Liability insurance for contractors
General contracting companies vary significantly in size and area of expertise. Despite the pandemic’s initial impacts, the recent rise in demand for contracting services due in part to the residential renovations boom suggests the industry is expected to make a positive recovery.
As a contractor, managing risk is inherent to your business, so it only makes sense that you have a robust risk management strategy in place for yours. At Zensurance, we know what makes your business unique. With over 50 insurance partners, we’ve helped thousands of contractors protect their businesses with flexible insurance policies customized to meet their specific needs.
Our mission is to make insurance as accessible as possible. We wrote this guide to help you navigate the basics of contractor liability insurance for your business.
What is contractor insurance?
Comprehensive coverage that can withstand multiple projects, managing employees, and general business liability risks is critical to running a thriving construction business.
When it comes to finding the perfect coverage for your business, distinct factors, such as trade, location, and service-related risks, need to be considered. For example, snow removal will have very different types and levels of risk exposure than residential painting.
We know what makes your business unique. Our contractor insurance policy packages protect contractors against the specific risks associated with contracting trades, such as third-party property damage and equipment theft.
What does it cover?
Each construction practice is different, and insurance requirements will vary by service; however, contractors insurance typically include the following policies:
- Commercial General Liability (CGL) Insurance – The most common and perhaps most important form of coverage for contracting trades is commercial general liability insurance. CGL is a liability insurance policy for contractors that protects you and your business against common claims you may run into at a job site, such as third-party property damage (e.g., damaging a client’s home) or bodily injuries (e.g., a slip and fall). Should your business be named in a lawsuit, CGL may cover medical expenses and legal fees, regardless of the outcome. Important note for contractors, your policy coverage limit applies to all employees of your business, not each employee. One option to accommodate all of your employees is to increase your limit. Hiring sub-contractors that carry liability insurance is another way to ensure all parties have adequate coverage.
- Tools and Equipment Insurance – Your tools and equipment are likely your most important assets, making equipment and tools insurance critical. This policy provides coverage to replace or repair lost or damaged equipment and tools, accessories, or others property in your care. Anything valued at less than $1,500 is considered a tool, whereas anything above is considered equipment.
- Pollution Liability Insurance – As an industry, construction produces more pollution than aviation. While not every project is going to have a large-scale impact, environmental liability is on the rise. Neglecting to seal a construction site or an improperly fitted pipe can lead to severe damage down the line. Pollution liability insurance covers clean-up costs, bodily injuries (e.g., respiratory illnesses), or property damages (e.g., water damage) caused by pollution or toxic substances produced due to your work on a covered job site.
- Builder’s Risk Insurance – Also known as Construction Liability Insurance, Builder’s Risk protects your building and liability against expensive property claims throughout a project’s duration. Contractors typically require their clients to carry this coverage, although sometimes you may be responsible. When finalizing the details of a project, be sure to confirm who will be responsible for purchasing the policy and ensure all involved parties are covered.
- Contractors do not typically require Professional Liability Insurance. However, if you offer advice or consulting as part of your services, consider adding it to your policy to protect against claims alleging you gave incorrect information or failed to deliver a service as promised.
Due to the variation across trades, finding a one-size-fits-all policy may be difficult. Speak with one of our specialized brokers to see if any of these additional coverages are right for your business:
- Products-Completed Operations Liability – Protects you and your business against customer lawsuits alleging property damage (e.g., faulty pipes) or a bodily injury after you have already completed a service or project.
- Non-Owned Auto Insurance – Auto coverage for vehicles used in connection with your business that you don’t own, lease, rent, or borrow. For example, this coverage could apply to an employee who uses their vehicle for company business.
- Tenants Legal Liability – This policy covers loss or damage to property that your rent or occupy (but do not own) for business purposes, such as a temporary office space near a job site.
- Installation Floater – This is an additional form of coverage, typically included with Builder’s Risk policies, which protect the tools and materials you use during construction from theft, loss, or damage.
- Leased, Rented, Borrowed Equipment – Coverage for loss or damage to materials and equipment you lease, rent, or borrow.
Who needs it?
Any independent contractor or business providing general contracting services should protect their company with a contractor insurance policy package.
Not only will it protect you from financial loss, but it will also help in securing jobs. In today’s increasingly litigious society, clients want to see that they have guaranteed contracting resources that are adequately insured.
We’ve insured thousands of contractors across Canada, some of our clients include:
How much does contractor insurance cost?
Contractor insurance starts from $450 annually for a basic CGL policy with a $2 million limit for a small or medium-sized business.
When you fill out our online application, we will ask some questions about your business to understand your needs better. The following factors are taken into consideration when determining the best policy options for you:
- Years of experience
- Trade types
- Annual and projected gross revenue
- Number of employees
- Previous insurance claims
We’ve partnered with over 50 insurance providers to offer you different options that suit your business needs at the best price.
Insurance considerations for independent contractors
Working as an independent contractor has many benefits; you define your schedule and contribute your expertise to various projects. However, operating independently has unique risks from an insurance perspective. Unless you are working full-time with one company, you are unlikely to be covered by an employer, meaning you need comprehensive insurance that travels to job sites with you.
General liability insurance for independent contractors could cover any third-party injuries during a project or property damage resulting from your actions, even if you work at multiple sites. Equipment and tools insurance will provide coverage should they be lost, damaged, or stolen, and you should always confirm Builder’s Risk coverage is in place before you begin a project. Suppose you offer advice as part of your services. In that case, you may wish to protect yourself with professional liability insurance, as it protects against claims alleging negligence or failure to deliver a service as promised, which can be costly.
Not only will purchasing insurance protect you from financial loss, but it may also help in securing jobs, as project managers and planners will often ask for proof of insurance before making a hiring decision. Having liability insurance for contractor can be the difference between whether or not you secure a contract.
- Commercial General Liability Insurance
- Builder’s Risk Insurance
- Tools & Equipment Insurance
- Professional Liability Insurance
Common claims scenarios
Frequently asked questions