The Importance of Having Contractor's General Liability Insurance

If you are a contractor working in California, you need to have commercial general liability insurance. While not required by law, most contractors find that they cannot obtain work without general liability coverage. What is general liability coverage and what does it provide? In simple terms, general liability insurance covers you for damages or injuries for which you are legally obligated to pay. Liability insurance also covers the cost of your legal fees if you are wrongfully sued.

General liability typically covers five basic categories of business liability:

• Bodily Injury – physical harm to a person at you place of business, or an injury caused by your employee at a client's site.
• Completed Operations/Products Liability – losses after your business has completed work for a customer (such as repairing appliances or installing plumbing), or from manufacturing or distributing products.
• Personal Injury – damage to the reputation or rights of a person or business due to slander, libel, copyright infringement, invasion of privacy, false arrest, wrongful evection, etc.
• Advertising Injury – losses caused by your advertising (spoken or written); for example, an ad that criticizes a competitor.
• Independent Contractors Liability Insurance – damage from the acts of an independent contractor hired by your business.

Medical payments may also be included in General Liability coverage. These pay the medical expenses of a person injured on your premises (a customer, client, visitor, or even a trespasser) up to a stated amount, regardless of fault.

How Much Will It Cost?

There are several factors that determine the cost of your coverage, or how much premium you will pay. Most important is your estimated payroll costs for the upcoming year. The higher your payroll (or the more employees you have), the more work you do. More work means greater exposure for the insurance carrier, and as such, more risk. More risk to the carrier means higher premium for you.

Other factors that can affect the cost of your insurance include your gross receipts for the year (how much money did you take in before expenses?), sub-out costs (the money you pay to sub-contractors working on your behalf), the type of work you are doing (builders constructing tract homes pay more than electricians doing residential service and repair), and your geographic location in the state (contractors working in urban areas usually pay more than those in more rural areas).

Choosing An Insurance Carrier

It is important to choose a good carrier. Insurance carriers are rated by A.M. Best. Most brokers and agents will typically offer you a quote from an "A" rated carrier. A competent broker, especially one who specializes in serving contractors, will typically have access to many programs designed for those in the building trades. Your broker should be able to give you help and direction when choosing a carrier to meet your needs.