyholder assumes a greater portion of the risk.
Cheapest General Liability Insurance for Contractors
General liability insurance is essential for every general contractor in the construction sector to protect themselves against claims of personal injury or property damage.
Every company ought to set aside money every year for general liability insurance. Since it protects against typical but potentially costly legal and financial concerns, general liability insurance is a must-have for businesses of all stripes. However, it is important to note that while general liability insurance is essential, businesses can still acquire coverage without incurring excessive costs. All you need to do is do a little homework, comparing some of the cheapest general liability insurance for contractors out there. Knowing this might not be as simple as it seems, we have compiled a few of the finest options in 2024 for you:
The Hartford.
The Hartford is a reputable insurance company that has a strong financial position, excellent customer service, and competitive premium rates. At The Hartford, LLCs pay an average annual fee of $11,059, whereas sole proprietors are subject to an average annual fee of $1,081.
The Hartford provides the cheapest general liability insurance for contractors in the majority of states. However, the location of your business has a big impact on the price of your insurance. For example, companies located in high-risk locations (e.g., earthquake or flood zones) could have to pay more for insurance. This is due to the fact that there is an increased risk for the insurer in these areas since businesses are more likely to file claims.
However, contractors across the country might not be able to purchase The Hartford’s general liability insurance online. Additionally, since you have to get in touch with an agent, getting a quote can take longer than it would with other carriers.
Pros
- Cost-effective for both limited liability companies (LLCs) and sole proprietors.
- Has a high rating from AM Best.
- Ensure a high level of customer satisfaction.
Cons
- Slower quotation turnaround time than other suppliers
- Not all states may provide general liability insurance to contractors.
Hiscox
Hiscox is a great choice for sole proprietors seeking cost-effective general contractor insurance that offers exceptional service quality. In addition, you have the opportunity to receive a 5% rate reduction when purchasing multiple Hiscox insurance products.
Hiscox offers the most affordable contractor insurance for sole proprietors, with average yearly premiums of $1,134 or $85 per month. In addition to being reasonably priced, Hiscox provides a decent trade-off between monetary stability, client happiness, and quote turnaround time.
However, it should be noted that Hiscox does not currently provide policies in all states. The availability of coverage will vary depending on the specific state in question. If you are considering enhancing your general liability policy with additional coverage, such as professional liability, your choices may be restricted.
Pros
- Extremely cost-effective for individuals operating as sole proprietors.
- Quicker than with other companies to receive a quote
- 5% off your rate when you purchase two or more Hiscox insurance plans.
Cons
- Does not provide insurance for Alaska
- The availability of business coverage is subject to variation depending on the state.
Thimble
Thimble is a great option if you’re searching for a quick insurance quote because of its quick response time compared to other suppliers. Contractors can rapidly acquire an estimate for their insurance by completing an online quotation in an average of 34 seconds. It’s crucial to remember that although Thimble provides instant insurance quotes, its costs might not be the lowest when compared to those of other suppliers.
Thimble, an online insurance provider, offers efficient and easily accessible general liability insurance to both sole proprietors and limited liability companies (LLCs). It offers nationwide coverage with a swift quote turnaround time that outperforms other insurance providers. On average, Thimble policies cost $1,530 per year for sole proprietors and $54,109 per year for LLCs.
On the other hand, the National Association of Insurance Commissioners (NAIC) complaint index indicates that Thimble likewise receives a high average amount of consumer complaints. And the reason behind this could be the company’s reliance on online customer care.
Pros
- A reasonable annual cost for sole proprietors, averaging $1,530.
- Provide prompt quotation services.
Cons
- Higher volume of customer complaints in comparison to other insurers.
- The cost of LLCs is relatively high, with an average annual price of $54,109.
What Does Contractor General Liability Insurance Cover?
To put it briefly, general liability insurance shields companies financially in the event that one of their operations or goods endangers or damages a third party, or if an accident occurs on the company’s property. A CGL insurance policy can pay for legal fees related to a claim brought against the policyholder, including defense and damages for which the policyholder is deemed accountable.
Since no two general liability policies are the same, it’s critical to check the carrier’s policy for any specific terms or exclusions that can limit the scope of coverage. Nevertheless, the majority of business general liability plans cover the following areas:
#1. Bodily Injury & Property Damage
The parts of general liability coverage that are most well understood are property damage and bodily injury. If an insured party’s carelessness results in bodily, psychological, or emotional harm to a third party or property damage to a third party, liability claims might be paid. The most common scenario for a prospective bodily injury lawsuit is someone slipping and falling on a business’s property.
#2. Personal and Advertising Injury
Advertising and personal injury are the second typical component of a general liability policy. Claims coverage of personal and advertising injuries will cover certain concerns that infringe on the intellectual or personal rights of the party filing the claim.
Defamation via libel or slander is a prevalent instance of a personal or advertising injury.
#3. Medical Costs
Medical expense coverage is a third feature that most general liability policies have in common. Regardless of the policyholder’s carelessness, coverage under this section of the policy includes medical costs in the event that someone is hurt on the policyholder’s property or as a result of their operations.
What Does General Liability Insurance for Contractors Not Cover?
Policies for contractor general liability are not designed to cover every risk, particularly in a high-risk sector such as construction. Insurers may occasionally issue limited coverage or endorsements that address certain situations. However, for actuarial (because the insurer wants to reduce their own risk exposure) or legal (because of what a state regulatory body allows insurers to give for a form of coverage), insurers would typically aim to guide clients toward additional commercial policies.
Following are some risks that CGL insurance might not cover and may require a different type of business insurance:
- Employee injuries
- Professional mistakes
- Auto-related coverage
- Damage to a business’s own property
- Intentional acts
- Lawsuits from employees
- Punitive damages
How Much Is a General Liability Policy for Contractors?
Whether you are a sole proprietor or an LLC determines how much general liability insurance coverage for contractors will typically cost. A general liability policy typically costs $36,746 for LLCs and $2,422 for sole proprietorships annually. This relates to an insurance policy with a $0 deductible, a $1 million occurrence limit, and an aggregate limit of $2 million.
What Factors Affect the Cost of Coverage?
General liability policies, like other commercial insurance types, are typically tailored to the unique needs of each company. These variables may have an impact on the cost of insurance as well as the kinds or quantities of coverage you will get.
- Industry
- Business size and number of employees
- Deductibles and coverage limits
- Location and premises
- Endorsements and additional coverage
- Claim history
What Types of Contractors Need General Liability Insurance?
Generally, general liability is a common commercial insurance policy for all kinds of enterprises. Because the dangers of physical harm and property damage are rather significant in the construction and contracting industries, contractors of all stripes can also benefit from having a policy in place. The following are some areas of construction work that could benefit from having general liability insurance for contractors:
- General contractors
- Handymen
- Electricians
- Plumbers
- HVAC specialists
- Carpenters
Bottom Line
In industries such as construction, where there is a higher likelihood of personal injuries or property damage, it is crucial to have robust business insurance policies in place to safeguard your business. General liability insurance is that option; it is an essential component of risk management. It provides crucial protection against common claims that may arise due to injuries or property damage caused by your business, making it a must-have.
However, comparing insurance costs to find the cheapest general liability insurance for contractors is not as simple as one might believe. While this guide might help you navigate your options, having a broker compile your information and secure three or four quotes from firms that meet your needs and tolerance for risk is a time-saving option.
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